The Pension Schemes Bill 2020 – “revolutionary”

The Pension Schemes Bill 2020 published on 7 January 2020 has been described by Guy Opperman, the Pensions Minister, as “revolutionary”.

Alongside provisions for collective defined contribution schemes and a pensions dashboard, the Bill includes measures to strengthen the powers of the Pensions Regulator to protect defined benefit schemes in the context of corporate activity. These include:

Contribution notices

The two new grounds for contribution notices are closely linked and provide simpler and narrower tests based on the immediate impact of a transaction or course of conduct on the assets available to meet a hypothetical statutory debt under section 75 of the Pensions Act 1995 (a “s. 75 debt”).

A transaction or course of conduct for these purposes can include acts, failures to act or a series of acts.

The employer insolvency test is met if, in the opinion of the Regulator:

  • immediately before the transaction, the scheme had a deficit as determined by the Regulator taking account of the basis used for s.75 debts; and
  • the transaction materially reduced the amount that might have been recovered by the scheme if a hypothetical s.75 debt had arisen at the time.

The Regulator determines the value of the liabilities for the purpose of this provision. It may be expected to clarify the basis it will use in guidance.

A statutory defence is available but only where the person reasonably concluded, in advance and having taken any appropriate steps and made all due enquiries, that the transaction would not reduce the amount recoverable on a hypothetical s.75 debt at the time or there was at the time no deficit on a s.75 basis. The amount of any actual s.75 debt due from the employer is in each case to be disregarded. The provision appears wide enough to take account of any third party guarantees relating to the employer’s obligations.

The employer resources test is met if, in the opinion of the Regulator:

  • the act or failure reduced the resources of the employer; and
  • that reduction was material relative to a hypothetical s.75 debt arising at the time.

Regulations are to clarify the meaning of resources and how they are to be valued for these purposes.

Again, there is a statutory defence based on prior consideration of the impact of the transaction, provided it was reasonable to conclude that the transaction would not bring about a reduction in the value of the resources of the employer which would be material to a hypothetical s.75 debt arising at the time.

There is no change to the persons who can be issued with a contribution notice, which includes anyone associated or connected with the employer, other than insolvency practitioners. The Regulator will still need to consider the issue of a contribution notice to be reasonable and clearance is available as under current provisions. The impact of the act or failure to act on the value of the assets of the scheme will be a relevant consideration for the Regulator for all contribution notices.

New criminal offences

The Bill introduces new criminal offences:

  • where a recipient of a contribution notice fails to pay, without reasonable excuse;
  • for avoidance of a s.75 debt; and
  • for a conduct risking accrued scheme benefits.

The first is subject only to a limited fine. The latter are punishable by a prison sentence of up to 7 years and/or an unlimited fine. Civil financial penalties of up to £1m also apply in each case.

The offence of avoiding a s.75 debt can be committed by any person, whether or not associated with the employer, who intentionally and without reasonable excuse, is party to an act or course of conduct that:

  • prevents the recovery of the whole or any part of a s.75 debt;
  • prevents a s.75 debt becoming due;
  • compromises or settles a s.75 debt; and
  • reduces the amount of any s.75 debt otherwise due.

There are no express exclusions for statutory apportionment arrangements or deferral arrangements or simply avoiding an insolvency event arising.

The offence of risking accrued scheme benefits will be committed by any person who, without reasonable excuse, engages in an act or course of conduct, which they knew or ought to have known, would detrimentally affect in a material way the likelihood of accrued benefits being received.

What qualifies as a “reasonable excuse” is not specified for either offence.

Both offences can by committed by any person, other than an appointed insolvency practitioner. They are not limited to persons who are associated or connected with the employer.

Notifiable events

The notifiable events regime has been revised and strengthened. The obligations are extended to new parties and to individuals, more detail is to be provided and there are new financial penalties of up to £1m for breach.

Parties who will need to report will include persons that are connected or associated with the employer and others to be specified in regulations. This will address the anomaly of employers having to report decisions of their shareholders.

Each report must specify the impact of the event on the scheme, how such impact is to be mitigated and what communications there have been with the trustees. Where plans change, any material change is to be reported.

It is expected that new notifiable events will be added in regulations.

New information gathering powers

The Bill introduces new information gathering powers for the Regulator, including the power to summon a person for interview and carry out “dawn raids”. These powers are widened to enable searches relating to the administration of the employer’s business, its assets or any decisions on change of ownership.

The Bill provides increased financial penalties of up to £1m and a new criminal offence for a failure to attend an interview or refusing to answer any question.


As it reads, the Bill is problematic for any corporate group with a defined benefit scheme or anyone who wants to do business with the sponsor of a defined benefit scheme. The new grounds for contribution notices and the new criminal offences will require a high degree of caution for any corporate transaction, reorganisation or refinancing.