DWP To Consult On Section 75 Relaxations

Section 75 of the Pensions Act 1995 has the potential to mean that, as a result of corporate restructuring (including on employee and TUPE transfers), an employer that participates in a defined benefit occupational pension scheme could have to make a one-off payment (a debt) to the scheme. The debt reflects the difference between the scheme funds that are available and the estimated cost of securing all scheme benefits in the form of annuity policies.

This has long been viewed as unduly onerous in the context of restructurings in which the intention is not to put in place contrived circumstances that are intended to avoid the obligation to fund scheme benefits.

Although in recent years, the Department for Work and Pensions (DWP) has introduced revised, more constructive legislation in this area, many still consider the employer debt legislation to be unnecessarily complex and a barrier to corporate restructuring.