New Pensions Regulator notification requirements for DB scheme employers

The government is consulting on regulations that (a) make changes to the list of employer notifiable events and (b) prescribe the events affecting a DB scheme employer in respect of which a notice and accompanying statement (often referred to as a “declaration of intent”) must be given to the Pensions Regulator (“TPR”) and the scheme trustees. The regulations are intended to come into force on 6 April 2022.

In addition, regulations have been laid before Parliament that will bring the majority of TPR’s new powers and sanctions under the Pension Schemes Act 2021 (the “Act”) into force on 1 October 2021.

Changes to the list of employer notifiable events

The regulations:

• Remove wrongful trading from the list of employer notifiable events because this requirement is ineffective as a director guilty of wrongful trading is unlikely to admit this to TPR. This amendment does not intend to diminish the serious ness of wrongful trading but rather reflect reality.
• Amend the existing employer change of control notifiable event to make it clear that the notification should take place when a decision is principle is made. A decision in principle is the point at which the decision to go ahead with an event is made, prior to any negotiations or agreements being entered into with another party.
• Add two new employer notifiable events:
  • A decision in principle by the employer to sell a material proportion of its business or assets.
  • A decision in principle by the employer to grant or extend a security over its assets where that grant/extension would result in the secured creditor being ranked above the scheme in the order of priority for debt recovery.

New “declaration of intent” requirements

The Act will introduce a requirement for the “appropriate person” to give notice to TPR of certain prescribed events in relation to the employer of a DB scheme and to provide an accompanying statement about the impact of the event on the scheme (often referred to as the “declaration of intent”). A copy of the notice and the accompanying statement must also be given to the trustees of the scheme at the same time that they are given to TPR. The appropriate person is the employer or any person connected or associated with the employer.

The regulations prescribe the following as events in respect of which a notice and accompanying statement must be given to TPR and the trustees:

• 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.
• The intended granting or extending of a security by the employer 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.
• Where the employer is a company, the intended change of control of the employer, in respect of which the main terms have been proposed, or where a change of control occurs without a decision to do so having been taken, the change of control of the employer.

These events are also notifiable events. The notifiable events regime and the declaration of intent regime are separate and, where an event will give rise to obligations under both regimes, both obligations must be complied with. The consultation document states that “[t]he notice and statement will be required at a later point in a corporate transaction than the notifiable event notification, when there is greater certainty as to whether the transaction is going ahead, its nature and the implications for the scheme”.

The regulations also set out the information to be included in the accompanying statement. That information is a description of:

• The event, including, where relevant, the main terms proposed.
• Any adverse effects of the event on the scheme.
• Any adverse effects of the event on the employer’s ability to meet its legal obligations to support the scheme.
• Any steps taken to mitigate those adverse effects.
• Any communication with the trustees about the event.

The consultation closes on 27 October 2021, and the regulations are intended to come into force on 6 April 2022.

TPR’s other new powers and sanctions under the Act

TPR’s other new powers and sanctions under the Act will come into force on 1 October 2021, including:

• The new criminal offences of avoidance of an employer debt, conduct risking accrued scheme benefits, and failure to comply with a contribution notice.
• The new employer resources and employer insolvency tests for issuing a contribution notice.
• The new civil penalty of up to £1 million for:
  • Avoidance of an employer debt.
  • Conduct risking accrued scheme benefits.
  • Failure to comply with a contribution notice.
  • Failure to comply with the notifiable events regime.
  • Knowingly or recklessly providing TPR (or, in certain situations, trustees) with false or misleading information.
• TPR’s new information-gathering powers and the new fixed and escalating penalties for failure to comply with its information-gathering powers.

The regulations also ensure that TPR’s new powers do not have retrospective effect.