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<p>The employer debt legislation (section 75 of the Pensions Act 1995 and the Occupational
Pension Schemes (Employer Debt) Regulations 2005) sets out the requirements on departing
employers where any shortfall between liabilities and assets in a Defined Benefit
pension scheme is treated as due.</p><p> </p><p>Trustees of all occupational pension
schemes including non-associated multi-employer pension schemes have a duty to employers
contributing to the scheme to ensure that the scheme is correctly administered in
accordance with its rules and that the promised benefits are paid. Where a restructuring
event takes place, trustees are required to consult the exiting employer and receiving
employer about the likelihood of the receiving employer being able to meet all the
exiting employer’s liabilities in relation to the scheme. The trustees must also notify
the exiting and receiving employer (in writing) of their decision as to whether they
consider the receiving employer capable of meeting all the exiting employer’s liabilities
to the scheme.</p><p> </p><p>Whilst there is no general requirement for trustees to
consult employers when granting apportionment arrangements to departing employers,
the Occupational Pension Schemes (Employer Debt) Regulations 2005 require the consent
of employers within the scheme when trustees grant Regulated Apportionment Arrangements,
Scheme Apportionment Arrangements and Flexible Apportionment Arrangements to departing
employers.</p><p> </p><p>The Government’s Green and subsequent White Paper on Defined
Benefit pension schemes looked very closely at this issue and considered carefully
what could be done to relieve the pressure some employers face from their obligation
to pay an employer debt.</p><p> </p><p>The White Paper concluded that the existing
arrangements in legislation, along with the deferred debt arrangement introduced in
April 2018, provide enough flexibility for employers to manage their employer debts
and the current “full-buyout” calculation method is the most secure and effective
way of protecting members and remaining employers in a multi-employer scheme.</p>
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