October 28, 2013
By Judith Ugwumadu
In a statement, the regulator said it had become ‘increasingly apparent that some trustees and employers consider that a payment under a schedule of contributions can settle a section 75 debt’.
Geoff Cruickshank, TPR’s interim executive director for DB regulation, said: ‘Double counting carries significant risks for schemes and members and it is important that trustees understand these risks and how to avoid them.’ [EXPAND Read more]
Risks of double counting include: leaving a debt owed to the scheme unpaid, which will have a detrimental impact to scheme assets and member security; potential ineligibility of the scheme for Pension Protection Fund entry; and failing to properly consider the impacts on the ‘employer covenant’ following an employer departure.
‘Where we become aware that double counting has occurred we will raise this with the trustees and expect it to be addressed,’ said Cruickshank.
The regulator said legislation requires the ‘section 75’ debt that is triggered when an employer departs from a multi-employer scheme to be treated as a separate payment from ongoing contributions to repair the pension scheme’s deficit under a recovery plan.
In most cases, an employer departing a scheme results in a change to the employer agreement. To avoid double counting, trustees should assess the impact of an employer’s departure and deal with the section 75 debt and ongoing funding issues separately.
As such, the regulator is now dealing with a number of cases where ‘section 75’ debt repayments and ongoing recovery plan payments have been ‘double counted’, contrary to legislation, the TPR said. [/EXPAND]