Following consultation last autumn, the Government is once again changing the Regulations under s75 Pensions Act 1995.

The changes1 take effect on 6 April 2010. They are intended to facilitate corporate restructurings. They also address some minor technical issues. The Government has postponed any more fundamental rewriting of the Regulations, saying that “this is a complex area that deserves closer consideration”.


Restructurings often involve the transfer of employees from one employer to another. If the transferring employer participates in a defined benefit pension scheme, then the transfer may count as an employmentcessation event for the purpose of the Regulations, meaning that a s75 debt is triggered.

The Government is introducing two new easements: “general” and “de minimis”. The easements potentially apply where a restructuring involves:

  • the transfer of employees between two associated employers (for example, on an intra-group transfer of an undertaking); or
  • a change in the legal status of an organisation (for example, where a partnership is converted into a company, and there is a transfer of employees between the two).

If a restructuring comes within one of the easements, then the transfer of employees will not count as an employment-cessation event, and no s75 debt will be triggered. For s75 purposes, pensionable service with the transferring employer will be attributed to the receiving employer – so that, in effect, the receiving employer steps into the transferring employer’s shoes.

The general easement

The general easement will apply only if:

  • the trustees are satisfied that the receiving employer,will be at least as likely to meet liabilities under the scheme (its own and the transferring employer’s) as it and the transferring employer would have been; and
  • the receiving employer takes over responsibility for all of the transferring employer’s assets, employees, scheme members and scheme liabilities.

The de minimis easement

The de minimis easement will apply only if:

  • the scheme is fully-funded on the PPF basis;
  • the transferring employer accounts for not more than 3% of the scheme’s defined benefit membership, or not more than two defined benefit members;
  • the accrued annual pensions of defined benefit members associated with the transferring employer, taken together, do not exceed a prescribed amount – £20,000 for 2010/11; and
  • the receiving employer takes over responsibility for all of the transferring employer’s assets, employees, scheme members and scheme liabilities.

Further conditions will need to be met if there have been other de minimis restructurings in the previous three years.

Small print

The Regulations as amended list the steps which an employer and a scheme’s trustees will need to take if the employer proposes to rely on one of the exemptions. Employers will want to ensure that the steps are taken within the time limits prescribed in the Regulations. Trustees may determine that any costs they incur are to be met by the transferring employer, the receiving employer or both.

An easement may in some circumstances be invalidated if it later comes to light that the requisite steps were not taken. Where an easement is invalidated, a s75 debt will become due retrospectively, and the transferring employer and the receiving employer will be jointly and severally liable.

Technical issues

The Regulations are being changed to address some minor technical issues. The Government had originally planned to make a number of more substantial changes, for example to deal with defects in the Regulations about “scheme apportionment arrangements”. The Government has decided not to proceed with the more substantial changes. It says that various new points came to light during the course of consultation, and “additional work will be needed”.