The Regulator has published a reminder stating that the underlying principle for considering clearance of corporate transactions is whether the event is financially detrimental to the ability of the pension scheme to meet its pension liabilities. The statement emphasises that if a corporate transaction is likely to result in a significant weakening of employer covenant, clearance should be sought irrespective of the funding position of the scheme involved.

Another issue to consider in such situations is whether it would be appropriate to seek a materially enhanced level of mitigation in excess of FRS17 / IAS 19.

The Regulator is planning to update its formal guidance on clearance in the summer.

View Norton Rose briefing Update on clearance and moral hazard (April 2007)

This publication is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to a particular matter.