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Dawn Heath, Tharusha Rajapakse and Katharina Crinson of Freshfields Bruckhaus Deringer LLP consider the powers of the Pensions Regulator and the civil liability aspects of the proposals made in the Pension Scheme Bill.
Following the general election, the government has reintroduced the Pension Schemes Bill (the Bill) into Parliament.
The Bill includes provisions which will significantly impact on restructuring activity involving financially distressed groups with a UK defined benefit pension scheme.
On the civil liability side, the circumstances in which the Pensions Regulator (the Regulator) can make connected third parties (such as group companies, directors and major shareholders) liable for pension scheme deficits by issuing a ‘contribution notice’ will be significantly widened.
There will be new requirements to give advanced notification and provide statements to the Regulator about the impact of certain corporate activity on a pension scheme. Failure to comply with these requirements could result in new civil penalties of up to £1m.
The Regulator’s investigatory powers will be strengthened, and the Regulator will have a power to require any person to attend an interview and a power to inspect records at parties’ premises (including unannounced raids).
There will also be civil penalties of up to £1m when misleading information is given to pension scheme trustees.
High profile insolvencies in the UK over the last few years have demonstrated that financially distressed companies can face intense, and sometimes highly public, scrutiny if they make decisions that could detrimentally impact a UK defined benefit pension scheme operated within the group. That scrutiny may take place a considerable time after decisions have been taken on restructuring options, when the circumstances of the group have radically changed, and will inevitably be conducted with the benefit of hindsight. For example, companies may face investigations from the Regulator and select committees in Parliament where funds have been returned to shareholders (eg through dividends or capital reductions) many years prior to its financial difficulties.
As signposted in its manifesto,
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