Dealing with the debt on an employer exit from a non-associated multi-employer scheme – DWP call for evidence generates conflicting responses

Written on 16 June 2015

The DWP has issued a call for evidence on possible new ways of dealing with the debt arising on an employer that exits from a non-associated multi-employer DB scheme. The DWP is exploring some
further options that could be made available to deal with the debt arising in this situation, including allowing the debt to be spread over a period of years, amending the legislation so that where a solvent employer ceases to participate in such a scheme the debt does not immediately arise, or changing the basis on which the debt arises.

A section 75 debt arises on an exiting employer from a multi-employer DB pension scheme, requiring it to pay up-front its share of the scheme deficit. Often referred to as the ‘s. 75 regime’, this can create acute difficulties for employers who do not have the resources to pay the debt. This has caused problems for charities that participate in multi-employer DB schemes, and can threaten the on-going survival of the organisation.

Various interested organisations have responded to the DWP’s call and have published their responses. These show that there is no unanimity among interested parties as to what changes should be made. Parties that have responded include the Merchant Navy Officers Pension Fund, the Pensions Trust and the National Association of Pension Funds.

The Osborne Clarke pensions team has extensive experience in advising clients on s. 75 debts and how to manage them, and on advising participants in non-associated multi-employer pension schemes on the issues arising. We have submitted our own response to the DWP’s Call for evidence, making recommendations on the basis of our experiences.

At this stage the DWP document stresses that no decision has been taken on whether to implement the proposals. The document is a call for input and data from the experiences of interested parties. We await to see what action the government will take.

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*This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.