Website Cookie Policy

We use cookies to give you the best possible online experience. If you continue, we’ll assume you are happy for your web browser to receive all cookies from our website.
See our cookie policy for more information.

Practice Areas

More Information

thepartners@wrigleys.co.uk

Leeds: 0113 244 6100

Sheffield: 0114 267 5588

FOLLOW WRIGLEYS:

Send us an enquiry
Close

New Regulatory Powers effective from 1 October 2021

30 September 2021

The provisions of the Pension Schemes Act 2021 creating new criminal offences and financial penalties come into force on 1 October 2021.

The existing anti-avoidance regime confers power on the Pensions Regulator to impose contribution notices on employers and connected / associated persons in prescribed circumstances.  These powers have been strengthened by the Act with the creation of new criminal offences which are punishable by financial penalty (up to £1 million) and / or imprisonment (for a term not exceeding seven years).

The offences include:

- failure to comply with a contribution notice

- avoidance of an employer debt

- conduct risking accrued scheme benefits

The financial penalty may also be imposed in circumstances where a person “knowingly or recklessly” provides false or misleading information to the Regulator and / or trustees.

The offences are committed by “persons” rather than “employers” or those who are “connected or associated” with employers, meaning the Regulator can cast the net more widely for the purposes of identifying those who may have committed an offence.  This has caused some alarm in the industry as trustees and professional advisers fall within the category of persons who could commit an offence. 

There is no clearance regime applicable in respect of the offences, meaning employers and trustees will need to carefully assess the impact of any proposals affecting the pension scheme (whether directly or indirectly).

From 1 October 2021, the Regulator will have the following two new grounds on which to impose a contribution notice:

- where the employer insolvency test is met

In summary, this requires an act or a deliberate failure to act which has the effect of reducing the amount of employer debt recoverable by an underfunded scheme.

- where the employer resources test is met

In summary, this requires an act or deliberate failure to act which has the effect of reducing the value of the resources of the employer and the reduction is material relative to the estimated value of the employer debt.

Sponsoring employers will need to consider these new tests (and the application of any statutory defences) in the context of corporate activity as they could bring it within the scope of the Regulator’s powers.  Code of Practice 12 (Contribution Notices: Circumstances in relation to the material detriment test) has been updated to include the new tests and new Code Related Guidance will come into force on 1 October 2021.  The Guidance provides illustrative examples of the types of transaction which are expected to meet the new tests as well as those that are not.  Transactions which result in the removal or reduction of support by the sponsoring employer, weaken the scheme’s creditor position, or otherwise involve payments to creditors/parties at the expense of the scheme, are potentially caught by the new tests. 

Please do speak to your usual advisor in the pensions team if you are concerned about the Pension Regulator’s powers in the context of any planned corporate activity.

If you would like to discuss any aspect of this article further, please contact Kate Buckham or any of the Pensions team on 0113 243 6100.

You can also keep up to date by following Wrigleys Pensions team on Twitter

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors. 

Kate Buckham View Biography

Kate Buckham

Partner
Leeds

15 Oct 2021

Top 10 FAQs on Covid-19 and Employment law

Employers are currently dealing with a number of issues in relation to the Covid-19 pandemic.

14 Oct 2021

Campaigning and COP26

What are students’ union permitted to do?

07 Oct 2021

Is my stairlift a step closer?

Disabled Adaptations in Leasehold flats and common parts.