The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2010 (SI 2010/ 725) have been laid today, accompanied by the now-customary Explanatory Memorandum. These changes to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678)* come into force on 6 April 2010.

* NB. the 2005 regs have been amended on many previous occasions during the intervening five years: see also SIs 2005/993, 2224, 3377 and 3378; 2006/467 and 558; 2007/60; 2008/731 and 1068; and 2009/1906. (The EM says "the Government accepts the need for consolidation of some pensions legislation in due course.")

The regulations introduce two new procedures, called the "general easement" and the "de minimis easement". They prescribe circumstances in which an employer need not pay an employer debt on ceasing to actively participate in a multi-employer DB scheme, as a result of a corporate restructuring eg involving one company being closed or merged with another. The clear principles underpinning the new arrangements are that pension scheme members' benefits must be protected and any changes must not undermine the employer's covenant.

Although the Government's main priority is member protection, it also recognises that a balance needs to be struck, and has responded to industry concerns about the complexity and usefulness of the easements in an unusually detailed and helpful Response to the consultation last autumn on draft regs (see previous Aries article).

53 responses to the consultation were received. Although many respondents welcomed the overall aim of the General Easement proposal, they also suggested the easement would be little used in practice. This was because trustees have to make a subjective judgement about the receiving employer being "at least as likely" as the exiting employer to cover its own liabilities after taking on those of another employer. Another reason was that the steps that needed completing were too complicated and prescriptive. The Government believes the "at least as likely" test (i.e. the restructuring test) is appropriate and workable. However, it has revised the general easement requirements in some areas. On many questions, as there was no clear consensus amongst respondents the Government has decided to keep the regulations broadly as they were in the consultation draft.

Many respondents also welcomed the overall De Minimis proposal in principle, but again they thought it was overly complex and expected it to be of little practical use. It is intended to apply where small scale corporate restructurings are being undertaken. Most respondents commented that the levels were too low. A particular concern was that small schemes with less than 50 members would never be eligible.

The scheme members in respect of whom defined benefits have accrued as a result of service with the exiting employer must now either be

1. no more than two (this is to assist smaller employers) or
2. no more than 3% of scheme membership,

whichever is the greater. The total annual amount of accrued pensions of the members covered by the transaction must not exceed £20,000 (to be increased by £500 each year). The Government has made a few other changes to allow greater flexibility than the original proposal.

The consultation regulations provided for a 12 week period within which the receiving employer was required to take over responsibility for assets, employees and pensions liabilities. Within this 12 week period, all parts of the transaction had to take place on the same date. The 12 week period has been extended to an 18 week period. In addition, at the discretion of the trustees, the period can be extended by up to a further 18 weeks. The requirements no longer include a reference to the "same date". Instead all the elements of the transaction between the exiting and receiving employers must take place within the 18 weeks (or such longer period as allowed by the trustees to a maximum in total of 36 weeks) but individual elements can be concluded on different dates.