On the go: The Association of Consulting Actuaries has called for “comprehensive guidance” to be published before the Pensions Regulator’s new notifiable events regime comes into force, citing the “significant penalties” that apply for non-compliance.
The Department for Work and Pensions opened a consultation in September clarifying when trustees and employers will have to report to TPR.
As Pensions Expert reported at the time, the draft regulations stemming from the Pension Schemes Act 2021 build on the list of events already set out in the Pensions Act 2004.
The government consulted in this area in 2018, setting out “notifiable events”. These are circumstances that “have the potential to cause harm to a pension scheme — for example, by increasing the chances of the sponsoring employer becoming insolvent, or by impacting on the employer covenant”, the new consultation explained.
At present, legislation requires that TPR be notified by the employer when specific events take place. In a consultation response in 2019, the government said it would introduce two new employer-related notifiable events, with the aim of allowing the regulator to get involved earlier, before employers make changes that could adversely impact their pension schemes.
The first event is the intended sale by the employer of a “material proportion” of its business or assets, included because these transactions “frequently indicate a change in covenant support for a pension scheme”, the consultation stated.
The second event set out in the consultation is “the intended granting or extending of a relevant security by the employer over its assets”, an arrangement where, should the employer become insolvent, a secured creditor would be ranked above the pension scheme in priority list for debt recovery.
The draft regulations explained that “relevant security” is a level of security of more than 25 per cent of the employers’ consolidated revenues or its gross assets.
The consultation also proposes that employers or “connected persons” will have to report to TPR with respect to intended transactions agreed “in principle”, for which “the main terms have been proposed”, ensuring the regulator is involved at an earlier point than it is currently.
Pensions specialists said at the time of the new consultation launch that the new notifiable events regime could have a bigger impact on the day-to-day running of pension schemes than TPR’s controversial new criminal powers.
The penalties for non-compliance include a fine of up to £1m and, where false or misleading information has been provided, prosecution under the Pension Schemes Act.
In its consultation response, the ACA said: “Comprehensive guidance is absolutely essential given the increased prominence of the notifiable events regime and significant penalties for non-compliance.”
ACA pension schemes committee chair Peter Williams added: “It would also be helpful if TPR took the opportunity to amend some of its directions as to when events should be notifiable.
“For example, because of the way interest rates have fallen since the directions were first published in 2005, the £1.5m threshold for reporting particular member-related events has resulted in far more events being reportable, which is onerous for administrators and trustees.”
Williams also noted that there are “some uncertainties of interpretation of the legislation, both of the current trustee notifiable events regime and the soon-to-be modified employer notifiable events. The code-related guidance would be the best place in which TPR could set out clearly its expectations”.
He added: “It would also be an opportunity to clarify the requirements for ‘former employers’ who remain liable for [section] 75 debts, and hence contribute to the scheme’s employer covenant, to bring these entities within the notifiable event framework.”
