Staying with matters relating to the weakening of the employer covenant, the Regulator has also published guidance for trustees on the abandonment of defined benefit pension schemes i.e. where a sponsoring employer leaves a scheme and does not provide adequate funds to support the scheme going forward.

The guidance aims to help trustees and others involved in pension schemes recognise arrangements which could lead to scheme abandonment. It guides the trustees in how best to consider such arrangements, and it re-iterates that the starting point for trustees should be that scheme abandonment may not be in the best interests of the scheme members. In particular, the guidance highlights the following key points: 

  • Trustees should give careful consideration to any proposed abandonment, and should be sure to seek independent advice before agreeing to any proposal. 
  • Abandonment is not likely to be in the members’ best interests where the new sponsoring employer is a nominal employer
  • Where a trustee believes that an arrangement could result in abandonment, early discussions should be entered into to consider alternatives.

The guidance is available on the Regulator’s website, using the following link: