The Pensions Regulator

Regulator reminds insolvency practitioners to comply with Pensions Act

Ref: PN05-36
13 December 2005

Insolvency practitioners are reminded to tell the Pensions Regulator when a company with an occupational pension scheme becomes insolvent.

Under the Pensions Act 2004, the Pensions Regulator has the statutory role of appointing an independent trustee to a pension scheme where the sponsoring employer enters insolvency.

Prior to the Act coming into force in April 2005, insolvency practitioners appointed independent trustees to a pension scheme. However, under the new rules the Pensions Regulator is now responsible for trustee appointments in insolvency.

The regulator selects independent trustees from its trustee register. Trustees on the register are rigorously vetted to ensure that they have the appropriate skills to protect members' benefits.

Clive Pugh, trustee services manager at the Pensions Regulator said:

"It is possible that some insolvency practitioners may be unaware of the regulator's new powers, and are continuing to make their own trustee appointments. We wish to work together with industry to dispel any remaining uncertainty".

Clive Pugh added that:

"We believe that it is not sufficient for insolvency firms to select trustees from our register; it is our role to do that and make the appointment. We have specific statutory powers that the insolvency practitioners do not, and we are best placed to use our powers to protect members' benefits.

"Because of those powers, we believe where an independent trustee appointment is needed before a company becomes insolvent, it will often be preferable that the appointment is carried out by the regulator. We suggest that we be informed of this need prior to insolvency so that a decision whether to appoint can be reached on a case-by-case basis.

"Insolvency practitioners must comply with the Pensions Act, and ensure that they tell us when a company becomes insolvent. We are already having productive talks with the Association of Business Recovery Professionals to raise industry awareness about this issue and we expect that this will increase the number of reports made."

The regulator's primary aim is to help insolvency practitioners comply with the new legislation, but it has the power to issue an improvement notice where insolvency practitioners have failed to do so. The regulator can also remove the trustee appointed and replace them with an alternative trustee.

Editor's notes

1. The legislation regarding appointing trustees in insolvency is found in s23 Pensions Act 1995 as amended by the Pensions Act 2004.
2. Relevant powers of the Pensions Regulator include requiring the provision of reasonable information. The regulator will also require its trustees to provide project plans which it can monitor and compare.
3. Pension schemes where the regulator appoints an independent trustee may be charged lower fees due to the stringent tender process.
4. The Pensions Regulator can issue fines to individuals up to £5,000 and to companies up to £50,000 who fail to comply with an improvement notice.
5. The Pensions Regulator has been established as the new regulator of work-based pensions in the UK, with wider and more flexible powers under the Pensions Act 2004. It has replaced Opra which no longer exists.
6. The powers of the Pensions Regulator include the ability to:
7. • collect more detailed scheme information;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates;
   • prohibit trustees who are judged not fit and proper to carry out their duties; and
   • the Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.