On 8 September 2021, DWP launched a consultation on the proposed amendments to the notifiable events regime under the Pension Schemes Act 2021 (PSA). The regime requires pension scheme trustees or employers, depending on whether the event is “scheme related” or “employer related”, to notify the Pensions Regulator (tPR) of certain prescribed events under section 69 of the Pensions Act 2004.
The proposed new provisions focus on employer rather than scheme related events. The first additional notifiable event is an intended sale by the employer of a “material proportion” of its business or assets, accounting for more than 25% of the employer’s annual revenue or more than 25% of the gross value of its assets, both as measured in the employer’s most recent accounts.
The second new notifiable event is the intended granting or extending of a “relevant security” by the employer over its assets such that, should the employer become insolvent, the secured creditor would be ranked above the scheme in the order of priority for debt recovery. A relevant security is a security granted or extended by the employer, or a subsidiary, the level of which is more than 25% of either the employer’s consolidated revenues or its gross assets.
The PSA also imposes a duty on a “relevant person” to give a further statement to tPR in respect of the two new notifiable events (as well as the existing event, the intended relinquishing of control by a controlling company of the employer company). DWP’s aim is to boost the flow of information to tPR, enabling it to get involved where sponsoring employers intend to make changes which could significantly affect a pension scheme. Please see our earlier flyer (https://www.dentons.com/en/insights/articles/2021/march/30/pension-schemes-act-2021-new-powers-for-the-pensions-regulator) for further information on the new notifiable events.
The consultation will run until 27 October 2021 and seeks views of pension industry bodies and professionals, employers and representative organisations, trustees and scheme managers, and other interested parties on the impact and any unintended consequences of the proposed drafting and approach of the regulations. Please click here for the Consultation. For example, the questions posed by the consultation focus on how the legislation could affect multi-employer schemes and whether there could be any simple ways of apportioning liabilities for these schemes. In addition, DWP is seeking views on concepts in the new notifiable events (concerning types of security which could affect an employer’s ability to support the scheme and the threshold for a material proportion of assets as noted above).
DWP acknowledges that, without clearly drafted regulations, uncertainty concerning the two new events to be notified could lead to considerable work for employers, trustees and tPR. There is a fine balance between aiming to protect schemes from exposure to corporate transactions, which could detrimentally impact schemes, whilst also ensuring that employers can continue to do business without unnecessary delays. Nevertheless, it makes sense, in our view, for the notifiable events regime to capture a business sale (as well as a share acquisition which is already within scope).