The recovery of section 75 debts in practice

Produced in partnership with Mark Ridler of Hill Dickinson

Practice notes

The recovery of section 75 debts in practice

Produced in partnership with Mark Ridler of Hill Dickinson

Practice notes

Trustees need to be aware of the events that could give rise to a debt under section 75 of the Pensions Act 1995 (section 75 debt) so that they know:

•
when a debt arises, and
•
when they need to take action to ensure that a debt is calculated and recovered

Trustees have a general duty to recover their pension scheme’s assets. Failure to act appropriately and without undue delay to recover an outstanding debt could be a Breach of trust and give rise to a claim against the trustees for any resulting loss. For further information on:

•
Disputes that may be brought by members under occupational or personal pension schemes, see Practice Note: Pension disputes—avenues available to scheme members
•
the protections available for trustees, see Practice Note: Trustee liability and protection in pensions

When does a section 75 debt arise?

In brief, a section 75 debt will arise in favour of an underfunded defined benefit scheme when:

•
the scheme is wound up
•
the employer becomes insolvent

Mark Ridler

Legal Director, Hill Dickinson

Mark is a legal director at Hill Dickinson. He qualified as a solicitor in 1986 and, after initially specialising as a corporate lawyer, has advised pension scheme trustees and corporate clients for over 20 years on a wide range of pension matters, including: resolving historic errors in pension documentation; drafting and updating pension scheme documentation; the pensions aspects of corporate transactions and restructuring; the closure, wind up and merger of pension schemes; Pensions Regulator proceedings; the Local Government Pension Scheme; fiduciary management agreements; and auto-enrolment.

Chambers 2013 says that Mark is noted for his wide-ranging experience of pensions law and that one peer states: "He's technically very able" and clients have noted in Chambers that Mark offers “good, strong, pragmatic” advice.

Jurisdiction(s):

United Kingdom

Key definition:

Insolvency definition

What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

The recovery of section 75 debts in practice

Produced in partnership with Mark Ridler of Hill Dickinson