Pensions debt: easing into reform

    March 2010

    Broadly, a buy-out debt is triggered in a defined benefit pension scheme if a participating employer ceases to employ any active scheme members (but other participating employers continue to do so). The employer debt regulations1 will be amended on 6 April 2010, to introduce two 'easements' that companies may wish to use when undertaking corporate transactions and group restructurings. Where the easement provisions are used, a buy-out debt will not be triggered by a company exiting a pension scheme. The easements are intended to be concessions to help reduce barriers to corporate transactions - they do not impact on the rest of the employer debt provisions or the Pensions Regulator's ability to intervene using its anti-avoidance powers.

    In September 2009, we reported on the Department for Work and Pensions' consultation on these easements, which appeared to us to be so restrictive that they would be of little practical use. Following consultation, the easements have a broader scope, wider timescales and are slightly less bureaucratic. In spite of these positive changes, the easements still contain a number of restrictions and we suspect they will be of limited use in practice.