Employment Law Enews

Pension Law Special

Welcome to this special addition of employment law enews briefing focusing on Pension Law following the Pensions Act 2004 and associated Legislation.

General

Since 6 April 2005, key provisions of the Pensions Act 2004 have come into force that fundamentally alter and expand the obligations on employers and trustees in respect of pension provision:-

The Pensions Regulator ("the Regulator") has begun operation in place of the Occupational Pensions Regulatory Authority. This new body has wide ranging powers that require employers and associated companies to make payments or to provide financial support to a defined benefit pension scheme. There are also new requirements to report notifiable events to the Regulator.

Minimum pension obligations are now imposed on the transferee following a business sale from an employer who provided pension benefits.

The minimum compulsory increase in pensions in payment for service will now be the lesser of either the increase in the retail prices index or 2.5%.

Trustees will be responsible for setting the statutory funding objective ("SFO") for defined benefit schemes and a recovery plan for eliminating any funding deficit. There is a duty for the trustees to consult the employer, and the recovery plan must ultimately be provided to the Regulator.

Notifiable Events

There are now new requirements on employers and trustees of defined benefit pension schemes to notify the Regulator of certain events. The purpose of these requirements is to provide warning of potential employer insolvency, or under-funding of defined pension schemes, giving the Regulator the necessary time to intervene. The Regulator has issued the following guidelines:-

• Procedures for notification must be put in place. This can be on a collective or an individual basis.
• Notifications must be made in writing "as soon as reasonably practicable". This clearly implies urgency.
• Where possible, the standard form available from the Regulator's website should be used. At the least a description of the event, the date of the event, the name of the scheme, the name of the employer and the contacts details should be included.

Clearance Statements

It is now possible to seek clearance from the Regulator, in circumstances that may lead to the issue of contribution notices or financial support directions. The Regulator will issue a statement confirming whether an event will lead to such repercussions. The guidance suggests:-

Consultation Regulations

The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 are due to come into force on 6 April 2006. Under these new regulations, employers will be required to consult with current and prospective members on significant changes to their occupational or personal pension scheme for a period of at least 60 days before the changes can be introduced. Changes deemed as significant are:-

• An increase in the normal pension age.
• The removal of the requirement for an employer to make contributions towards a pension scheme.
• The closure of a pension scheme to new members.
• The introduction of compulsory contributions by members.
• An increase in members' contributions.
• The prevention of members' future accrual of benefits under a pension scheme, or changes to their rate of accrual.
• Any change from defined benefit to defined contribution benefits.

steeles work with a leading Pensions Barrister Mr. Fenner Moeran to provide advice and expert documentation In-house training for Pensions Trustees, amending Pension Scheme Rules and advice can be provided on a cost effective basis.

For detailed advice on pensions law and how it will affect your business or to arrange a free initial ½ hour consultation, please contact Andrew Wood at Steeles Law llp on 0870 60 90 200 or email commercial@steeleslaw.co.uk

This article copyright © 2006 Steeles Law llp. All rights reserved.