The final version of the Pension Regulator's Code of Practice on the new material detriment test for Contribution Notices has been laid before Parliament. The code outlines when the Regulator expects to apply the new test and potentially issue a Contribution Notice. The Regulator must believe that a person's act or failure to act is materially detrimental to the likelihood of accrued scheme benefits being received and the Regulator must consider it reasonable to impose the Contribution Notice.
The Regulator expects to apply the test where:
- a scheme is transferred out of the UK;
- the sponsoring employer is transferred out of the UK or replaced with a non-UK entity;
- sponsor support is removed, substantially reduced or becomes nominal;
- a scheme's liabilities are transferred to another scheme leading to a significant reduction of employer support or funding;
- a business model creates a financial benefit from the scheme for the employer or some other person.
Although the code and corresponding legislation will not come into force until the summer, it applies to acts and failures to act from 14 April 2008. The Regulator will issue further guidance later in the year.