The new Pension Schemes Act 2021 (the Act) contains provisions that will have a major impact on UK pension schemes, especially those which provide final salary benefits with significant implications for corporate restructurings.
Criminal offences
The provisions include two new criminal offences – "conduct risking accrued scheme benefits" and "avoidance of employer debt" – which could catch business activity such as corporate rescue. They could also apply to a wide range of persons, including banks, investors and professional advisers (although there are some exemptions for insolvency practitioners in certain circumstances).
The offences carry maximum penalties of up to seven years in prison and/or an unlimited fine. The Pensions Regulator will also be able to impose civil penalties for such actions of up to £1 million.
Advanced notification and contribution notices
There are also several other areas in the Act which could affect corporate restructuring activity, in particular by requiring advanced notification in more circumstances. This could slow transactions and widen the circumstances in which the Pensions Regulator can make a person other than the employer contribute to a final salary pension scheme.
What's next?
We're waiting for more detail regarding regulations and guidance from the Pensions Regulator on how it intends to enforce the new regime, the key provisions of which are expected to come into force by autumn 2021. We will issue a more detailed update when further information is available but there's no doubt that this is an area that those involved in corporate restructurings need to become familiar with going forwards.
Find out more
To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.
