The Association of Consulting Actuaries (ACA) says comprehensive guidance is needed in its response to the consultation on the notifiable events amendments regulation.
Following the government’s consultation on Strengthening the Pensions Regulator’s Powers: Notifiable Events (Amendments) Regulation 2021, ACA says comprehensive guidance is essential and should happen at the very least before the modified provisions come into force.
The government is broadening the events that trustees and employers must notify The Pensions Regulator about for their scheme. The two new employer-related notifiable events are the sale of a material proportion of the business or assets of a scheme employer which has funding responsibility for at least 20 per cent of the scheme’s liabilities; and granting of security on debt to give it priority over debt to the scheme, as well as the removal of wrongful trading as a notable event was outlined in the regulations. An amendment of an existing notifiable event has also been made to section 69A, which requires a relevant person to provide the regulator with notices and statements regarding specific events.
According to ACA, there are areas where the current regime appears to have flaws that could be replicated to some extent in the amended regime. Employer-related notifiable events currently apply to the “employer in relation to the scheme.” In some cases, the insolvency of a “former” employer may result in schemes becoming eligible for PPF compensation. ACA states that “former” employers are not subject to the notifiable events regime, despite being explicitly taught in other cases.
The resulting legal obligations may strengthen the scheme’s covenant. If the intention is to include these former employers in the notifiable events regime, this appears to be an opportunity to make that clear, says ACA.
The current regime imposes a duty on the “employer about the scheme” to report existing notifiable events, and the option of prescribing other “appropriate persons” has not been used. ACA says it applied the same logic to the scope of notifiable events. If the definition of “employer” to determine whether a notifiable event has occurred is expanded, ACA believes that the definition of employers who must report notifiable events should be expanded as well.
ACA says it would also be beneficial if TPR used this opportunity to revise some of its guidelines regarding when events should be reported as well as consider raising the threshold to maintain parity with the original intention or for directions to achieve a similar goal by defining how liabilities should be assessed.
ACA pension schemes committee chair Peter Williams says: “It would also be helpful if TPR took the opportunity to amend some of its directions as to when events should be notifiable. For example, because of the way interest rates have fallen since the directions were first published in 2005, the £1.5m threshold for reporting particular member related events has resulted in far more events being reportable, which is onerous for administrators and trustees.
“There are also some uncertainties of interpretation of the legislation, both of the current trustee notifiable events regime and the soon to be modified employer notifiable events. The Code-related guidance would be the best place in which TPR could set out clearly its expectations.
“It would also be an opportunity to clarify the requirements for ‘former employers’ who remain liable for s75 debts, and hence contribute to the scheme’s employer covenant, to bring these entities within the notifiable event framework.”
