There has recently been a spike in the Pensions Regulator’s eagerness to exercise, or threaten to exercise, its powers to make third parties liable for the deficit in a defined benefit (DB) pension scheme.
These powers are to issue contribution notices (CNs) and financial support directions (FSDs). These can only be issued in certain circumstances and only where the Regulator believes it is reasonable to do so. However, there is no cap on the liability that could be imposed. This could, in theory, be very high.
The Regulator is permitted to issue a notice on any person ‘connected’ or ‘associated’ with an employer that participates in (or used to participate in) a UK scheme. Given the wide definition of these terms in the Insolvency Act 1986, it usually means all companies in a corporate group will be caught.
Companies are advised to minimise the risk of the Regulator ever targeting the company by keeping the UK scheme adequately funded or, for example, considering obtaining Regulator clearance for particular transactions that might otherwise have an (indirect) adverse effect on the UK pension scheme.