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The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018

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EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations contain provisions about debts arising for employers under section 75 of the Pensions Act 1995 (c.26) in respect of occupational pension schemes and also contain consequential amendments. In particular, the Regulations introduce a new option for employers managing section 75 debt, namely the ‘deferred debt arrangement’ which permits employers in specified circumstances to defer payment of the section 75 debt provided certain conditions are met.

These Regulations amend the Occupational Pension Schemes (Employer Debt) Regulations 2005 (“the Employer Debt Regulations”) (S.I. 2005/678), and the Occupational Pension Schemes (Scheme Funding) Regulations 2005 (“the Scheme Funding Regulations”) (S.I. 2005/3377).

Regulations 3 to 11 of these Regulations amend the Employer Debt Regulations.

Regulation 3 inserts new definitions in regulation 2 of those Regulations for ‘deferred debt arrangement ‘and ‘deferred employer’. In addition, the regulation provides a clarified definition of ‘receiving employer’.

Regulation 4 makes a consequential amendment to regulation 6ZA.

Regulation 5 makes amendments to regulation 6A (employment-cessation events: periods of grace) consequential to the relationship between the period of grace and the deferred debt arrangement. In addition, it extends the period for employers to provide a period of grace notice to the trustees or managers of the scheme from within 2 months of the employment-cessation event to within 3 months of the employment-cessation event.

Regulation 6 makes an amendment to regulation 6E (flexible apportionment arrangements) clarifying the date on which a flexible apportionment arrangement takes place where the scheme in question is a frozen scheme.

Regulation 7 inserts a new regulation 6F (deferred debt arrangement) into the Employer Debt Regulations to allow an employer in a multi-employer occupational pension scheme who experiences an employment-cessation event (a ‘deferred employer’) to defer payment of the section 75 debt and to continue as an employer in relation to the scheme if certain conditions are met. The deferred employer will remain responsible for the debt and following certain events will be obliged to pay it.

New regulation 6F(1) provides that a deferred debt arrangement commences on the date that the trustees or managers of the scheme being satisfied that certain conditions set out in paragraphs 6F(2) and (3) have been met consent to the arrangement in writing.

New regulation 6F(2) sets out the conditions for a deferred debt arrangement to take place. The arrangement can be entered into by an employer who has experienced an employment-cessation event, including a situation where the employer has previously entered into a period of grace.

New regulation 6F(3) states further conditions that must be met for the arrangement to take place, namely that the scheme is not in an assessment period or being wound up, and that the trustees or managers of the scheme are satisfied that neither a Pension Protection Fund assessment period in relation to the scheme or a material weakening of the employer’s covenant is likely to occur within 12 months of the date that the arrangement takes place.

New regulation 6F(4) confirms that a deferred employer is treated, for the period that the deferred debt arrangement is in place, as an employer of an active scheme member, and for the purpose of the Employer Debt Regulations and the Financial Support Regulations as an employer in relation to the scheme.

New regulation 6F(5) deals with the effects of the arrangement while it is in place specifying that the deferred employer is treated as if an employment-cessation event had not occurred.

New regulation 6F(6) deals with how a deferred debt arrangement comes to an end.

New regulation 6F(7) deals with how the various ways that the deferred debt arrangement concludes in regulation 6F(6) affect whether and when an employment-cessation event has occurred.

Regulation 8 makes clarifying amendments to regulation 8.

Regulation 9 makes clarifying and consequential amendments to regulation 9.

Regulation 10 amends Schedule 1B to make the commencement and conclusion of a deferred debt arrangement a notifiable event to the Pensions Regulator and to impose notification duties on the trustees or managers of the scheme.

Regulation 11 inserts a new Regulation 19 (Review) and gives the Secretary of State for Work and Pensions a duty to review the provisions in new Regulation 6F and publish a report setting out the conclusions of the review, in accordance with sections 28 to 32 of the Small Business, Enterprise and Employment Act 2015 (c. 26), no later than five years after these Regulations come into force, and subsequently at intervals of not more than five years.

Regulation 12 makes amendments to the Scheme Funding Regulations consequential to the deferred debt arrangement.

A full impact assessment of the effect that this instrument will have on the costs of business, the voluntary sector and the public sector is available from the Department for Work and Pensions at Caxton House, 6-12, Tothill Street, London, SWIH 9NA and is published with the Explanatory Memorandum alongside this instrument on www.legislation.gov.uk.

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