Proposed changes to pensions regulation will affect business sales
The UK Government has announced proposed changes to the regime for regulating UK pension schemes. Some of the changes will affect organisations looking to dispose of assets or businesses.
The proposals follow a consultation published by the Government in June 2018 on how to protect defined benefit (DB) pension schemes and create a stronger Pensions Regulator.
The key points to note from the consultation are as follows:
- The Government will consider making certain business and asset sales “notifiable”. Where the disposal includes an employer under a DB scheme that has funding responsibility for at least 20% of the scheme’s liabilities or a sale of a “material proportion” of its business and assets, the transaction would need to be notified to the Pensions Regulator.
- The grant of security on a debt taking priority over a pension scheme will also need to be notified to the Pensions Regulator.
- Under a new “early warning system”, scheme employers, parent companies and possibly others would need to make a declaration of intent to a pension scheme’s trustees in advance of a sale of a “controlling interest” in a sponsoring employer or entering into one of the two new notifiable transactions described above. The declaration would need to explain the transaction and any detriment to the pension scheme.
- Existing civil penalties for non-compliance will be increased. Civil penalties will be proportionate to the seriousness of the breach, but capped at £1m. There will be a new criminal offence of “wilful or reckless behaviour in relation to a pension scheme”, punishable by up to seven years’ imprisonment and/or an unlimited fine.
- The Pensions Regulator’s powers to impose financial support directions will be extended to individuals who are controlling shareholders of a sponsoring employer. However, they will not be extended to directors of connected entities, as had previously been proposed.
Our colleagues Camilla Barry and Stacey Yon provide more detail and their thoughts on the Government’s proposed changes in their article here.