The Pensions Regulator

AbandonmentAbandonment of defined benefit pension schemes

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Obtaining independent advice

16. The arrangements that may lead to abandonment are often very complex and trustees are expected to take independent advice before agreeing to any proposed abandonment arrangement. The advice should be appropriate and commensurate to the arrangement being proposed. In most cases commensurate advice is expected to result in a thorough review of the proposed arrangement and of the implications for the scheme, covering the factors set out in this guidance.
17. Before any work is done by advisers, trustees should scope and cost such advice. Costs issues do not remove trustees' fiduciary duty but trustees should expect that the costs would normally be paid by the employer or party looking to implement the arrangement, and should obtain confirmation of this. Trustees should not agree to any proposed abandonment arrangement without suitable advice, and should not agree to consider the arrangement without ensuring they have secured the resources to finance the advice without jeopardising the scheme's security.
18. Trustees should seek their own independent advisers. However, this does not prevent each party's set of advisers relying on work produced by one firm, provided the scope and nature of that work is common to all parties and the advisers confirm that they are not conflicted or constrained. Whilst parties should not have to replicate work there should be rigorous testing of assumptions relied on by advisers.
19. Trustees should remember that advisers themselves can be subject to conflict where corporate transactions are involved. Trustees are encouraged to seek disclosures, if necessary, from employer's advisers but should be mindful that the same advisers may be subject to conflict and that trustees may not be able to rely upon their advice.
20. Trustees are encouraged to consult with scheme members and make them aware of the type and extent of advice they have obtained.

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