Understanding employer support in multi-employer schemes

Understanding the support employers provide in multi-employer schemes and how to manage employer departures is the focus of new guidance published for consultation today by The Pensions Regulator.

Defined benefit multi-employer schemes and employer departures: guidance for trustees is accompanied by two new e-learning modules which can be accessed on the regulator’s website.

Bill Galvin, the regulator’s acting chief executive, said:

“The support of the employer standing behind the scheme is central in securing members’ benefits. This is just as important in a multi-employer scheme.

“It is of course crucial that trustees understand their duties when an employer departs the scheme. But our draft guidance also reinforces the importance of ensuring that the strength of the employer covenant is regularly reviewed and maintained throughout the scheme’s life.”

The regulator has released this guidance and e-learning now in response to requests for help from trustees, and following new regulations from the Department for Work and Pensions, as part of this year's focus on key issues for defined benefit pension schemes.

The regulator recognises that the employer debt regime for multi-employer schemes is a complex area. The draft guidance aims to help trustees understand their responsibilities and options associated with such schemes, as well as the different mechanisms by which an employer can depart from a scheme.

The guidance is not intended to be an exhaustive technical guide - the regulator expects that trustees will normally need to seek independent professional advice about employer support and departures.

The recent High Court judgment on the Pilots’ National Pension Fund also highlights the importance of understanding which parties support a multi-employer scheme, and the importance of seeking independent professional advice. 

The bite-sized learning covers a short checklist of the areas trustees are expected to understand and a longer, more detailed case study which illustrates the considerations needed when an employer departs the scheme.

The consultation lasts 12 weeks and responses should be submitted by 23 September 2010.

1. This guidance relates to amendments to the employer debt regime introduced by: 
   
   • the Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 (SI 2008/731);
   • the Occupational Pension Schemes (Employer Debt Apportionment Arrangements) (Amendments) Regulations 2008 (SI 2008/1068); and
   • the Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2010 (SI 2010/725).
2. This guidance replaces the ‘Multi-employer withdrawal arrangements’ guidance published in April 2008.
3. As of 6 April 2010, in addition to the option of paying the full section 75 debt, there are now six mechanisms by which an employer can depart from a multi-employer DB scheme and be discharged from their liability to that scheme.
4. This guidance and e-learning is one of the products the regulator is releasing as part of its 2010 DB Campaign - which started with a statement on 09 June. Consistent with draft guidance on employer support published on 15 June, this draft guidance reiterates the importance of ensuring that covenant strength is reviewed and maintained throughout the life of a scheme, not only when an event such as employer departing a scheme occurs.
5. 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:
   • 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 an attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.

• Ben Lloyd 01273 627208
• Katherine Long 01273 811859
• Ruth Hallam 01273 627752
• Out of hours 01273 648496
• www.thepensionsregulator.gov.uk