The Pensions Regulator has issued a statement to insolvency practitioners (IPs) in relation to its power to appoint trustees and the requirement to notify it when an IP is appointed in respect of an insolvent employer. This statement supports the Pension Protection Fund’s (PPF) recent focus on working with insolvency practitioners in the appointment of trustees to final salary occupational pension schemes. It also follows hot on the heels of recent guidance for IPs from the PPF on its approach to IP fees and pre-packaged administrations. A copy of the Regulator’s statement can be accessed here.
In summary, the Regulator reminds IPs that it has a statutory power to appoint trustees to a final salary occupational pension scheme, once an employer suffers an insolvency event. However, this power is discretionary and so the Regulator will only use it in limited circumstances.
Therefore, IPs should not rely on the Regulator to exercise its statutory power. Instead the Regulator encourages IPs to consider either:
- acting as trustee of the scheme on behalf of the employer; or
- exercising the employer’s power to appoint a trustee under the scheme’s trust deed and rules.
The first option will not be available to every scheme, as it only applies if the employer is also the current trustee of the scheme. Where it does apply, it is unlikely to appeal to most IPs, as it will mean that they will remain involved with the affairs of the insolvent employer for a longer period of time. Therefore, the majority of IPs will need to appoint a trustee using the employer’s power to appoint and remove trustees under the scheme’s trust deed and rules.
In deciding who to appoint, the Regulator recommends IPs to select a trustee that:
- is able and willing to act;
- is independent (i.e. the trustee has no connections with the scheme, the employer or the IP);
- is capable of discharging trustee duties; and
- charges professional fees that are reasonable.
Additionally, if the scheme is to (or is likely to in the future) enter a PPF assessment period the IP should choose a trustee with experience of dealing with issues arising during a PPF assessment period. In order to make such a choice, IPs are strongly recommended to seek the PPF’s view on who to appoint, as the PPF will acquire the trustees’ creditor rights once a scheme enters the PPF.
In September 2013 the PPF launched a Trustee Advisory Panel, which now consists of five independent trustee firms it considers to have the appropriate specialist experience and skills to deal with the issues arising during a PPF assessment period. All panel members are also on the Regulator’s list of approved trustees. Open Trustees Limited (a sister company to Osborne Clarke) has been a member of the PPF’s Trustee Advisory Panel since its establishment and has extensive practical experience of taking schemes through PPF assessment quickly and cost effectively.
If you would like any further information on Open Trustees or would like to consider them for an appointment please contact Jonathan Hazlett, a partner of Osborne Clarke and Managing Director of Open Trustees, whose contact details are below.