DWP consults on amendments to the employer-debt regulations

The Pensions Regulator (the Regulator) recently used its powers under the Pensions Act 1995 to appoint an independent trustee to the exclusion of all other trustees of the scheme. The employer was required to pay the fees and expenses relating to the appointment.

The Regulator decided to use its powers because:

Pensions and insolvency legislation uses the test in the Insolvency Act 1986 for assessing whether a person is ‘connected’ or ‘associated’ with another. This test is important because various statutory provisions use it, especially in limiting the persons whom the Pensions Regulator can make responsible for pension scheme deficits under the ‘moral hazard’ powers in the Pensions Act 2004. This briefing gives an outline of the statutory provisions and points to some difficult areas.  

Why is this relevant?  

In the case of Andrew Fender v National Westminster Bank PLC Judge Purle QC set aside a deed of release that had been executed in the mistaken belief that the company was no longer indebted to the bank.

The United States Bankruptcy Court for the District of Delaware has approved a settlement agreement between three Sea Containers companies, their unsecured creditors and the trustees of the two pension schemes belonging to the UK subsidiary Sea Containers Services Limited.

In Bridge Trustees Limited v Noel Penny, Judge Purle QC, sitting as an additional Judge of the High Court, held that the Court could use its inherent jurisdiction to permit an independent trustee to distribute surplus in a scheme that was winding-up. Under the Pensions Act 1995, an independent trustee is appointed to exercise powers otherwise conferred on the employer where an insolvency practitioner begins to act in relation to a company.

Summary

Pension scheme trustees will generally be concerned to try to ensure that the “safety net” provided by the Pension Protection Fund (PPF) remains potentially available for their scheme.

The Pensions Regulator (TPR) has announced that it has withdrawn moral hazard proceedings against Chemtura Manufacturing UK Limited and its US parent, Chemtura Corporation. This follows an agreement being reached by Chemtura with the trustees of the Great Lakes UK Limited Pension Plan (the Plan) over its funding package.

We reported on the High Court case of BNY Corporate Trustee Services Limited v Eurosail in August 2010 and last week's Court of Appeal decision provides further important guidance on the interpretation of the balance sheet insolvency.

A section 75 debt is a debt due from an employer in a multi-employer defined benefit pension scheme to the trustees of the scheme.