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Pensions Alert - Pensions Regulator to have stronger powers in corporate transactions

The government has issued its first consultation paper on proposals set out in the Pensions White Paper (see our alert for further details) to strengthen the Pensions Regulator’s powers in relation to corporate activity. 

The online consultation includes further details of proposals in the White Paper as well as some new proposals to strengthen the Pensions Regulator’s powers which, if implemented, will impact on corporate activity for groups which operate defined benefit pension schemes. 

The proposals, somewhat light in detail, are aimed at deterring behaviours by pension scheme sponsors and their corporate groups that could detrimentally impact on a defined benefit pension scheme.   The consultation paper includes proposals to give the Pensions Regulator powers to impose new criminal and civil sanctions for a lack of compliance with the new/improved regime. 

As a result of the proposals in the consultation paper and the Pensions Regulator’s mantra to be “clearer, quicker, tougher”, it will be more important than ever for corporate groups to ensure that the impact of corporate activity on their defined benefit pension schemes is carefully considered and appropriately mitigated.

Key proposals that will impact on corporate activity include:

  • New criminal penalties to punish “wilful or grossly reckless behaviour” of directors in relation to a defined benefit scheme, failure to comply with a contribution notice (issued under the Pensions Regulator’s anti-avoidance powers) and failure to comply with the new framework for notifying the Pensions Regulator about corporate activity.
  • A new civil penalty of up to £1m to be imposed by the Pensions Regulator for any non-compliance with existing and new legislative requirements, with the most serious breaches attracting the highest level of penalty.
  • Expanded requirements to notify the Pensions Regulator of certain corporate events, with an obligation to notify some events earlier than is currently the case, along with potential civil and criminal penalties, including custodial sentences, for failure to comply.
  • Corporate groups being obliged, before proceeding with any material corporate transaction, to provide scheme trustees and the Pensions Regulator with a “declaration of intent” statement on the impact of the transaction.  The declaration would need to include details of the transaction, any mitigation proposed in relation to the pension scheme and whether the trustee has agreed to the proposed transaction and the mitigation package.  Failure to provide this statement could result in a civil penalty up to £1m.

For further details about the proposals in the consultation, please download our alert below.

Freshfields Pensions Consultation Alert - July 2018 (online)
(PDF - 2.7 MB)

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