The draft Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2017

26 April 2017

This consultation is mainly aimed at those administering and managing defined benefit multi-employer occupational pension schemes.

This consultation seeks views on ‘The draft Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2017’.

Geographical extent - This consultation applies to England, Wales and Scotland. It is anticipated that Northern Ireland will make corresponding regulations.

The Employer Debt Regulations (s75 Pensions Act 1995) are intended to provide protection for members of defined benefit pension schemes where the employer ceases to participate actively in the scheme. Employer debt is broadly the amount the employer must pay into the scheme when it ceases to participate at a time when there is a shortfall between the scheme’s assets and liabilities.

In response to approaches made by a number of stakeholders with concerns about how the existing employer debt legislation operates for employers in non-associated multi-employer schemes (i.e. schemes where the participating employers are from unconnected businesses or organisations), the Department for Work and Pensions (DWP) undertook a Call for Evidence in March 2015.

The majority of respondents to the Call for Evidence advocated some form of change to the employer debt regime to help employers in non-associated multi-employer pension schemes manage employer debts that arise following an employment-cessation event.

The Pensions and Lifetime Savings Association (PLSA) has welcomed the DWP consultation. Joe Dabrowski, Head of Investment and Governance, Pensions and Lifetime Savings Association, said:

“While at first glance, section 75 employer debt in non-association multi-employer defined benefit (DB) pension schemes might seem to be a minor technical point; this consultation is vital. This issue impacts on some of the UK’s largest DB schemes as well as being a particular concern for many charities participating in multi-employer schemes.

“Under the current regime, companies that do not wish to maintain active membership in the scheme (for example as they have chosen to stop offering defined benefits pensions) are forced to do so unless they are able to pay the Section 75 employer debt. While this may not be a problem for some organisations, for others this might mean being threatened by insolvency if they ceased active membership. The proposals could make the system more sustainable by allowing employers to better manage their risks – in the same way that employers participating in single employer schemes can.

“However, there is little question that in a non-associated multi-employer scheme a departing employer must cover its liabilities to the scheme. So we will need to look carefully at the details of the proposed changes to ensure that the right balance of member protection and employer flexibility is achieved. The strength of the ongoing relationship between employers and the scheme is essential to ensuring this.”

The consultation will run until Thursday 18 May 2017.

See ‘The draft Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2017’ for further details.