UK - The Pensions Regulator (TPR) has published updated guidance on multi-employer withdrawal arrangements, following amendments to government regulations on section 75 debt.

The original Employer Debt legislation, which came into force in 2005, specified how employers should meet its share of any funding shortfall - measured on an annuity buyout basis - when it severs links with a defined benefit (DB) pension scheme.

Although the aim was to stop employers from avoiding their pension liabilities, in practice internal restructuring or the sale of subsidiary companies could trigger an employer debt, so in March the government announced amendments to make the regulations "more flexible".

However, consultants claimed the changes - which came into effect on April 6 2008 - could increase the regulatory burden on schemes, and would see a shift in power form trustees and employers working together to trustees acting alone. (See earlier IPE story: Employer debt changes "increase regulatory burden")

In addition, the industry criticised the way the changes interact with updated clearance guidance from TPR - published at around the same time - as it is unclear in some cases whether employers need to seek approval form TPR before they can exit a multi-employer scheme. (See earlier IPE story: Clearance confuses employer debt rules)

As a result, TPR has now issued an update to its initial guidance to take into account the amendments, although it claimed it is just a "brief overview" of the key messages which will be included in the future "guidance materials" for trustees, employers and advisers, which are expected to be published for consultation "in the coming months".

The update includes brief outlines on TPR's views on:

Payment of statutory debts in multi-employer schemes Withdrawal arrangements and apportionments - including approved withdrawals, regulated apportionments and scheme apportionments How employers and trustees should "weigh up the options" In particular, TPR highlighted trustees should ensure the option they have chosen is "appropriate" for the circumstances of the scheme, and should also consider their decision "in light of their fiduciary duties", while employers are urged to check whether the withdrawal can be considered a Type A event and, if so, whether they need to seek clearance from TPR.

However, the update also warned in certain circumstances an employer debt might be subject to the old regime, so in this case it said trustees, employers and advisers should continue to use the existing guidance on multi-employer withdrawal arrangements.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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