Despite concerns raised from across the pensions industry, the Pension Schemes Act 2021 ('the Act') finally received Royal Assent on 11 February 2021, with the provisions that will impact corporate activity involving groups with UK defined benefit pension schemes remaining unchanged. The UK government has indicated that those provisions will come into force by autumn 2021.
- The Act includes a number of provisions that will significantly impact on corporate activity involving groups with a UK defined benefit pension scheme. A wide range of corporate activity could be in scope, including:
- M&A activity (both share and asset) and takeovers;
- group reorganisations, including changes to corporate structure, inter-company debt arrangements and asset holdings;
- financing and refinancing arrangements;
- any grant of security or provision of guarantees;
- sale and leaseback arrangements;
- dividends and other distributions; and
- significant strategic decisions.
- Two new criminal offences of ‘risking accrued scheme benefits’ and ‘avoidance of employer debt’ will be introduced, each carrying a maximum penalty of unlimited fines and/or seven years in prison. The Pensions Regulator ('the Regulator') will also be able to impose civil penalties for such actions of up to £1m. Any person can be in scope for the criminal offences, including directors, shareholders, advisers, lenders and other commercial counterparties.
- The circumstances in which the Regulator can make connected third parties (such as group companies, directors and major shareholders) liable for pension scheme deficits by issuing a ‘contribution notice’ will be significantly widened.
- There will be new requirements to give advanced notification and provide statements to the Regulator about the impact of certain corporate activity on a pension scheme. Failure to comply with these requirements could result in new civil penalties of up to £1m.
- The Regulator’s investigatory powers will be strengthened, and the Regulator will have a power to require any person to attend an interview and a power to inspect records at parties’ premises (including unannounced raids).
- Other new criminal offences have been included in the Act for:
- failing to comply with a contribution notice;
- refusing to attend an interview with, or answer questions from, the Regulator; and
- providing misleading information to the Regulator in relation to notifiable events and the new statements.
- There will also be civil penalties of up to £1m when misleading information is given to pension scheme trustees.
For further details of the new criminal offences and other provisions that will impact on corporate activity, together with our thoughts on the actions that corporate groups and others can take to mitigate pensions risk on corporate activity, please see our briefing below:
For more information, please speak to the authors of this post or your usual Freshfields contact on pensions matters.