Pension schemes in 'limbo' amid delay to notifiable events regulations

Delays to the Department for Work and Pensions' (DWP) final regulations for notifiable events could risk leaving pension schemes and their sponsors in “limbo”, LCP has said, with further guidance and clarification still needed to address industry concerns.

The DWP previously consulted on proposed changes to the notifiable events regime, which covers major changes to a company’s finances that have to be notified to The Pensions Regulator (TPR) because of their potential impact on the security of the pension scheme.

Whilst industry experts had expected DWP to publish the final regulations in response to the consultation in order for the regulations to come into force this month, the regulations are yet to be published.

In light of this delay, LCP suggested that, by the time they appear and are followed up by guidance from TPR, it is likely to be autumn before the new rules come into force.

This could be a particular concern as industry experts have emphasised the need for further clarity and guidance in a number of key areas.

In particular, LCP noted that the proposed timing of notifications were due to be ‘when a decision has been made in principle’, clarifying however, that there is not necessarily a very precise moment when a business can be said to have made a decision ‘in principle’.

It also suggested that the requirement for accompany statements to be made when ‘main terms of the relevant event have been proposed’ was another subjective milestone.

LCP flagged industry concerns that the definition of the new notifiable events could be so broad that companies may not realise that they applied to them, explaining, for instance, that the breach of the 25 per cent threshold for selling off assets need not be in a single transaction but could be in a series of transactions over a 12-month period.

It noted that the delay puts trustees in a “difficult position” in the intervening period, as they may not be able to use the new regulations as leverage to be given information about corporate transactions that are being considered by the sponsor and could affect the security of the pension scheme.

Adding to this, LCP partner, Laura Amin, commented: “Pension schemes are having to cope with a torrent of new legislation and regulation arising from the Pension Schemes Act.

“It can be very hard for sponsors of DB schemes to plan for ensuring that all legal notification requirements are followed in respect of any corporate activity when both the timing and content of regulations is so uncertain.

“It is important that DWP is clear about its timetable for new regulations and sticks to it so that pension schemes and their sponsors know exactly where they stand. Until they do this, pension schemes are in limbo waiting for the outcome of DWP’s deliberations."

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