Top of the agenda
Fixed protection: HMRC issues further clarification ahead of 6 April 2012 deadline
Under the Finance Act 2011, the lifetime allowance (LTA) will be reduced from its current level of £1.8m to £1.5m from 6 April 2012. The fixed protection mechanism allows individuals who have built up pensions savings of more than 1.5 million, or are expecting to do so, to elect to have the current lifetime allowance of £1.8m to be applied to them, notwithstanding the reduction in the LTA. To claim fixed protection, individuals must complete the relevant form (Form APSS227) and ensure HMRC receive it by 5 April 2012. Late notifications cannot be made.
Fixed protection can, however, be lost in certain circumstances, for instance, if a member accrues further benefits above a certain level or joins a new arrangement. If fixed protection is lost, the member will return to the new LTA of £1.5m and be exposed to a lifetime allowance charge for benefits exceeding this figure. HMRC Pension Schemes Newsletters 50 and 52 give guidance on when fixed protection may be lost.
Whether entitlement to a lump sum death benefit invalidates fixed protection deserves particular attention. It is clear from Newsletter 50 that where the lump sum death benefit is provided under a pension arrangement set up after 6 April 2012, fixed protection will be lost. With regards to continued life cover provided from 6 April 2012 under a registered pension scheme, the broad position is that this will not count as "benefit accrual" and therefore will not cause fixed protection to be lost where the benefit is a defined benefit i.e. a multiple of salary. However, recently, we became aware of HMRC correspondence suggesting that where the pension scheme rules restrict the death benefit to the amount paid out by an insurance policy (many pension scheme rules contain such provisions), this may count as "benefit accrual". HMRC have now issued guidance this week allaying those concerns. However, the guidance does highlight the importance of reviewing the terms relating to death benefits under a registered scheme carefully to ensure they do not result in fixed protection being lost.
We are currently involved in advising employers on the risk of employees losing fixed protection under any pension and life assurance arrangement provided by the employer. One way round the issue of lump sum death benefits would be to take out an Excepted Group Life Assurance Policy, an unregistered life assurance policy. For further information, speak to your usual contact in the pensions team.
Abolition of DC contracting-out - further issues to consider for schemes that have not amended their rules
HMRC has issued its sixth and final "Countdown Bulletin" to help schemes prepare for the abolition of contracting out on a defined contribution (DC) basis. The bulletin may be viewed here. Separately, HMRC have highlighted a problem with paying a short service refund lump sum (SSRLS) after the abolition date for schemes that have not removed their protected rights rules.
Broadly, under the Finance Act 2004, for a lump sum to count as a SSRLS and therefore be an authorised payment, the lump sum must, apart from any protected rights retained by the scheme, fully extinguish a member's rights under the scheme. Following the abolition date, the exemption allowing protected rights to be held back will no longer apply. Schemes that have not removed provisions in their rules relating to protected rights and therefore are obliged to hold back any protected rights from a SSRLS under their rules run the risk of the lump sum becoming an unauthorised payment. HMRC has said that it will issue regulations allowing schemes to continue to pay partial short-service refunds without incurring an unauthorised payment charge; the easement will not, however, be retrospective.
We are currently advising schemes on amending their rules as a result of the abolition of DC contracting-out. For further information, speak to your contact in the pensions team.
Latest pieces in the auto-enrolment jig-saw
Under the auto-enrolment regime, every employer will be required to automatically enrol certain employees into a pension scheme that meets statutory requirements and pay minimum contributions for those employees to that pension arrangement. These requirements will be rolled out on a phased basis from October 2012 to February 2018, starting with the largest employers first (broadly those with 120,000 or more employees in the employer's PAYE scheme). There have recently been a number of developments in relation to the auto-enrolment regime – we consider these below.
- After consulting on the matter in December 2001, the DWP has also confirmed the earnings threshold for auto-enrolment purposes for 2012/13. Under the auto-enrolment requirements, broadly a jobholder is eligible for auto-enrolment in a qualifying workplace pension scheme if, among other things, his earnings in a pay reference period exceed the "earnings trigger". Employees who do qualify are entitled to minimum pension contributions by reference to what is called a "qualifying earnings band". Following the consultation, the DWP has now confirmed new figures as follows:
- The earnings trigger will now increase from £7,475 to £8,105 which is the same level as the personal allowance for tax purposes for 2012/13 (the point at which people start paying income tax).
- The qualifying earnings band will be changed to £5,564 - £39,853 from the current level of £5,035 - £33,540.
- The DWP has issued for consultation draft regulations that make changes to the auto-enrolment implementation timetable for small and medium sized employers and to the arrangements for phasing of minimum contributions affecting all employers. The key changes being proposed are:
- Small employers (those with fewer than 50 workers in their PAYE scheme) will be allocated a staging date between 1 June 2015 and 1 April 2017.
- Medium-sized employers (those with between 50 and 249 workers in their PAYE scheme) will be allocated a staging date between 1 April 2014 and 1 April 2015.
There will be no change in the auto-enrolment timetable for employers with a staging date of 1 February 2014 or earlier.
- The end of the staging period will be extended from 1 September 2016 to February 2018.
- New employers setting up business between 1 April 2012 and 30 September 2017 will have staging dates from 1 May 2017 to 1 February 2018.
- The proposed increase in the minimum rate of contributions from 1% to 2% for employers using money purchase and personal pension schemes will be delayed from 1 October 2016 to 1 October 2017, with the rate increasing to 3% from 1 October 2018.
- The transitional period during which employers using defined benefit and hybrid schemes can delay the auto-enrolment requirements will now end on 30 September 2017.
The closing date for the consultation is 4 May 2012.
With the exception of the consultation on staging dates for small employers, these recent changes will impact on all other employers, including large employers who have a staging date of October 2012. Despite these latest pieces to the auto-enrolment jig-saw, there are still a number of problem areas and outstanding issues with the regime. We will be producing a briefing discussing those issues shortly. Budget 2012 items
The budget speech delivered by the Chancellor George Osborne in the House of Commons on 21 March 2012 was light on pensions. Here, we summarise the key measures relating to pensions that were announced.
Implementation of a single flat rate pension
In April 2011, the DWP published its green paper setting out proposals to reform the state pension. For more about the proposals, view our April e-bulletin. The chancellor has announced that the Government will implement its proposal for a single-tier state pension.
The proposal chosen involves combining the Basic State Pension and the Second State Pension into a single benefit that will be worth around £140 per week for individuals with a full national insurance record. The Government will produce further details of the measures in a white paper this Spring.
A key consequence of the reforms will be that contracting out for DB schemes will end. This will have significant implications for schemes that are contracted out on a salary-related basis, especially around scheme design. Schemes that are integrated with the basic state pension (BSP) (for instance where the amount of the BSP is deducted from the total pension payable), will typically make explicit references to the BSP in their rules and if the BSP is replaced with a new single flat rate pension, it is not clear how those rules would be interpreted - implications for such schemes could be significant. For further information about how the proposed reforms could affect your scheme, please speak to your contact in the pensions team.
Technical amendments in relation to FA2011
Technical amendments will be made to the Finance Act 2011 legislation to ensure that the rules around annual allowance work as intended, in particular the scheme pays facility and rules for deferred members. The Government will also introduce a regulation making power under which regulations will be made to ensure that the rules surrounding fixed protection work as intended. These measures will be introduced through the Finance Bill 2013.
There are a number of problems areas and outstanding issues in relation to the annual allowance and fixed protection. Following the Budget, HMRC has issued Pension Scheme Newsletter 53 giving some details of the issues in relation to which it is intending to make technical amendments - we will be issuing a briefing in relation to the outstanding issues and Newsletter 53 shortly.
Aligning tax legislation with abolition of DC contracting-out
Pensions and tax legislation will be amended through the Finance Bill 2013 to remove references to tax relief on employee contracted-out contributions to defined contribution schemes.
Changes to tax relief on asset backed funding arrangements
The budget statement recaps on changes made to the tax relief regime for asset back funding arrangements, the most recent changes to be effective from 21 March 2012. These recent changes are the third bite at the cherry, HM Treasury already having announced changes to the regime that are effective from 20 November 2011 and a second lot of changes that are effective from 22 February 2012. For our e-alerts on those changes click here and here.
Qualifying Recognised Overseas Pension Schemes
Regulations were issued for consultation in December last year to strengthen the conditions that a scheme has to meet to be a QROPS and the information and reporting requirements for a QROPS. Those regulations have now been laid before Parliament and will come into force on 6 April 2012.
The Government will introduce changes in primary legislation to strengthen reporting requirements and powers of exclusion relating to QROPS to support the changes introduced under the recent regulations. These measures, to be introduced in the Finance Bill 2013, will include measures to ensure that where the country or territory in which a QROPS is established makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended to be available under the QROPS rules, the relevant pension schemes in those countries will be excluded from being a QROPS.
Revised guidance on the QROPS regime has also now been issued - the guidance reflects changes introduced on 6 April and may be viewed here. HMRC have also stated in its Newsletter 53 that a letter is being sent to all QROPS informing them of these recent changes.
Bridging pensions and State Pension Age
Legislation will be introduced aligning the tax rules on the payment of bridging pensions with the DWP's plans to change the state pension age for men and women.
Monitoring of unfunded arrangements
The chancellor also outlined measures to monitor the use of unfunded pension arrangements so the Government "remains ready to act as necessary to prevent new and extensive use of these arrangements from creating a significant fiscal risk and undermining its objectives of a more affordable pension regime".
The Finance Act 2011 introduced new legislation, the Disguised Remuneration rules, to limit the opportunity for using employer financed retirement benefit schemes (“EFRBS”) as a means of sidestepping the reduced annual and lifetime allowance limits introduced by the Act. For a summary of those rules, see our Finance Act 2011 briefing. Under the measures announced in the Budget the government will continue to monitor the use of EFRBS and may, if it identifies that these arrangements are creating a significant fiscal risk, introduce further measures to restrict their use. Legislation
Employers must now consult with employees when changing revaluation and indexation rates under the employer consultation requirements
Regulations have been laid before Parliament requiring employers of occupational pension schemes to consult with affected employees in advance if they wish to change the rate at which pensions in payment are increased and deferred members' benefits are revalued. The regulations introduce a new "listed change" into the Employer Consultation Regulations 2006 from 6 April 2012. The new "listed change" provides that an employer has to consult with affected, active and prospective scheme members if it wants to change the rate for indexation and revaluation. This requirement, however, only applies where the change would (or would be likely to be) less generous to all members or members of a particular description. The requirements also do not apply to scheme members who have been notified of a proposal to make the change before 6 April 2012. Cases
High Court rules that a deed of intention to equalise normal retirement ages for men and women was effective in amending the pension scheme's rules
In Premier Foods Group Services Limited and Another –v- RHM Pension Trust Limited (2012) EWHC 447 (Ch), the High Court has handed down a helpful decision that a brief deed (called a Deed of Intention) to equalise the normal retirement age for men and women was effective from the date of the deed in equalising the scheme's normal retirement age. The Court held that despite its extreme brevity (stating that the scheme will be administered on an equalised basis), the deed was effective in amending the pension scheme and that no actual textual changes to the original rules were required (although these changes were made by the scheme over two years later). For more details about the case, see our earlier e-alert.
High Court rules that liabilities under an employer debt arising on the employer's insolvency must be calculated at the date of the employer's insolvency
In Bestrustees Plc and Kaupthing Singer and Friedlander (2012) EWHC 629 (CH), the High Court has held that the liabilities under an employer debt arising on an insolvency of the employer should be calculated as at the date of the employer's insolvency. The employer debt is the debt an employer owes to the trustees of the defined benefit scheme when it withdraws from the scheme and is calculated by setting off the "buy out" valuation of liability of the scheme against the value of the assets held by the scheme. The buy-out valuation of pension liabilities is the notional cost of going into the market to buy annuities for scheme members.
The assets of the scheme are assessed as at the date of the employer's insolvency. The issue the Court had to consider was whether the liabilities had to be measured as at the date of the employer's insolvency or whether they could be measured as at a later date when the debt was certified and therefore reflect market conditions at that time. The Court held the former: the liabilities had to be measured as at the date of the employer's insolvency, Mr Justice Sales stating that the employer debt legislation was clear that the annuity rates as at the insolvency date should be used. Had it been the date of certification, the scheme employer, Kaupthing Singer and Friedlander Bank which had gone into administration in 2008, may have been liable for an extra £66m by way of employer debt to the scheme trustees. Under statutory provisions, the employer debt ranks as an unsecured debt claim on the company entering an insolvency.
The clarification as to when the liabilities have to be calculated for an employer debt arising on an employer's insolvency will be welcomed by employers and insolvency practitioners. However, the circumstances of the case should not be confused with an employer debt arising when a scheme winds-up - in the case of a winding-up, Justice Sales stated that the legislation was clear that the trustees can pick the time during the winding-up process at which to crystallise the employer debt.
Court of Appeal finds that the Government acted lawfully in changing the measure for public sector pension increases from RPI to CPI
The Court of Appeal has held that the Government acted lawfully in deciding to alter the basis upon which public sector pensions are annually increased to take account of inflation by using the Consumer Prices Index rather than the Retail Prices Index. Specifically, the Court has held that the Government had been entitled to have regard to the national economic situation as one of the factors when taking its decision. For our e-alert about the decision, click here.
Upper Tribunal gives its interim decision in relation to a decision by the Pensions Regulator to impose Contribution Notices
The Upper Tribunal has issued its interim decision in Desmond and Others v The Pensions Regulator and Garvin Trustees Ltd concerning a decision by the Determinations Panel of the Pensions Regulator to impose contribution notices (CNs) against two director shareholders of Desmond & Sons Ltd totalling £1m. The appeal to the Tribunal had been brought by the director shareholders (among others) with references then made by the Pensions Regulator and the trustees of the Desmond & Sons Ltd Pensions & Life Assurance Scheme. Questions put to the Upper Tribunal included whether a higher amount should be issued against the two director shareholders under the CN and whether a CN should be issued against a third shareholder. The Upper Tribunal held that, as part of its statutory role to determine whether the Determinations Panel had taken appropriate action, it had jurisdiction to increase the sum requested from the two director shareholders under the CNs. However, a CN could not be imposed on the third shareholder because the Panel was now time barred from doing so and the tribunal could not make an order beyond the authority of the Panel. The case will now proceed to a full hearing before the Upper Tribunal. We will produce a more detailed briefing about the interim hearing shortly.
High Court rules that the trustees' exercise of a power under the scheme rules to adopt CPI for increasing pensions in payment and revaluing deferred pensions did not breach statutory restrictions on scheme modifications
In Danks & Ors v QinetiQ Holdings Ltd & Anor  EWHC 570 (Ch), the High Court has held that the decision by a pension scheme's trustees to switch from RPI to CPI as the index for revaluing deferred pensions and increasing pensions in payment did not breach statutory provisions on scheme modifications. The provisions, contained in section 67 of the Pensions Act 1995, broadly, prohibit trustees from detrimentally amending benefits to which members are entitled or rights which members have accrued under the scheme to future benefits, without complying with certain safeguards first. These safeguards include obtaining affected members' consents, which can be very difficult to obtain in practice, rendering it difficult for schemes to make changes to certain benefits. Working out what is an "entitlement" or an accrued right for the purposes of section 67 can, in practice, also be a headache for employers and trustees when considering changes to scheme rules. Trustees who have switched to CPI under a power under their rules of the type considered in this case, or are thinking about doing so, will therefore welcome the clarification from the High Court that those changes will not be a "modification" caught by section 67 of the Pensions Act 1995. We will issue a more detailed briefing on the High Court's decision shortly.
Court of Appeal confirms that costs alone cannot be justification for discriminatory treatment of an employee
In Woodcock v Cumbria Primary Care Trust  EWCA Civ 330, the Court of Appeal has upheld the Employment Tribunal's decision that an employer's decision to time a redundancy dismissal so as to avoid the employee accruing generous pension entitlements if the employee was to continue in employment to the age of 50 was not unlawful age discrimination and that the employer's actions were in this case justified. In reaching its decision, the Court confirmed that an employer cannot justify discriminatory treatment on the basis of costs alone. Rimer LJ gave as an example of "costs alone" treatment a decision to pay A less than B simply because it would cost more to pay them the same. This was a case of "costs plus" justification, the additional factor here being the legitimate aim of the employer to give effect to its genuine decision that the employee should be made redundant. Having identified the additional legitimate aim, the Court looked at whether the treatment was a proportionate means of achieving that aim. The significant level of cost saving was relevant to this, as was the fact that the employee knew of his impending redundancy almost a year prior to notice was given. There had been a failure in this case to formally consult with the employee before notice of redundancy was given but the Court held that in this case, the failure did not result in the employee being deprived of anything of value. There had been lengthy informal consultation and consideration of alternatives, which had already lead to the conclusion that there was no alternative role the employee would have accepted.
The decision is helpful for employers in confirming that costs can form part of the equation and in confining "costs alone" cases to decisions made without any other business context, based on nothing more than saving cost. For more details about the decision, see our employment monthly briefing.
Court of Appeal upholds High Court decision relating to HMRC's decision to withdraw a Singaporean scheme's QROPS status
In our August 2011 bulletin, we reported on the High Court's decision upholding the decision by HMRC to withdraw a Singaporean scheme's QROPS status on the grounds that certain qualifying conditions for the scheme to qualify as a QROPS were not met. On an appeal to the Court of Appeal, the Court of Appeal has upheld the High Court judgment holding that the scheme did not qualify as an "overseas pension scheme" under regulations governing QROPS. Broadly, for a scheme to qualify as an "overseas pension scheme", there must be a system for the approval or recognition by or registration with the Inland Revenue Authority of the country overseas; the overseas pension scheme must also be open to persons resident in that country. The Court of Appeal held that these conditions were not satisfied in this particular case: although there was a system for approval in Singapore governing occupational pension schemes, this scheme was more like a personal pension scheme and therefore fell outside that system. The Court was also not convinced, on the facts, that the scheme was open to Singapore residents.
High Court grants an order for a lump sum to be withdrawn under a debtor's pension fund in enforcement of a judgment debt against the debtor
In Blight & Others v Roger Brewster  EWHC 165 (Ch), the High Court has granted an order effectively requiring the debtor to exercise his right to withdraw a tax-free lump sum from his Canada Life Pension Fund and for a third party order to take effect when that right had been exercised. The claimants in this case were the victims of fraud by the defendant and had taken steps earlier to enforce a judgment debt against the defendant. The Court granted the order requiring the lump sum to be drawn for the benefit of the claimants in exercise of its jurisdiction under section 37 of the Senior Courts Act 1981. Under this section, the Court may grant an injunction or appoint a receiver in all cases in which it appears to the Court to be "just and convenient" to do so. We will produce a more detailed briefing on the judgment shortly.
Pensions Ombudsman Determinations
Enhanced benefits under a severance package were not "money purchase benefits" within the statutory meaning and were therefore subject to the Pension Protection Fund compensation cap
In Marshall (77989/1), the Pensions Ombudsman reviewed whether enhanced pension benefits provided under a severance package were "money purchase benefits" within section 181 of the Pension Schemes Act 1993. The benefits in question had been granted to the complainant, Mr Marshall, who had received a severance payment on leaving employment, the bulk of which (approximately £320,000) he had indicated he would like to be treated as an enhancement to his pension under the executive pension scheme of which he was a member. Later, Mr Marshall received a benefit statement from the scheme stating that his benefits had been "augmented by a £320,000.00 special contribution paid" on his behalf (among other things). Subsequently, in 2007, the scheme entered a Pension Protection Fund assessment period and the appointed independent trustee decided to treat the £320,000 payment as an employer contribution to fund an augmentation of Mr Marshall's defined benefit rather than to provide money purchase benefits. As a result of the treatment of these benefits as defined benefits, they were subject to the PPF's 90% compensation and the overall compensation cap (which at the time was £26,050 a year). If the augmentation had been considered to provide money purchase benefits, those benefits would have been secured by the trustee outside the PPF and therefore excluded from these reductions.
The Pension Schemes Act 1993 defines "money purchase benefits" as:
"…..benefits the rate or amount of which is calculated by reference to a payment or payments made by the member or by any other person in respect of the member and which are not average salary benefits."
The Pensions Ombudsman held that the additional benefits to which Mr Marshall had been entitled as a result of the severance payment were received "in exchange for" a special employer contribution, rather than "calculated by reference to" it. Consequently, they were defined benefits and subject to reduction to PPF compensation levels.
Estoppel argument raised by the member fails in a claim remitted to the Pensions Ombudsman by the High Court
Mr Grievson, a member of a small self-administered pension scheme had made a complaint to the Pensions Ombudsman about the transfer value that he received from the scheme arguing that, as a result of scheme information supplied to him, he should have received a share of fund i.e. a proportionate share of the assets rather than a smaller transfer value calculated solely by reference to the value of assets. The Ombudsman had rejected the claim and the member appealed to the High Court claiming that he should have been entitled to a higher transfer value under the legal principle of estoppel (broadly, a legal principle that stops a person from relying on facts that are inconsistent with what the person had said before). The High Court had referred the issue of estoppel back to the Pensions Ombudsman to determine. Click here to see our summary of that decision. On referral back to the Pensions Ombudsman for reconsideration of the issue, the member submitted that in the calculation of his transfer value, it would be unconscionable for a scheme trustee and the employer to go back on documents that indicated that his transfer value would be calculated on a share of fund basis.
The Ombudsman held that as Mr Grievson had also been a scheme trustee and an officer of the principal employer of the scheme, his involvement in producing the documents indicating he was entitled to a share of fund, undermined any argument of "unconsionability" i.e. the member was effectively arguing against himself. Also in relation to the estoppel argument, no representation (as is required for an estoppel for representation argument to succeed) had been made as the representor and the representee were not distinct from each other.
Trustees' failure to pay death benefits to a beneficiary within period prescribed by the scheme rules was maladministration
In Parizad (82720/2), the Pensions Ombudsman has found the trustees of the Harvey Nichols Pension Scheme liable for maladministration for failing to pay death benefits to the beneficiary, Mrs Parizad, within the 24 month period prescribed by the scheme's rules.
Mrs Parizad and Ms T Gholikhani ("Ms TG") were sisters of the deceased member. They had been nominated by the members as equal beneficiaries of any lump sum death benefits payable under the scheme. With regard to death benefits, the scheme rules provided that the "Trustees shall have power to pay or apply the whole or any part of that benefit within a period of 24 months after the Member’s … death" to one or more of the five categories of potential beneficiary "in such shares as the Trustees shall in their absolute discretion decide". Following the death of the member, the scheme trustees issued a cheque to Ms TG for half of the lump-sum death benefit (£31,375). They were however informed by Ms TG that Mrs Parizad had mental health problems and could not be told about her sister's death and so carried forward, over several trustee meetings, the issue of paying the remaining lump sum to her. They then decided that they would create a trust, with Ms TG, as a trustee, to hold the remaining benefits on trust for Mrs Parizad but then abandoned the idea because Ms TG would not give them an indemnity for setting up the trust and paying benefits into it. Finally, the trustees informed Ms TG that they had decided to pay the outstanding benefits to the legal executors of her deceased sister's estate, so that they could be distributed under the intestacy laws. HMRC subsequently informed the trustees that paying the death benefit beyond 24 months from the member's death was an unauthorised payment under the Finance Act 2004 and the resultant tax would reduce the £31,375 payment to £9,412. Ms TG obtained a power of attorney for Mrs Parizad in Iran in December 2010 and brought a claim against the trustees on her sister's behalf.
The Ombudsman determined that the failure of the trustees to exercise their discretion to pay the lump sum death benefit to Ms Parizad within the 24 month period was a breach of trust. The Ombudsman also found the trustees were in breach of trust for actively deciding to pay the death benefit to the legal representatives, who were not within the defined categories of potential beneficiary under the scheme rules. Moreover, if the trustees had made a conscious decision to defer payment until after the 24 month period, with knowledge of the tax consequences, then that decision was perverse.
The Ombudsman indicated that the trustees should have set up a trust for Mrs Parizad's benefit as this offered an "ideal" solution to the problem. With regard to the trustees abandoning their plans to set up such a trust because Ms TG was unwilling to provide the trustees with a full indemnity they required, the Ombudsman commented that this was not "appropriate action" on the part of the trustees. The trustees were responsible for exercising the discretionary power to pay the death benefit and should not, in effect, try to pass that responsibility to another party. The Ombudsman did not remit the matter to the trustees to exercise their discretion properly on the basis that "there would be a number of difficulties with that" not least that the discretion strictly no longer existed and the moneys would be subject to tax. Instead, he treated the decision as having been made that Mrs Parizad was the appropriate recipient and directed the trustees to set up a trust for Mrs Parizad's benefit, to receive net of tax the sum of £31,775.40 together with simple interest. Ms TG had asked if she could be a trustee of that trust and the Ombudsman said that was an "eminently sensible suggestion".
Regulator publishes report on the Uniq restructuring
The Pensions Regulator has issued a report in relation to the Uniq group restructuring. In our February 2011 bulletin, we reported on the steps involved in the Uniq restructuring.
Following the restructuring, in July 2011, Greencore Food Limited made a cash offer of £113 million for the entire issued share capital of Uniq plc. This resulted in some £100 million flowing into the Uniq pension scheme. The scheme trustee was then able to enter into a buy-in contract in December 2011 ensuring the members would ultimately receive benefits at least equal to PPF compensation levels. The Regulator's report states that "The Uniq case is a good illustration of a trustee and sponsoring employer working closely and collaboratively with the Regulator and the PPF". However, it has emphasised that where an employer is able to provide appropriate long-term funding through a recovery plan for a defined benefit scheme, this is the best outcome for scheme members and the PPF and that the solution reached in Uniq would not be appropriate in most cases.