Compromising section 75 debts—Bradstock agreements
Produced in partnership with Wyn Derbyshire of gunnercooke LLP

The following Pensions practice note produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Compromising section 75 debts—Bradstock agreements
  • Bradstock agreements
  • Risks posed by Bradstock agreements in the post-A-day era
  • Risk of criminal sanction
  • Risk of contribution notices
  • Risk of loss of PPF eligibility
  • Notifiable event
  • Historical criticisms of Bradstock agreements

Compromising section 75 debts—Bradstock agreements

A key piece of pensions legislation is section 75 (and 75A) of the Pensions Act 1995 (PA 1995) and its underlying legislation, which collectively comprise what is commonly referred to as the ‘employer debt legislation’.

Broadly speaking, the employer debt legislation provides that a statutory (non-priority) debt will be created in respect of an employer (or employers) participating in a registered defined benefit occupational pension scheme at a time when the scheme is underfunded on the buy-out basis upon the occurrence of one of three triggering events:

  1. the scheme commencing wind-up

  2. an insolvency event (as defined for the purposes of the legislation) occurring in relation to a participating employer, or

  3. in the case of a multi-employer scheme, a participating employer ceasing to employ active members at a time when at least one other employer continues to do so (an ‘employment cessation event’)

The statutory debt created under section 75 of the Pensions Act 1995 (a ‘section 75 debt’ or 'employer debt') is owed by the relevant employer to the pension scheme, and is calculated by reference to the employer’s share of the pension scheme’s deficit as measured on the buy-out basis. Section 75 debts can thus be substantial in amount, and over recent years a considerable body of law has developed in reference to them and how (legally) to avoid them.

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