Regulator comes close to formally intervening on a scheme funding matter
In the first report of its kind since the scheme funding provisions of the Pensions Act 2004 came into force over a decade ago, the Pensions Regulator has explained the context in which it came close to exercising its powers to impose its own views as to a scheme’s deficit calculation and recovery plan after the employer and trustees failed to settle the actuarial valuation.
The report concerns the Docklands Light Railway Pension Scheme whose 2009 valuation revealed a funding deficit. Although the trustees had certain powers, set out in the scheme’s rules, to seek appropriate contributions, there was not a common interpretation between the parties and the Regulator as to what they meant. By late 2013 and in the absence of reaching an agreement with the employer (as they were required to do under the Pensions Act 2004), the trustees made a demand for contributions under the scheme’s rules and brought court proceedings to seek payment of the contributions demanded.
In November 2014 an out of court settlement was reached under which substantial deficit contributions were agreed and underwritten by a parental guarantee. To facilitate this settlement, the Regulator confirmed to the trustees that the regulatory action that back in 2012 it had formally warned all relevant parties it might take was now unlikely to go ahead.
Comment
Although the Regulator states that it “has a low tolerance for late actuarial valuations”, more than four years passed from the deadline to agree the 2009 valuation to the settlement, during which time the deadline for agreeing the 2012 valuation also passed. Given that the trustees started legal proceedings, it is not clear whether the threat of regulatory action was a key factor in a settlement being reached.
2015/16 PPF levy collection commences
The Pension Protection Fund will shortly be issuing invoices to eligible schemes for their 2015/16 levy and to coincide with this has published its latest regular guide.
The guide, which accompanies the levy invoices, is designed to help recipients understand their invoice and explains what to do if any questions arise.
For those not happy with the amount being invoiced, the guide outlines the appropriate appeals process. This is the first year in which Experian insolvency probability scores are being used but it is no longer possible to appeal against the individual monthly scores Experian assigned to companies for the 2015/16 levy season. It is, however, possible to appeal against the average Experian score used, the levy band the scheme was allocated to and the corresponding “Levy Rate” (basically the insolvency probability for that levy band) as well as the actual levy calculation. It is important to appeal quickly as all appeals must be made within 28 days of the invoice date.
Interest is payable 28 days after the invoice date whether or not the levy is being appealed. The PPF anticipates that schemes will pay the invoice even if they are appealing the amount of the levy, then receive a credit note if the appeal is successful.
Comment
Every levy season we hear stories of schemes which wanted to review their levy but ran out of time. Schemes should act fast if they think they may have been overcharged – 28 days goes quickly!
Autumn Statement on 25 November
HM Treasury has revealed that this year’s Autumn Statement will be delivered on 25 November – the same day as the Spending Review.
The Chancellor has asked the Office for Budget Responsibility to produce an autumn forecast and, as the Spending Review has already been scheduled for 25 November, the decision has been taken to make it a joint Autumn Statement and Spending Review.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
