The Pensions Regulator

Pensions Regulator publishes guidance on multi-employer pension schemes

Ref: PN05-34
23 November 2005

The Pensions Regulator has today published guidance for multi-employer schemes, outlining actions that need to be taken in the event of an employer withdrawing from such a scheme.

Since September 2005, employers wishing to withdraw from a multi-employer scheme have had to fund any remaining debt on a full buy-out basis - the amount it would cost to buy out the members' benefits by purchasing annuities. This gives members greater protection should an employer stop participating in a pension scheme.

However, employers can modify their share of the debt owed to the scheme by entering into an arrangement with the trustees and the guarantor to guarantee part of the debt - this is a withdrawal arrangement. They must gain approval from the Pensions Regulator for this arrangement.

The regulator's guidance sets out how, and in what circumstances employers can apply for a withdrawal arrangement, focussing on what will be required from employers and what the regulator will consider in granting approval.

The regulator plans to collect feedback on the guidance and revise it in the New Year.

To read the full guidance or to apply for approval of a proposed withdrawal arrangement visit www.thepensionsregulator.gov.uk. The application form can be sent via post or electronically.

Editor's notes

1. A multi-employer scheme is a pension scheme that accepts contributions from a number of employers. All the employers are responsible for the pension liabilities of the members.
2. Any withdrawal arrangement must be agreed between the ceasing employer, the trustees and the guarantor taking on part of the debt. The arrangement must then be approved by the Pensions Regulator. If the regulator does not approve the arrangement, the withdrawing employer is liable to pay the debt calculated on a full buy-out basis.
3. The Pensions Regulator has a number of powers which can be used when approving a withdrawal, such as issuing a direction to suspend trustees' power to enforce the withdrawal debt; a direction modifying the statutory debt due from the employer; and a direction deeming that the approval arrangement is no longer required.
4. The Department for Work and Pensions (DWP) have published the regulations on multi-employer schemes. These are The Occupational Pension Schemes (Employer Debt) Regulations 2005/678 and The Occupational Pension Schemes (Employer Debt) (Amendment) Regulations 2005/2224.
5. The Pensions Regulator has been established as the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It has replaced Opra which no longer exists.
6. The new powers of the Pensions Regulator include the ability to:
7. • collect more detailed scheme information;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates;
   • prohibit trustees who are judged not fit and proper to carry out their duties; and
   • the Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.