The Pensions Regulator’s powers have increased significantly in order to maintain the security of member benefits following the introduction of the material detriment test. The material detriment test was introduced as a result of concerns over the reduced security provided by sponsoring companies and is being welcomed as a positive step to protect member pension benefits.
The Pensions Regulator has now increased powers to issue contribution notices should the employer make corporate decisions (actions or failures to act) that would have a “materially detrimental” effect on the probability of members receiving their benefits in full.
Whilst the Regulator has predicted that there will not be a significant rise in the number of clearance applications but employers are being encouraged to consider more thoroughly the effect of corporate activity on their pension scheme. However, given the broad basis of the test and the Regulator’s new powers it seems inconceivable that this will not increase the number of clearance applications, particularly in the short term, but also increase the complexity and cost of corporate activity.