Government Goes Ahead With New Pensions Exit Debt Flexibility

Last May we issued an update highlighting that the Government was consulting on a new flexibility to allow employers to defer paying a pension scheme exit debt - called a Deferred Debt Arrangement (a DDA). Its aim is to help employers in non-associated employer schemes currently caught in the trap of the cost of future service benefits and the exit debt arising on stopping these benefits both being unaffordable. The Government has now announced that it will go ahead with the new flexibility from 6 April, but with a few changes to make its use more practicable.

Currently, where an employer in a multi-employer scheme which isn't split into actuarially ring-fenced sections terminates accrual of pensionable service for its employees, while other employers continue to have employees building up benefits, it becomes liable to pay its share of the scheme's buy-out funding deficit. Where employers are part of the same group, they can avoid this liability by all stopping