Moral hazard—themes from the cases of the Pensions Regulator
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:

  • Moral hazard—themes from the cases of the Pensions Regulator
  • What are the moral hazard powers?
  • Moral hazard determinations
  • Clearance applications
  • Deals involving regulated apportionment arrangements (RAAs)
  • Emerging themes

Moral hazard—themes from the cases of the Pensions Regulator

What are the moral hazard powers?

Broadly, the Pensions Regulator’s moral hazard powers under the data-ln-csis="473627 292140 292140 274768" data-ln-lnis="612H-FT93-GXFD-80FJ-00000-00 5PDP-JFD1-DYS3-K074-00000-00 5PDP-JFC1-DYS3-K4RV-00000-00 4ST8-60T0-TWPY-Y12M-00000-00">Pensions Act 2004 (PeA 2004) and underlying regulations enable it to circumvent corporate structures and impose liabilities on third parties that are connected and associated with the employer of a defined benefit pension scheme, provided certain statutory conditions are met.

The Pensions Regulator’s moral hazard powers are powers to impose:

  1. a contribution notice (CN)—where one of four tests is satisfied:

    1. the material detriment test—where there is an act or a deliberate failure to act that is materially detrimental to the scheme

    2. the main purpose test—where the main purpose of the act or deliberate failure to act was to prevent the recovery of all or part of a debt under section 75 of the Pensions Act 1995 (employer debt)

    3. the employer insolvency test—where, if an employer debt had fallen due, the act or deliberate failure to act would have materially reduced the amount of the debt likely to be recovered by the scheme

    4. the employer resources test—where the act reduced the value of the resources of the employer and that reduction was a material reduction relative to the estimated employer debt in relation to the scheme

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