New Clause 4 - Employer debt: trustees’ discretion

Part of Pension Schemes Bill [Lords] – in the House of Commons at 9:03 pm on 16 November 2020.

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‘(1) The following changes are made to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678).

(2) In regulation 2, in the definition of “scheme apportionment arrangement”—

(a) in sub-paragraph (f)(ii), after “apply”, insert “but not if the circumstances in paragraph (h) apply”;

(b) at end insert—

“(h) the consent of the remaining employer or employers shall not be required under (f)(ii) above where all of the following conditions apply—

(i) the departing employer’s debt was treated as becoming due prior to the coming into force of this provision; and

(ii) the departing employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due; and

(iii) the employer in question was operating as an unincorporated business during his participation in the scheme; and

(iv) the trustees or managers consider that, in the context of the scheme overall, taking into account factors such as the scheme’s assets, liabilities and the trustees’ or managers’ most recent assessment of the overall employer covenant, there would be no material benefit to the scheme and its members in seeking recovery of the employer’s liability share from the departing employer.”

(3) In regulation 9, after paragraph (14B), insert the following new paragraph—

“(14C) Condition L is that a debt was treated as becoming due from him under section 75 of the 1995 Act but is excluded under this Condition because—

(a) the employer’s debt was treated as becoming due prior to this Condition coming into force; and

(b) the employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due; and

(c) the employer in question was operating as an unincorporated business during his participation in the scheme; and

(d) at or before the applicable time, the trustees or managers have made a determination not to pursue the debt on the grounds that, in the context of the scheme overall, taking into account factors such as the scheme’s assets, liabilities and the trustees’ or managers’ most recent assessment of the overall employer covenant, seeking recovery represented a disproportionate cost to the scheme and would be of no material benefit to the scheme overall.”’—(Neil Gray.)

This new clause would enable pension scheme trustees to exercise discretion not to pursue employer debt following an employer’s exit from a pension scheme where such debt is below a de minimis threshold. This aims to support unincorporated employers who are now retired for business and for whom the current regulation allows no easements.

Brought up.

Question put, That the clause be added to the Bill.