Pension Schemes Act 2021 – notifiable events regime
Many of the Act’s provisions – including the headline grabbing criminal offences and extended Regulator powers – seem aimed at employers but could they affect trustees too? One area which is likely to have a real impact on trustees of DB schemes is the changes to the notifiable events regime.
Currently, information about employer related notifiable events is provided after the event has happened – although this was designed as an “early warning system”, there is nothing that requires an employer group to provide information to trustees in advance of certain corporate activity which may have an impact on a DB pension scheme. Under changes included in the Pension Schemes Act 2021, not only will more events be notifiable, but information about some events will need to be given to the trustees and the Pensions Regulator before the event takes place. The aim of the provisions is to get the Pensions Regulator and trustees a seat at the table earlier in corporate activity which will have an effect on the pension scheme. Coupled with the threat of the new criminal offences, it is likely to result in earlier engagement with trustees which has the potential to impact on corporate timetables as well as requiring additional work.
Full details of the new notifiable events and the information to be provided will be covered in regulations. New events are expected to cover sales of some or all of an employer’s business (not just share sales) and granting of security to other parties which ranks ahead of the pension schemes. It is not yet clear whether this will be restricted to new security or whether it will catch every instance of refinancing or overdraft extensions by corporates.
New “accompanying statements” will need to be provided in advance of some activity – which is expected to be sale of some or all of an employer’s business, change of control of an employer and granting of security. These statements will be provided to the Regulator and to the trustees and will have to identify any adverse effect of the event on the pension scheme, steps taken to mitigate that effect and what communications there have been with the trustees.
While there is no obligation to have reached agreement with the trustees, it seems likely the new requirements will lead to trustees receiving information about corporate activity earlier in the process and may require them to negotiate with the employer about mitigation more often than at present. It remains to be seen how the Regulator will deal with the deluge of information it seems set to receive once these changes are in force.