GLOSSARY
Defined benefit definition
What does Defined benefit mean?
Benefits calculated by reference to a fixed formula, irrespective of the contributions paid or investment performance. The most common type of defined benefits are final salary and career average (or career average revalued earnings (CARE)). The sponsoring employer is responsible for funding any deficit in the provision of such benefits.
Pensions
Benefits calculated by reference to a fixed formula, irrespective of the contributions paid or in-vestment performance.
The most common type of defined benefits are final salary and career average (or career average revalued earnings (CARE)). The sponsoring employer is responsible for funding any deficit in the provision of such benefits.
View the related practice notes about Defined benefit
Auto-enrolment—the transitional period for DB and hybrid schemes [Archived]
ARCHIVED. This Practice Note has been archived and is not maintained.As well as the option to postpone auto-enrolment, employers which operate defined benefit or hybrid schemes may choose to delay the implementation of auto-enrolment for eligible jobholders until 30 September 2017 (called the transitional period) if certain conditions are satisfied.If the employer delays auto-enrolment for the transitional period in respect of eligible jobholders (and chooses not to apply a postponement period of up to three months following the end of that period), the auto-enrolment obligations will apply:•on the day after the end of the transitional period (ie 1 October 2017), or•if earlier, on the day after the date on which the transitional period ceases to apply (ie because one of the conditions is no longer satisfied)If the employer applies a postponement period following the end of the transitional period, the auto-enrolment obligations will apply on the deferral date.Note that an eligible jobholder who is not already an active member of the scheme can opt in to active membership of the scheme at any time during the transitional period.For further information on postponement, see Practice Note: Auto-enrolment—postponement.Conditions for applying the transitional periodThe conditions that must be met in order for an employer to apply the transitional period
Auto-enrolment—certification of DB schemes
What is certification and when is it required?The process of determining whether a pension scheme satisfies the test scheme standard for auto-enrolment purposes is referred to as certification.For defined benefit schemes (or the defined benefit element of hybrid schemes), an employer can:•certify that the scheme (or defined benefit element of a hybrid scheme) satisfies the test scheme standard for the purposes of its enrolment duties, or•delegate the certification of the scheme to the actuary in certain circumstancesThere are also certain circumstances in which the actuary must certify the scheme.For further information on the test scheme standard for defined benefit schemes, see 'Defined benefit occupational pension schemes' in Practice Note: Auto-enrolment—what types of scheme may be used?Note that hybrid schemes are defined, for the purposes of auto-enrolment only, as schemes that are neither wholly money purchase nor wholly defined benefit. They generally have elements of both types of benefits and, depending on the type of scheme involved, they may need to satisfy a combination of the defined benefits quality requirement and the money purchase quality requirement or they may only need to satisfy either of the requirements (for further information on the different types of hybrid scheme and the quality requirements that apply to them, see Practice Note: Auto-enrolment—hybrid schemes and the quality requirements).
Types of pension arrangements for employees
Ways of accruing pension benefitsThere are a variety of possible pension arrangements for employees. The main options include:•occupational pension schemes•personal pension schemes•employer-financed retirement benefits schemes (EFRBS)•master trusts (including the National Employment Savings Trust (NEST) since October 2012)•the state pensionEmployees may be members of and contribute to more than one pension arrangement at the same time eg the employer's occupational pension scheme and the employee's own personal pension scheme.Occupational pension schemesOccupational pension schemes can be set up as:•defined benefit (DB) schemes•defined contribution (DC) schemes•hybrid schemes•mixed benefit schemes•cash balance schemes•small self-administered schemes (SSASs)•sectionalised pension schemesOccupational pension schemes (whether DB or DC) may also provide a facility for employees to top-up their benefits by paying additional voluntary contribution (AVCs) to the scheme (ie in addition to the ordinary contributions they are required to make under the scheme rules).The two main types of defined benefit schemes are:•final salary•career average revalued earnings (CARE)Defined benefit—final salary schemesIn defined benefit schemes, employees' benefits are defined in the scheme rules. In a final salary scheme, benefits are calculated by reference to a proportion of their final pensionable salary for each year of pensionable service ie employees accrue a proportion of their final pensionable salary in pension for each year of pensionable service (known
Restructuring defined benefit schemes
An employer may propose the restructuring of a defined benefit pension scheme for a variety of reasons. These include:•the need to ensure that the pension scheme complies with and properly reflects recent statutory and case law developments•a desire to harmonise pension provision across the relevant corporate group, and•a desire to control or minimise future pension costsTypes of scheme restructuringCommon ways of restructuring defined benefit schemes include:•changing the scheme’s accrual rate for future service (eg from 1/60th of final salary for each year of pensionable service to 1/80th)•changing from final salary to career average accrual rates•pension scheme incentive exercises (eg an enhanced transfer exercise)•closing the scheme to new entrants•closing the scheme to future accrual (with or without retaining a link to final salary)•merging one or more schemes•buying out members' benefitsFor more information, see:•Pension scheme incentive exercises•Changing from final salary to career average accrual rates•Scheme closure—overview•Pension scheme mergers—considerations for employers and trustees•De-risking—pension buy-outs and buy-ins•Preserving a final salary link—what does it mean?Issues to consider when restructuring schemesThe options available to the employer as regards the actual nature of the proposed restructuring will depend on the desired objective, and the various legal constraints and possibilities that will arise to shape the nature of the restructuring exercise. Issues to
Changing from final salary to career average accrual rates
Reducing the financial burden of defined benefit schemes on employersRecent years have seen many employers seeking to escape or limit their exposure to the rising costs of defined benefit pension schemes and the risks that the operation of such schemes entail. Many employers have sought to achieve this by either restricting access to their defined benefits scheme (so new entrants are no longer admitted to membership) or, in more extreme cases, closing the scheme to the future accrual of benefits.Alternatively, employers may be able to change the scheme’s operative provisions so that benefits accrue on a less generous basis. One way of doing this is to alter the scheme so that members no longer accrue benefits on a 'final salary' basis (ie by reference to salary at or near to the date on which pensionable service ends) but rather on a “career average” basis (ie by reference to salary averaged over a specified period, typically the relevant member’s period of active membership of the scheme).Making such a change involves the worsening of benefits and poses challenges from both an employment law and pensions law perspective. Careful consideration of the potential risks and prior planning of the process (including the approaches to be made to both the members and the trustees) should help to minimise the
The impact of regulatory and legal changes on facilities agreements
The impact of regulatory and legal changes on facilities agreements This Practice Note discusses the key provisions of facilities agreements that are impacted by regulatory change, focusing on the following areas: • Brexit • prohibition on 'big four' auditors clauses • impact of Basel III and Capital Requirements Directive IV (CRD IV) and CRD V • reform of benchmarks • US Foreign Account Tax Compliance Act 2010 (FATCA) and Common Reporting Standard (CRS) tax evasion measures • contractual bail-in under Article 55 of the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) and the US Qualified Financial Contracts (QFC) Stay Rules • sanctions, bribery and corruption and money laundering • prohibition on restrictive contractual clauses and other competition law issues • defined benefit pensions schemes • the National Security and Investment Bill • regulation of sustainable finance • guidelines on loan origination and monitoring, and • DAC 6 This Practice Note assumes that the borrower is a UK corporate and the facilities agreement is governed by English law and based on a market standard such as the relevant Loan Market Association (LMA) recommended form of primary lending document. This Practice Note focuses primarily on the impact of settled legislation or regulation. For information on proposals and regulatory and legal developments at an earlier stage, see Practice Note: Hot topics for Banking & Finance lawyers. Brexit The end of the implementation period may require some amendments to new and existing facility documentation. Practice
Engaging in scheme funding negotiations
Engaging in scheme funding negotiations THIS PRACTICE NOTE APPLIES TO DEFINED BENEFIT OCCUPATIONAL PENSION SCHEMES CORONAVIRUS (COVID-19) UPDATE: The coronavirus pandemic has had a detrimental impact on the funding levels of a lot of DB schemes and on their employer covenant. The Pensions Regulator (TPR) has issued various guidance documents, including DB scheme funding and investment COVID-19 guidance for trustees and the Annual Funding Statement 2020, to help DB trustees deal with funding issues, including employer covenant changes, employer requests for funding easements (eg to reduce or suspend deficit repair contributions), completing ongoing valuations and changes to recovery plans. For further information, see Practice Note: Coronavirus (COVID-19)—the pensions implications for trustees — Funding impact for DB schemes. FORTHCOMING DEVELOPMENT: The Pensions Regulator (TPR) is working on the design of a new code of practice for the funding of defined benefit (DB) schemes, which will provide clearer funding standards and implement measures introduced through the Pension Schemes Act 2021, including the requirement for a long-term funding strategy. On 3 March 2020, TPR published its first consultation on the revised DB code of practice, which focuses on the principles behind the new code. TPR proposes a ‘twin-track’ compliance approach to how it oversees the funding arrangements of DB pension funds. Schemes that can provide required information on investments and risks
Early leavers—preservation
Early leavers—preservation THIS PRACTICE NOTE APPLIES IN RELATION TO OCCUPATIONAL PENSION SCHEMES In this Practice Note, references to the trustees of a scheme include a manager of that scheme. Preservation requirements Occupational pension schemes are required by statute to provide certain benefits for active members when their pensionable service ends before normal pension age (ie to preserve benefits for them in the scheme). Members who leave a scheme (ie cease to be in pensionable service) before normal pension age are referred to as early leavers (or deferred members). The benefits that schemes must preserve for an early leaver are called a short service benefit (or a deferred pension). The preservation requirements which occupational pension schemes must comply with in respect of early leavers are contained in: • the Pension Schemes Act 1993, Pt IV, ss 69–82 (PSA 1993), and • the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991, SI 1991/167 Insofar as the early leaver has accrued contracted-out salary-related (COSR) rights which are preserved within the scheme, separate legislative provisions dictate how these rights should be treated. For further information, see Practice Note: Legal regime applicable to Section 9(2B) rights and GMPs from 6 April 2016. The preservation requirements are not overriding (ie they do not apply automatically to schemes regardless of the provisions of their trust deed and rules). A scheme's rules are required to contain provisions that comply with
Restructuring and insolvency—Austria—Q&A guide
Restructuring and insolvency—Austria—Q&A guide This Practice Note contains a jurisdiction-specific Q&A guide to restructuring and insolvency in Austria published as part of the Lexology Getting the Deal Through series by Law Business Research (published: April 2022). Authors: Freshfields Bruckhaus Deringer—Friedrich Jergitsch; Jasmin Julia Denk 1. What main legislation is applicable to insolvencies and reorganisations? Insolvency The legislation applicable to the insolvency of natural persons and companies having their centre of main interest in Austria is the Austrian Insolvency Code (the Insolvency Code) as amended. The Insolvency Code provides for, in principle, three different proceedings: • bankruptcy proceedings; • reorganisation proceedings with self-administration (debtor in possession proceedings); and • reorganisation proceedings without self-administration. In addition to the Insolvency Code, the procedures for the restructuring and orderly winding up of credit institutions, financial institutions that are subject to supervisory consolidation and particular financial holding companies are established in the Act on the Recovery and Resolution of Banks (BaSAG), which has implemented Directive 2014/59/EU on the recovery and resolution of credit institutions and investment firms (BRRD) into national Austrian law. Further, the Austrian civil law, company law, labour law, information technology or intellectual property law, as well as tax law, include, inter alia, insolvency related provisions. Restructuring and reorganisation In relation to the restructuring of viable and (still) solvent companies and entrepreneurs, which are in financial difficulties, the Austrian Restructuring Code (the Restructuring Code) offers a novel preventive restructuring
The UK Stewardship Code
The UK Stewardship Code Background The origins of the UK Stewardship Code lie in Sir David Walker’s final review of corporate governance in UK banks and other financial institutions, along with his final recommendations (Walker Review), published on 26 November 2009. The Walker Review was principally driven by a perception that corporate governance failures contributed to the financial crisis in the UK that began towards the end of 2008, and it recommended a number of changes to the UK corporate governance regime. These included recommendations that the then existing Code on the Responsibilities of Institutional Investors prepared by the Institutional Shareholders’ Committee (ISC Code) should be ratified by the Financial Reporting Council (FRC) to operate as a stewardship code for institutional investors, setting out principles of best practice to be applied on a ‘comply or explain’ basis. Following a consultation, the FRC published the first version of the UK Stewardship Code in July 2010, which was largely based on the previous ISC Code. The Stewardship Code supplements the UK Corporate Governance Code (UKCG Code) and aims to enhance the quality of engagement between institutional investors and companies. It is thought that this, in turn, will help to improve long-term returns to shareholders and result in the efficient exercise of governance responsibilities. Versions The current version of the UK Stewardship Code (2020 Stewardship Code) was published in October 2019 and applies
View the related precedents about Defined benefit
Deed of apportionment of liability—Flexible apportionment
Deed of apportionment of liability—Flexible apportionment This Deed is made the [insert day] day of [insert month] 20[insert year] Parties 1 [Insert full company name] registered in England and Wales with company number [insert number] and having its registered office at [insert registered company address] (the “Departing Employer”); 2 [Insert full company name] registered in England and Wales with company number [insert number] and having its registered office at [insert registered company address] (the “Receiving Employer”); and 3 [[Insert full name of company] registered in England and Wales with company number [insert number] and having its registered office at [insert registered company address] OR [insert individual name(s)] of [insert individual address(es)]] (the “Trustees”). Background: (A) [Insert full name of scheme] (the “Scheme”) was established by an [interim OR definitive] deed dated [insert date]. (B) The Scheme is currently governed by a trust deed dated [insert date], as amended by the deeds executed after it[, details of which are set out in Schedule 1 to this Deed] (the “Trust Deed”). The rules of the Scheme (the “Rules”) are set out in Schedule [insert number] to the Trust Deed. (C) The Trustees are the present trustees of the Scheme. (D) The Departing Employer and Receiving Employer are both participating employers in the Scheme. (E) [Set out brief background as to the circumstances in which the departing employer no longer employs/will no longer employ any active
Deferred Debt Arrangement—Deed
Deferred Debt Arrangement—Deed This Deed is made the [insert day] day of [insert month] 20[insert year] Parties: 1 [●] a limited company incorporated and existing under the laws of England and Wales (registered in England and Wales No. [●]) whose registered office is at [●] (Deferred Employer); and 2 [●] a limited company incorporated and existing under the laws of England and Wales (registered in England and Wales No. [●]) whose registered office is at [●] (Trustees). Background (A) [●] (Scheme) was established by a[n] [interim OR definitive] trust deed dated [●]. (B) The Scheme is currently governed by a trust deed dated [●], as amended by the deeds executed after it[, details of which are set out in the Schedule to this Deed] (Trust Deed). The rules of the Scheme (Rules) are set out in Schedule [●] to the Trust Deed. (C) The Trustees are the present trustees of the Scheme. (D) The Deferred Employer is a participating employer in the Scheme. (E) [Set out brief background as to the circumstances in which the Deferred Employer no longer employs any active members of the scheme or has entered a period of grace]. As a result, the Deferred Employer has ceased to employ any active members of the Scheme which [would trigger OR would have triggered] an ‘employment-cessation event’ (as defined in Regulation 6ZA of the Occupational Pension Schemes (Employer Debt)
Share purchase agreement—pro-buyer—corporate seller—conditional—long form
Share purchase agreement—pro-buyer—corporate seller—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 [Insert name of selling corporate entity] incorporated in [England and Wales OR [insert country of incorporation] OR with registered number [insert company number] whose registered office is at [insert address] (the Seller); 2 [Insert name of purchasing corporate entity] incorporated in England and Wales OR [insert country of incorporation] OR with registered number [insert company number] whose registered office is at [insert address] (the Buyer), and 3 [Insert name of guarantor entity] incorporated in England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Guarantor) [(each of the Seller, the Buyer and the Guarantor being a Party and together the Seller, the Buyer and the Guarantor are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 1. (B) The Seller is the legal and beneficial owner of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Seller has agreed to sell and the Buyer has agreed to purchase the Sale Shares on the terms of this Agreement. (D) The Guarantor
Share purchase agreement—pro-buyer—individual sellers—conditional—long form
Share purchase agreement—pro-buyer—individual sellers—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 The several persons whose names and addresses are set out in Schedule 1 (together the Sellers), and 2 [Insert name of purchasing corporate entity] incorporated in [England and Wales OR [Insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Buyer), [(each of the Sellers and the Buyer being a Party and together the Sellers and the Buyer are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in[ England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 2, Part A. (B) The Sellers are the legal and beneficial owners of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Sellers have agreed to sell and the Buyer has agreed to purchase the Sale Shares on the terms of this Agreement. The parties agree: 1 Definitions and interpretation 1.1 In this Agreement[ unless the context otherwise requires]: Accounts • means the audited accounts of[ the Company OR each Group Company and the audited consolidated accounts of the Group] [ for the accounting reference period ended on the Accounts Date OR for each of the last [insert number] consecutive accounting
Pensions warranties—group personal pension scheme—share purchase agreement
Pensions warranties—group personal pension scheme—share purchase agreement Replace Schedule 4, paragraph 19 of Precedent: Share purchase agreement—pro-buyer—corporate seller—conditional—long form with the following: 1 Pensions 1.1 Except as provided for by the Pension Scheme, the Company is not and has never participated in an arrangement or agreement to provide pensions, annuities, lump sums, gratuities or similar benefits on retirement, long-term ill-health or death, or pursuant to a pension sharing order, in relation to the service or historic service of a present or former employee of the Company or any other person, or for the benefit of that individual’s dependents. 1.2 The Pension Scheme is a group personal pension scheme arranged by the Company for the benefit of its employees. 1.3 All benefits under the Pension Scheme are provided on a money purchase basis. No assurance, guarantee or promise has been made to any current or former employee of the Company or any other person as to the amount of benefits to be provided under the Pension Scheme. 1.4 Copies of the following documents have been Fairly Disclosed to the Buyer: 1.4.1 the agreement between the Company and the Pension Scheme provider; 1.4.2 all documents issued to members (including all explanatory booklets, correspondence and announcements (other than individual benefit statements)) of the Pension Scheme, and current and former employees of the Company in respect of the Pension Scheme; 1.4.3 details of all members of the
Share purchase agreement—pro-seller—corporate seller—conditional—long form
Share purchase agreement—pro-seller—corporate seller—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 [Insert name of selling corporate shareholder] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Seller), and 2 [Insert name of purchasing corporate entity] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Buyer), [each of the Seller and the Buyer being a Party and together the Seller and the Buyer are the Parties.] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 1. (B) The Seller is the legal and beneficial owner of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Seller has agreed to sell and the Buyer has agreed to purchase the Sale Shares on the terms of this Agreement. The parties agree: 1 Definitions and interpretation 1.1 In this Agreement[ unless the context otherwise requires]: Accounts • means the audited accounts of [the Company OR each Group Company and the audited consolidated accounts of the Group] [ for the accounting reference period ended
Statement of investment principles (SIP) for defined benefit (DB) pension scheme
Statement of investment principles (SIP) for defined benefit (DB) pension scheme THE [insert name of pension scheme] PENSION SCHEME This statement of investment principles is effective from [insert date]. 1 Statement of investment principles 1.1 Purpose of statement This statement sets out the principles governing the decisions about the investment of the assets of the [insert name] Pension Scheme (the Scheme). This statement is issued by the Trustees of the [insert name] Pension Scheme (the Trustees) to comply with the Pensions Act 1995, s 35. 1.2 Review The statement will be reviewed annually. A special review may be undertaken at any time if the Trustees think that there has been a significant change in investment policy or any other circumstances affecting the Scheme. 1.3 Advice The Trustees have obtained and considered written advice on the content of this statement in a letter from [insert name of investment consultant or actuary]. [insert name] have confirmed to the Trustees that they are qualified by their ability in a practical experience of financial matters and have the appropriate knowledge and experience of the management of the investments of such schemes to give the advice required by the Pensions Act. 1.4 Consultation The Trustees have consulted the Employers [insert name] about the content of this statement. 1.5 Investment powers The Scheme is governed by its Trust Deed and Rules which set out all of the benefits in detail and specifies the
Share purchase agreement—pro-buyer—short form
Share purchase agreement—pro-buyer—short form This Agreement is made on [insert day and month] 20[insert year] Parties 1 [Insert name of selling corporate shareholder] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Seller), and 2 [Insert name of purchasing corporate entity] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Buyer) [(each of the Seller and the Buyer being a Party and together the Seller and the Buyer are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 1. (B) The Seller is the legal and beneficial owner of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Seller has agreed to sell and the Buyer has agreed to purchase the Sale Shares on the terms of this Agreement. The parties agree: 1 Definitions and interpretation 1.1 In this Agreement[ unless the context otherwise requires]: Accounts • means the audited accounts of [the Company OR each Group Company and the audited consolidated accounts of the Group] [for the accounting reference period ended on the
Share purchase agreement—pro-seller—individual sellers—unconditional—long form
Share purchase agreement—pro-seller—individual sellers—unconditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 The several persons whose names and addresses are set out in Schedule 1(together the [insert address] (the Sellers), and 2 [Insert name of purchasing corporate entity] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Buyer), [(each of the Sellers and the Buyer being a Party and together the Sellers and the Buyer are the Parties).] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [England and Wales OR [insert country of incorporation]]. Details of the Company are set out in Schedule 2. (B) The Sellers are the legal and beneficial owners of the Sale Shares (as defined below), being in aggregate the entire allotted and issued share capital of the Company. (C) The Sellers have agreed to sell and the Buyer has agreed to purchase the Sale Shares on the terms of this Agreement. The parties agree: 1 Definitions and interpretation 1.1 In this Agreement[ unless the context otherwise requires]: Accounts • means the audited accounts of [the Company OR each Group Company and the audited consolidated accounts of the Group] [for the accounting reference period ended on the Accounts Date OR for each of the last [insert number] consecutive
Share purchase agreement—long form pensions warranties (where target company has a defined benefit (DB) scheme)
Share purchase agreement—long form pensions warranties (where target company has a defined benefit (DB) scheme) This precedent has been prepared on the basis that the drafter is acting for the buyer Drafted on the basis that the target company (the Company) is a subsidiary of the Seller. You are strongly advised to involve a pensions specialist at the earliest opportunity. 1 Definitions For the purposes of paragraphs 2 to 9 inclusive: Employee means a present or former employee, officer or director of the Company [or of any Group Company] [and any other person taking part in the management of the affairs of the Company]; Pension Scheme[s] mean[s] [[name(s) of scheme(s)] OR an arrangement or practice for the payment of, or contribution towards, an annuity, pension, lump sum, gratuity or similar benefit to be given on retirement, ill-health, death or change in service status, or pursuant to a pension sharing order, in relation to the service or historic service of an Employee or any other person, or for the benefit of that individual’s dependants]. 2 No other obligations or commitments Except as provided for by the Pension Scheme[s]: 2.1 [the Company is not OR no Group Company is] participating and never has participated in any agreement or arrangement, or has entered into any obligation or commitment (whether funded or unfunded and whether legally binding or otherwise), to provide or contribute towards any pensions, annuities,
View the related q&as about Defined benefit
Where an employee is transferring from one employer to another by virtue of TUPE, where the transferor is the parent company and the transferee is the subsidiary what are the options for the group companies in respect of the transferring employee's occupational pension? Would the answer change where the transferor has a smaller shareholding?
Where an employee is transferring from one employer to another by virtue of TUPE, where the transferor is the parent company and the transferee is the subsidiary what are the options for the group companies in respect of the transferring employee's occupational pension? Would the answer change where the transferor has a smaller shareholding? We have assumed that the transferor's scheme is an occupational pension scheme—the answer would be different if the transferor had a contractual obligation to contribute to a transferring employee's personal pension scheme. The answer will depend on the circumstances. Where the transferor employer and the transferee are in the same group of companies, it is possible they both participate in the same occupational pension scheme. In that case, the employees may be able to continue their membership of the scheme on the same terms and the transfer will have little impact. It may be less likely that a joint venture company would participate in the transferor's scheme though certainly not impossible. If the transferee employer does not participate in the transferor employer's scheme, the transferring employees' pensionable service in the transferor's scheme will terminate as a consequence of the transfer. Depending on what scheme the transferee offers and any arrangements for a bulk transfer between the schemes, the transferring employees could be disadvantaged. For example, if the transferor employer has a defined benefit scheme, the
The wife of a deceased member has requested information regarding the deceased member's pension from the trustees of a pension scheme in order to support a medical negligence claim, but the wife is neither a current or prospective beneficiary under the scheme. In these circumstances: (i) if the scheme trustees do not disclose the information and the wife complained to the Pensions Ombudsman, would the complaint fall within the remit of the Ombudsman, and (ii) if the complaint does fall within the Pensions Ombudsman’s remit and the complaint is successful, what award could the Ombudsman make?
The wife of a deceased member has requested information regarding the deceased member's pension from the trustees of a pension scheme in order to support a medical negligence claim, but the wife is neither a current or prospective beneficiary under the scheme. In these circumstances: (i) if the scheme trustees do not disclose the information and the wife complained to the Pensions Ombudsman, would the complaint fall within the remit of the Ombudsman, and (ii) if the complaint does fall within the Pensions Ombudsman’s remit and the complaint is successful, what award could the Ombudsman make? It is stated that the wife of the deceased member is neither a current or prospective beneficiary under the pension scheme. However, it is not specified if the occupational pension scheme was contracted-out of the State Earnings Related Pension Scheme (SERPS) or was a contracted-in scheme. For example, since 1978, all occupational pension schemes (and personal pension schemes) which contracted-out of SERPS had to provide for a survivor’s pension for a widow. In relation to defined benefit schemes, guaranteed minimum pensions (GMPs) accrued until 1997 when the reference scheme test was introduced. Any survivor’s benefits in excess of these minimum requirements depended on the actual provisions of the occupational pension scheme’s trust deed and rules (and any amending legislation and case law which extended spouses’ benefits to same-sex spouses,
When a defined benefit scheme enters wind up does the schedule of contributions fall away?
When a defined benefit scheme enters wind up does the schedule of contributions fall away? The requirement to have a schedule of contributions is derived from Part 3 of the Pensions Act 2004 (PeA 2004). PeA 2004, Pt 3 does not however apply to a scheme which is being wound up (although this is subject to a requirement for the actuary to
Does regulation 10 of the TUPE Regulations apply to pension contributions where there is a TUPE transfer between associated companies?
Does regulation 10 of the TUPE Regulations apply to pension contributions where there is a TUPE transfer between associated companies? In a TUPE transfer, regulation 10 of the TUPE Regulations prevents contractual rights relating to old age, invalidity or survivors' benefits under occupational pension schemes from transferring across to the new employer (the transferee). This is known as TUPE's pension exception. The application of regulation 10 is determined not by the nature of the particular TUPE transfer concerned but instead by the nature of the pension scheme concerned. Regulation 10 specifically applies only to occupational pension schemes. As a result, the exception does not apply to personal pension schemes or group personal pension schemes (since they are not occupational pension schemes). Thus, where the transferor's pension scheme is a personal or group personal pension scheme, contractual rights relating to such a scheme (including any contractual rights relating to employer contributions) will not be covered by the pension exception and will transfer under TUPE, including where the transferor and transferee are associated companies. Conversely, where the transferor's pension scheme is an occupational pension scheme, contractual rights relating to old age, invalidity or survivors' benefits (including contractual rights to employer contributions) will not transfer under TUPE, including where the transferor and transferee are associated companies. However, this is subject to various considerations, including the following: • the transferee is required
How do you convert inter-company debt into equity? What are the advantages and disadvantages for the company and its shareholders?
How do you convert inter-company debt into equity? What are the advantages and disadvantages for the company and its shareholders? This Q&A deals with the question of whether an inter-company debt can be the subject of a debt for equity swap. It looks particularly at some of the advantages and disadvantages for the company and its shareholders in making such a conversion. The Q&A assumes that both the debtor and the creditor companies are private companies limited by shares and that no part of their group is listed. There is no reason in principle why an inter-company debt within a private group should not be the subject of a debt for equity swap. Such a swap involves shares being issued in return for the release of all or part of the debt obligation. For other debt management options, see Practice Note: Debt waivers, extending maturity and debt rescheduling. Valuation considerations The directors of the debtor company will need to agree the type and number of shares to be issued. The present capital structure should be considered, together with the likely recoverability of the debt in its present form. See Practice Note: Debt for equity swaps. Internal process checks The directors of the debtor company must have sufficient authority to allot the required shares. It is no longer a requirement for companies to have an authorised share capital. However, there may be
In a company which had a ‘multi-employer’ pension scheme, the administrators are willing to admit the scheme trustee’s debt (based on a valuation of the deficit including a section 75 (of the Pensions Act 1995) certificate). Must the administrators also accept the Pension Protection Fund’s subsequent claim for the entirety of the deficit (ie including all the deficits of all the employers as against only one of them)?
In a company which had a ‘multi-employer’ pension scheme, the administrators are willing to admit the scheme trustee’s debt (based on a valuation of the deficit including a section 75 (of the Pensions Act 1995) certificate). Must the administrators also accept the Pension Protection Fund’s subsequent claim for the entirety of the deficit (ie including all the deficits of all the employers as against only one of them)? Double proof in the administration Administrators may make distributions to creditors of a company in administration either to: preferential creditors, unsecured creditors from the prescribed part under section 176A of the Insolvency Act 1986 (IA 1986), or otherwise unsecured creditors with the permission of the court. If it is appropriate for the administrators to agree the claims of creditors in this case, then the administrators should first of all establish who may make a claim in respect of the deficit by finding out what type of pension scheme it is. The Pension Protection Fund (PPF) deals with eligible defined benefit schemes and if the pension scheme is not an eligible defined benefit scheme then the PPF does not have the authority to make a claim in respect of the deficit; it would be for the trustees to make this claim. Section 137(2) of the Pensions Act 2004 (PA 2004) states that the PPF takes over the creditor rights of the
Can an employer pay its staff different rates of employer pension contributions, increasing with age?
Can an employer pay its staff different rates of employer pension contributions, increasing with age? General rules relating to direct age discrimination Under section 13 of the Equality Act 2010 (EqA 2010) a person directly discriminates against another person where: • he treats him less favourably than he treats or would treat others, and • he does so because of a protected characteristic Where the protected characteristic in issue is age, an employer can defend a claim of direct discrimination if he can show that the treatment is justified as a proportionate means of achieving a legitimate aim. Under EqA 2010, s 61, a ‘non-discrimination rule’ applies in respect of occupational pension schemes, whereby a responsible person (which can include an employer whose employees are, or may be, members of the scheme) must not, amongst other things, in carrying out his functions in relation to the scheme, discriminate against another person. Special exceptions relating to pension schemes There are, however, various exceptions with regard to the non-discrimination rule, set out in the Equality Act (Age Exceptions for Pension Schemes) Order 2010, SI 2010/2133, (as amended) (the Age Exceptions Order), which allow responsible persons (see above) to do certain things in relation to pension schemes without giving rise to a contravention of the EqA 2010. Some concerns have been expressed by commentators about whether Directive 2000/78/EC, the European Framework Directive sufficiently authorises all the
Where an employer, who is subject to the auto-enrolment duty, has not made employer pension contributions into the workplace pension scheme, can a claimant include within his schedule of loss for an unfair dismissal claim all arrears of the employer pension contributions that have accrued since the employer’s staging date?
Where an employer, who is subject to the auto-enrolment duty, has not made employer pension contributions into the workplace pension scheme, can a claimant include within his schedule of loss for an unfair dismissal claim all arrears of the employer pension contributions that have accrued since the employer’s staging date? The auto-enrolment regime, established under Part 1 of the Pensions Act 2008 (PenA 2008), imposes three key enrolment duties on employers: • to enrol all of their ‘eligible jobholders’ automatically into an ‘automatic enrolment scheme’ (the auto-enrolment duty) • to enrol 'non-eligible jobholders' into an 'automatic enrolment scheme' if they choose to opt in • to enrol 'entitled workers' who request to join a scheme into a registered pension scheme The enrolment duty does not apply: • to jobholders who are already active members of a qualifying scheme, or • to entitled workers who are already active members of a registered pension scheme Employers that use a defined contribution scheme to meet their enrolment duties are also required to contribute a minimum amount to the scheme in respect of: • eligible jobholders who are enrolled automatically into the scheme • non-eligible jobholders who opt-in to the scheme The 'default' mandatory minimum contribution rates to DC schemes are being phased in as follows: • before 6 April 2018—the employer contribution component was 1% • 6 April 2018–5 April 2019—the employer contribution component is 2% • 6 April 2019 onwards—the
How do the bridging pensions exceptions in Equality Act 2010 (Sex Equality Rule) (Exceptions) Regulations 2010, SI 2010/2132, reg 2 apply to the Barber case?
How do the bridging pensions exceptions in Equality Act 2010 (Sex Equality Rule) (Exceptions) Regulations 2010, SI 2010/2132, reg 2 apply to the Barber case? These exceptions apply in respect of bridging pensions, which are the subject of the Practice Note: Bridging pensions. As explained in the Practice Note, bridging pensions are a form of pension provided by some (but not all) defined benefit occupational pension schemes in circumstances where a member’s scheme pension commences before state pension age (SPA). As the name suggests, bridging pensions are a form of temporary 'top-up' pension intended to 'bridge the gap' between the date on which the relevant member's 'normal' scheme pension comes into payment, and a later date, typically the member’s SPA when their state pension commences. Until 5 November 2018, the SPA of men and women was unequal. The consequent inequality in bridging pensions gave rise to criticisms, particularly following the Barber case. This eventually led to the testing of the legality of bridging pensions under European law before the ECJ in the case of Birds Eye Walls Limited v
A former member-nominated director (MND) (who has just lost their position as MND) of a corporate trustee would like to challenge the result of the election as they believe one of the newly elected MNDs did not follow the rules of the process. Should the former MND bring a challenge through the scheme’s IDRP process or go straight to the Pensions Regulator?
A former member-nominated director (MND) (who has just lost their position as MND) of a corporate trustee would like to challenge the result of the election as they believe one of the newly elected MNDs did not follow the rules of the process. Should the former MND bring a challenge through the scheme’s IDRP process or go straight to the Pensions Regulator? We have assumed that the pension scheme concerned is a defined benefit scheme and that the former MND is a member of the scheme. Whether the former MND should first challenge the result of the MND election through the pension scheme’s internal dispute resolution procedure or complain directly to the Pensions Regulator depends on the nature and seriousness of the breach. Under section 10 of the Pensions Act 1995, the Pensions Regulator has the power to fine trustees for breach of the statutory requirement to put in place and implement arrangements which provide for at least one-third of the total number of directors of a corporate trustee to be MNDs under section 242 of the Pensions Act 2004, and the Regulator’s code of practice on MNTs/MNDs states that trustees should comply with that requirement in accordance
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Private Client weekly highlights—30 June 2022
This week’s edition of Private Client highlights includes: (1) Companies House’s blog ‘Explaining the secondary legislation for the Register of Overseas Entities—part 1; (2) Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc, in which the court granted an injunction over stolen NFTs held on constructive trust; (3) Official Receiver v Obaigbena, which considered the principles governing the disqualification period for directors in insolvency proceedings; (4) Analysis of Royal Commonwealth Society for the Blind v Beasant, which concerned the construction of a legacy determined by reference to the nil rate band; (5) The Department for Work and Pensions’ call for evidence on helping pension scheme members to understand pension choices; (6) Analysis of the Bill of Rights Bill and its implications for human rights in the UK, and (7) Devall v Ministry of Justice, which concerned the systemic and operational duties owed by a public authority to the deceased pursuant to Article 2 and 8 of European Convention on Human Rights.
Broader choices could cut pension buyout costs by £100bn
Law360: Hymans Robertson LLP has stated that defined benefit (DB) retirement plans could lower buyout costs by as much as £100bn by offering members a broader range of choices for accessing benefits.
Pensions weekly highlights—23 June 2022
Welcome to the Pensions weekly highlights from the Pensions team. This week's edition of Pensions highlights includes a review of key news stories, as well as dates for your diary and trackers.
Retirees urged to use home equity to fill £48bn pensions gap
Law360: The lang cat has published a report stating the annual income of pensioners is £48bn less than the sum needed for a moderate standard of living.
De La Rue completes £320m pension buy-in deal
Law360: De La Rue plc, which prints money for central banks, has discharged £320m of its pension liabilities to Scottish Widows, the insurer said on 16 June 2022.
Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022—key aspects and implications
Pensions analysis: The Pension Schemes (Conversion of Guaranteed Minimum Pensions) Act 2022 (PS(CGMP)A 2022) received Royal Assent on 28 April 2022, having started life as a Private Members’ Bill, introduced by Margaret Ferrier MP. Unusually for a Private Members Bill, it passed through the various parliamentary stages unopposed, with no substantive amendments, and crucially received early government support. PS(CGMP)A 2022 is short, containing only three sections. It makes several tidying up amendments to the guaranteed minimum pension (GMP) conversion legislation introduced in the Pension Schemes Act 1993 (PSA 1993) on 6 April 2009. Catrin Young, practice development lawyer at Burges Salmon LLP, considers the provisions of PS(CGMP)A 2022 and its implications.
Corporate Crime weekly highlights—16 June 2022
This week's edition of Corporate Crime weekly highlights includes analysis of the Law Commission’s long-awaited options paper on corporate criminal liability, the fallout from the Glencore resolutions & lessons learned, and government plans to increase capacity at the Office of Financial Sanctions Implementation (OFSI). We also include news of the sentencing of two individuals for fraud in connection with Global Forestry Investments following a successful Serious Fraud Office (SFO) prosecution and comments published by the Royal Institute of British Architects (RIBA) reflecting on Grenfell Tower and industry progress five years later. All this, and more, in this week’s Corporate Crime highlights.
Private Client weekly highlights—16 June 2022
This week’s edition of Private Client highlights includes: (1) The Treasury publishes the outcome of its consultation on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; (2) The Breathing Space Scheme, which aims to help individuals with problem debt; (3) The Charity Commission opens a consultation on Annual Return 2023-25 revisions; (4) The Department of Work and Pensions’ consultation on helping savers understand their pension choices; (5) Elaine Curtis v HMRC, in which the First-tier tribunal held that the taxpayer should not owe taxes on a £20,000 loan connected to a pension fund transfer because she could not have known the illicit nature of the transaction, and (6) Representation of White Willow (Trustees) Limited and Trilogy Management Limited, in which the Royal Court of Jersey reaffirmed a trustee's broad right to an indemnity as reasonable security when making an interim distribution to beneficiaries.
TPR announces date for launch of DB funding code
Law360: The Pensions Regulator's (TPR) has announced its new funding code for defined benefit (DB) retirement schemes could be operational by September 2023.
BoE chief defends record on British Steel pensions scandal
Law360: The former chief executive of the Financial Conduct Authority (FCA) has argued that it did the best that it could with the resources it had in the British Steel Pension Scheme (BSPS) transfer scandal.
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