The Pensions Regulator (TPR) has updated its guidance on clearance and abandonment of defined benefit pension schemes. TPR has said that these changes have been made to ensure that this guidance reflects the expanded TPR following the enactment of the Pensions Act 2008. For more information on the changes to TPR’s powers, please see EPB briefing 177: Proposed changes to the Pensions Regulator’s powers to issue contribution notices and financial support directions.

However, the changes to the guidance are not intended to address the new power of TPR to issue contribution notices on the basis of a “material detriment” to the security of a pension scheme (TPR is currently consulting on a separate Code of Practice relating to this “material detriment” test – see EPB bulletin 22 December 2008).

TPR has also made it clear that there are no changes to the clearance process. TPR says that appendices B and C of the clearance guidance have been amended to the reflect the following changes to TPR’s powers (which are summarised in EPB bulletin 22 December 2008):

  • the additional factors that TPR must consider where relevant, including the reasonableness of a party’s actions in the circumstances, when deciding whether it would be reasonable to issue a contribution notice to that party;
  • the removal of the “good faith” defence against the power of TPR to issue contribution notices under the “main purpose” test;
  • the clarification that a series of acts and failures to act can be considered as a whole by TPR when deciding whether to issue a contribution notice;
  • the extension of TPR’s powers to the issue of contribution notices and financial support directions in respect of separate pension schemes that members have been transferred to;
  • the insufficiently resourced test for financial support directions can also take into account aggregate resources of associated persons; and
  • the date when the legislative changes take effect.  

TPR has amended its abandonment guidance to remove a reference to the “otherwise than in good faith” test for issuing contribution notices.

TPR has stated that it is planning to issue other guidance materials to address subjects including the statutory defence to the material detriment test and some practical guidance about transactions that might fall within the second ground for contribution notices (following the removal of "otherwise than in good faith"). TPR has also stated that no significant change will be made to the definition of type A event in the clearance guidance.