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The Pensions Regulator (Regulator) has recently published a statement[1] to assist Insolvency Practitioners (IPs) dealing with occupational pension schemes in employer insolvency scenarios.

Why should IPs be interested?

The statement focusses on the issue of trusteeship and statutory notifications in an insolvency scenario. Some of the key decisions for IPs relate to how pension schemes are managed and who to notify. Getting these decisions wrong could lead to IPs falling foul of the law or unnecessarily prolonging an already complex and time consuming insolvency process.

Who can be appointed trustee of a pension scheme?

Whilst the Regulator confirms its power to make a statutory appointment in certain circumstances[2], it also focusses on the alternatives to this process which involve IPs being appointed themselves as trustees or appointing appropriate independent trustees.

When can an IP act as trustee?

  1. Where the insolvent employer also acted as trustee and the scheme is relatively simple to administer this option can be attractive and gives the IP greater control of the overall process.

What are the benefits of an IP acting as trustee or appointing a trustee?

The Regulator suggests the main benefits are that these options may:

  • shorten the insolvency process by speeding up the resolution of scheme issues; and
  • provide greater certainty on scheme costs.

So why should an IP appoint a trustee?

IPs may well be wary about acting as a trustee of an occupational pension scheme particularly where complex issues are involved which may be time consuming to resolve. Where there is an employer power to appoint a trustee the Regulator suggests that IPs should consider this option because appointing an independent trustee could be beneficial. Such an appointment would potentially free up time for the IPs to progress the remainder of the insolvency and avoid any conflicts if there was uncertainty about the employer’s liability or if there were material section 75 debt claims to deal with.

What should an IP consider when appointing a trustee?

The Regulator confirms that IPs should be satisfied that any potential trustees are:

  • able and willing to act;
  • independent of the scheme, employer and the IP;
  • capable of discharging trustee duties;
  • charging reasonable professional fees (if any); and
  • able to demonstrate relevant Financial Assistance Scheme (FAS)/Pension Protection Fund experience (PPF).

To assist IPs in their deliberations the Regulator suggests considering trustees:

  • on their own register (tpr.gov.uk/trustee-register); or
  • who the PPF considers to have relevant skills on PPF/FAS matters (the PPF’s Trustee Advisory Panel of trustees).

Do the IPs have any notification obligations to comply with?

The Regulator also takes the opportunity to clarify that IPs’ notification duties (under section 120 of the Pensions Act 2004 (where an IP begins to act in relation to a scheme employer) and section 22 of the Pensions Act 1995 (where there is an insolvency event) are separate and distinct duties). Whilst acknowledging that on occasions both duties may be triggered, it would still expect each of these individual statutory obligations to be complied with rather than IPs assuming one overrides the other.

Finally

The contents of the statement will be familiar to most IPs but the timing and reasoning for it may be of more significance. It is possible that the Regulator views its statutory discretion to appoint a trustee as a default option for the IP community. The Regulator appears to be encouraging IPs to be more proactive where possible in taking trustee appointment issues away from the Regulator. The Regulator is currently dealing with a plethora of issues including pensions liberation, public sector schemes, auto enrolment, DC governance, moral hazard issues as well as trustee appointments. The contents of its latest statement could be designed to shorten its “to do” list by at least one.

This post was contributed by Suresh Bhatt. For more information, email blogs@gateleyplc.com or visit www.entrustpension.com.

[1] The Pensions Regulator Statement entitled “Notes for insolvency practitioners: trustees and statutory notices”, September 2015

[2] Section 23 of the Pensions Act 1995


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.