DWP sets out detail of notifiable event regulations for pension schemes

Out-Law News | 21 Sep 2021 | 11:46 am | 2 min. read

The UK’s Department for Work and Pensions (DWP) is consulting on proposals that will require employers to notify the Pensions Regulator (TPR) of events that could have an impact on pension schemes.

The proposals, published in the draft Pensions Regulator (Notifiable Events) (Amendment) Regulations 2021 on 8 September, will require an employer to notify the pensions regulator if there is an intended sale of a material proportion of its business or assets, in respect of which a decision in principle has been reached.

Employers will also have to notify the regulator of the intended granting or extending of a relevant security over its assets, which would mean that, should the employer become insolvent, the secured creditor would be ranked above the pension scheme in the order of priority for debt recovery.

Meanwhile, the regulations also propose to remove wrongful trading as a notifiable event.

Three notifiable events will require both a notice and an accompanying statement, to be provided when there is greater certainty as to whether the transaction is going ahead, its nature and the implications for the scheme.

The statement must indicate the impact on the scheme of the proposed transaction and what action is being taken to mitigate any detrimental effects.

Those three events include the intended sale by the employer of a material proportion of its business or assets, in respect of which the main terms have been proposed.

A notice and statement will also be required where the employer intends to grant or extend a relevant security over its assets which would result in the secured creditor being ranked above the scheme in the order of priority for debt recovery, in respect of which the main terms have been proposed.

If the employer is a company, they will also need to provide a notice and statement in the event that a controlling company intends to relinquish control and the main terms of such a transaction have been proposed, or where the controlling company relinquishes control of the employer company without a decision to do so having been taken.

The DWP is consulting over the likely impact of the new notifiable events, and the burden the changes will impose on employers and trustees.

Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law, said the draft regulations did not address confidentiality or price sensitivity issues.

Tyler said the requirement for employers to notify TPR of events before terms and conditions had been agreed was “rather vague”, and could cause issues for employers due to the addition of a criminal offence for providing TPR with false or misleading information about notifiable events in the Pension Schemes Act 2021.

“These proposals have proven controversial since they were first mooted in a white paper back in March 2018,” he said.

“Potentially, an employer could be caught simply if it picks up the phone to a potential buyer without first notifying TPR and the trustees, as long as ‘a decision in principle has been reached’ on the sale. In a previous consultation paper, the triggering event had been linked to a ‘point at which heads of terms are agreed’,” Tyler said.

The DWP’s consultation is open until 27 October 2021.