Changes to the 2005 Regulations are proposed by the draft Occupational Pension Schemes (Employer Debt) (Amendment) and Pension Protection Fund (Multi-employer and Entry Rules) (Amendment) Regulations 2007 (the Amending Regulations).
A consultation paper has been published by the Department for Work and Pensions on the Amending Regulations which sets out the policy behind the amendments.
The consultation will run until 1 October 2007 with implementation of the Amending Regulations due in December 2007.
The principal amendments are as follows:
- the definition of “employment-cessation event” has been amended so that it now includes a situation where all employers cease to have active members in the scheme simultaneously. This means that a section 75 debt (under the Pensions Act 1995) would arise where, for example, a scheme was closed for future accrual and all employers in the scheme therefore ceased to employ any active members at the same time;
- there is an exclusion from the 2005 Regulations for employers offering only money purchase benefits and no section 75 debt would be triggered for such employers on cessation of participation;
- the 2005 Regulations set out five ways of dealing with a section 75 debt:
- liability share;
- scheme apportionment agreement between employer and trustees;
- regulated apportionment agreement between employer and trustees then approved by the Pensions Regulator;
- cessation agreement (simplified version of the existing withdrawal arrangement without reference to the Pensions Regulator); and
- withdrawal arrangement approved by the Pensions Regulator with criteria for approval that should be more easily satisfied than those which currently apply;
- further involvement for trustees in the calculation of assets and liabilities is proposed; and
- a default method for calculation of an employer’s “liability share” of the scheme deficit is introduced. This will apply in the absence of a cessation agreement, apportionment agreement or withdrawal arrangement. The liability share will be calculated on a buy-out basis and liabilities attributable to each employer will be assessed with reference to members’ pensionable service with that employer. View the consultation paper (255.67 KB)