The Pensions Regulator

Clearance

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Appendix B: Contribution notices and financial support directions

Contribution notices

182. The regulator can issue a contribution notice to a person, requiring an amount up to and including the s75 debt which is due from the employer, or the s75 debt which might become due on the winding up of the scheme, to be paid to the scheme or the PPF, if the regulator is of the opinion that the main purpose or one of the main purposes of an act or deliberate failure to act was:
     • to prevent the recovery of the whole or part of a s75 debt which was, or might become, due from the employer in relation to the scheme; or
     • otherwise than in good faith, to prevent such a debt becoming due, to compromise or otherwise settle such a debt, or to reduce the amount of such a debt, which would otherwise become due.
183. A contribution notice may be issued to a person who is party to the act or failure to act and who is also the employer or a person connected or associated with the employer. This includes parties who knowingly assist in the act or failure to act. A contribution notice may be issued to one or more persons.
184. The regulator must consider that it is reasonable to impose liability on a person to pay the sum specified in a contribution notice. This will depend on various matters, examples of which are outlined below:
     
     • the degree of involvement of that person in the act or failure to act; for example, did the person sanction the business deal?
     • the relationship the person has or had with the employer; for example, is the person a director or a senior executive of the employer? Is the person a company that is the parent company of the employer?
     • any connection or involvement the person has or had with the scheme; for example, is the person a trustee of the scheme or an employer in relation to it?
     • whether the act or failure to act was a notifiable event that the person had a duty to notify to the regulator but failed to do so;
     • all the purposes of the act or failure to act, including whether a purpose was to prevent or limit loss of employment;
     • the financial circumstances of the person; for example, the regulator may consider that it is appropriate for less than the full s75 debt to be required if contributions to another scheme would otherwise be materially affected.
185. The regulator does not have to consider a matter listed above if it does not consider that it is relevant, and it will consider other matters outside this list, for example the status of the scheme, if it considers that such matters are relevant.
186. The regulator can issue a contribution notice in relation to acts that occurred, or failures to act that first occurred, on or after 27 April 2004. The regulator can determine to issue a contribution notice up to six years after an act occurred, or up to six years after a failure to act first occurred or continued.
     
     

     Financial support directions

187. The regulator can issue a financial support direction, requiring financial arrangements to be put in place to support a scheme, when the employer is a service company or is insufficiently resourced at the relevant time. There is no requirement for there to have been an act or failure to act. The 'relevant time' is a time determined by the regulator which falls within the period of 12 months ending with the regulator's determination to issue the financial support direction.
188. A financial support direction can be issued to the employer or persons connected or associated with the employer. A financial support direction cannot normally be issued to an individual, except in specific circumstances.
189. Once the regulator has issued a financial support direction, those named in the direction must put forward proposals for financial support for the scheme. If the regulator considers these arrangements to be reasonable in the circumstances, it may issue a notice approving the arrangements.
190. The financial support arrangements which must be put in place under a financial support direction may include, but are not limited to:
     • where an employer is part of a group, all members of the group becoming jointly and severally liable for the pension liabilities in relation to the scheme;
     • the holding company within the group becoming liable for the pension liabilities in relation to the scheme;
     • an arrangement whereby additional financial resources are provided to the scheme.
191. The employer is a service company if:
     
     • it is a member of a group of companies; and
     • its turnover in the latest available statutory accounts is solely or principally derived from amounts charged for providing the services of its employees to other members of the group.
192. The employer is insufficiently resourced if:
     
     • the value of its resources is less than 50 per cent of the estimated s75 debt; and
     • the value of the resources of a person who is connected or associated with the employer, when added to those of the employer, would be 50 per cent or more of the estimated s75 debt.
193. Assessing a person's resources is a complex process. The Pensions Regulator (Financial support directions, etc.) Regulations 2005 prescribe how to determine what constitutes the resources of a person and how to determine, calculate and verify the value of a person's resources.
194. The regulator must consider that it is reasonable to impose the requirements of a financial support direction on a person. This will depend on various issues, examples of which are outlined below:
     
     • the relationship the person has or had with the employer; for example, is the person a company that is the parent company of the employer?
     • the benefits the person has received directly or indirectly from the employer; for example, has the person received assets or dividends from the employer, or shared common security or cash flow arrangements or gained tax advantages?
     • any connection or involvement the person has or had with the scheme; for example, was the person a trustee of the scheme or an employer in relation to it?
     • the financial circumstances of the person.
195. The regulator does not have to consider a matter listed above if it does not consider that it is relevant, and it will consider other matters outside this list, for example the status of the scheme, if it considers that such matters are relevant.
     
     

     Connected persons

196. A person is connected with a company if:
     • he is a director or shadow director of the company, or an associate of such a director or shadow director; or
     • he is an associate of the company.

     Associated persons

197. A person is an associate of an individual if that person is, for example:
     
     • the individual's husband or wife or civil partner;
     • a relative of the individual;
     • a relative of the individual's husband or wife or civil partner;
     • the husband or wife or civil partner of a relative of the individual; or
     • the husband or wife or civil partner of a relative of the individual's husband or wife or civil partner.
198. A person is an associate of any person with whom he is in partnership, and of the husband or wife or civil partner or a relative of any individual with whom he is in partnership.  A Scottish firm is an associate of any person who is a member of the firm.
199. A person is an associate of any person whom he employs or by whom he is employed. Any director or other officer of a company is to be treated as employed by that company.
200. If a person is associated with another person then they are associates of each other.
201. A company is an associate of another company if:
     
     • the same person has control of both, or a person has control of one and persons who are his associates, or he and persons who are his associates, have control of the other; or
     • a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an associate.
202. A company is an associate of another person if that person has control of it or if that person and persons who are his associates together have control of it.
     
     

     Control

203. A person is to be taken as having control of a company if:
     
     • the directors of the company or of another company which has control of it (or any of them) are accustomed to act in accordance with his directions or instructions; or
     • he is entitled to exercise, or control the exercise of, one-third or more of the voting power at any general meeting of the company or of another company which has control of it.
204. Where two or more persons together satisfy either of the above conditions, they are to be taken as having control of the company.
     

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