Material detriment code of practice published for consultation

The Pensions Regulator has today published its draft material detriment code of practice for consultation.

The material detriment test, introduced by the Pensions Act 2008, is a new test for contribution notices, based on whether a sponsor's actions or failures have a materially detrimental effect on the likelihood of members receiving their benefits. 

The code, which targets the new material detriment test, sets out the circumstances in which the regulator expects to use this new power. It aims to provide greater certainty on its use to help trustees, employers and other related parties to understand the practical application of the new ground for contribution notices.

The new material detriment test will come into effect on commencement of the code of practice. The code will only relate to the new ground for contribution notices and has no impact on the other grounds, powers, clearance or scheme funding, which will continue to operate as they do now. As such it will not affect the majority of employers.

Pensions Regulator chief executive, Tony Hobman said, “We have had valuable input from our stakeholders during the writing of the draft material detriment code of practice. We look forward to continuing this work as we move forward into the consultation period, and welcome wider responses from industry on the draft code published today.”

The Department for Work and Pensions has today also released a consultation document which sets out a number of deregulatory changes to the regulator's notifiable events framework and an amendment to the statutory period that applies to the use of financial support directions.

The closing date for submissions on both documents is Friday 6 February 2009.

To view the draft code of practice visit the Pensions Regulator's website.

The view the DWP consultation document visit: www.dwp.gov.uk.

1. After the formal consultation, the final code document, including any revisions, must be approved by the Secretary of State for Work and Pensions and laid before Parliament before it comes into force. Codes of practice are not statements of the law however they do have evidential value, meaning they will be taken into account by the Pensions Regulator Determinations Panel, a court or tribunal where relevant.
2. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
3. • collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports; 
   • issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
   • direct pension schemes as to how to calculate their liabilities and the contributions required;
   • issue a contribution notice where there is a deliberate attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.
     

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