The Pensions Regulator’s moral hazard powers—what should company directors look out for?
Produced in partnership with Barry Gibb of Hill Dickinson LLP
Practice notesThe Pensions Regulator’s moral hazard powers—what should company directors look out for?
Produced in partnership with Barry Gibb of Hill Dickinson LLP
Practice notes
What are the moral hazard (Anti-avoidance) powers?
Broadly, the Pensions Regulator’s (TPR) moral hazard powers or anti-avoidance powers under the Pensions Act 2004 (PeA 2004) 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.
TPR’s moral hazard powers are:
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a financial support direction (FSD)—where there is an underfunded scheme and TPR concludes that the employer is insufficiently resourced. An FSD requires appropriate financial support to be put in place for the scheme, but it may not be imposed on an individual generally speaking, and
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a contribution notice (CN)—this may be imposed if one of four tests is satisfied. A CN requires a specified amount of money to be paid into a pension scheme and may be imposed on an individual as well as a company. In broad terms, the four tests are:
- ◦
the material detriment test—where there is an act
- ◦
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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Pensions Regulator definition
What does Pensions Regulator mean?
The Pensions Regulator was established under the Pensions Act 2004 to replace the dysfunctional OPRA in April 2005. Its main purposes are to: protect the benefits of members of company pension arrangements (whether trust or contract based); keep claims on the pension protection fund to a minimum; and facilitate good pension administration.
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