You should understand the impact of corporate changes and transactions on your defined benefit scheme. You should take independent, professional advice where necessary.
Corporate changes and transactions include the employer selling or restructuring their business, transferring the scheme to another sponsor or leaving a multi-employer scheme.
- Work with the employer to understand the impact of any corporate changes and transactions..
- Ask the employer to consider whether it would be appropriate to apply for clearance from us if you believe a corporate transaction is ‘materially detrimental’ to the scheme’s ability to meet its liabilities.
- Analyse any proposed abandonment arrangement and reach a decision with other parties as to whether is in the members’ best interests.
- If the employer is leaving a multi-employer scheme, work with them to understand which of the options to manage their liability to the scheme under the legislation is most suitable.
- Notify us when certain events occur that could lead to a possible call on the Pension Protection Fund.
Corporate transactions are employer-related or scheme-related events that may affect the employer’s finances or underlying structure, such as:
- selling or restructuring their business
- making a return of capital
- exiting a multi-employer pension scheme.
You should work with the employer to understand the impact of corporate transactions on your defined benefit (DB) pension scheme.
If you believe an employer-related or scheme-related event is ‘materially detrimental’ to the scheme’s ability to meet its liabilities, you should ask the employer to consider whether they think that it would be appropriate to apply for clearance from us. For examples of material detriment, read our code-related guidance on the material detriment test.
Clearance is a voluntary process. A clearance statement provides assurance that we won’t use our anti-avoidance powers in relation to the transaction. The statement isn’t our approval of the transaction.
For more information on when it is likely to be appropriate for employers to consider applying for clearance, read our regulatory guidance on clearance.
If your employer decides not to apply for clearance where you believe an event is ‘materially detrimental’ to the scheme’s ability to meet its liabilities, you may wish to raise this with us directly.
Abandonment of a pension scheme is where the sponsoring employer cuts its link with the scheme without providing the scheme with sufficient funds or assets to compensate for losing the employer’s ongoing support. This could happen, for instance, when the employer carries out a significant restructuring or transfers their scheme liabilities to another employer.
You need to be able to recognise events that may result in abandonment as they are often not in the members’ best interests.
You should analyse any proposed arrangement and reach a decision with other parties as to whether it is in the members’ best interests. You should also consider whether any alternative options might be available. You should consult with us at an early stage in the process.
For more information, read our regulatory guidance on abandonment of DB pension schemes.
Leaving multi-employer schemes
There are a number of different ways that employers can manage their obligations if they leave a multi-employer scheme. You should work with the employer to understand which option is most suitable and to ensure that the scheme’s liabilities will continue to be appropriately funded.
For more information, read our regulatory guidance on multi-employer schemes and employer departures.
A further option has been introduced since this guidance was written. This is known as a 'deferred debt arrangement' and will allow a leaving employer to defer a statutory debt it owes to the scheme provided the trustees consent and the employer continues to provide support to the scheme on an ongoing basis.
Our guidance will be updated to take account of this option. In the meantime you can find details of the deferred debt arrangement in the Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018.
Trustee toolkit online learning
The ‘How a DB scheme works’ module contains a tutorial on corporate transactions. You must log in or sign up to use the Trustee toolkit.