The notifiable events framework imposes reporting obligations on both pension scheme trustees and sponsoring employers of schemes that are eligible for entry into the Pension Protection Fund (‘PPF’). Current guidance can be found on The Pensions Regulator (‘TPR’) website at - Notifiable events framework, but it should be noted that the requirements are subject to changes (not yet in force) under the Pension Schemes Act 2021 (‘PSA 2021’).
A draft of the changes has been issued, although this could be amended prior to enactment. The draft provides details of the events that trustees and employers are required to notify and these have been extended (see ‘The new Notifiable Events’, below). The events fall into two groups:
- Scheme-related – to be notified by trustees
- Employer-related – to be notified by employers
One of the main reasons for the changes is that, at the moment, information about employer-related events is provided after the event has occurred - there is no requirement to provide information in advance. However, under PSA 2021, it is proposed that more events will become notifiable and information about some of them will need to be given to trustees and TPR before the event happens.
Also, section 69A of PSA 2021 introduces the duty for a ‘relevant person’ to give notices and statements to TPR in respect of certain events. These statements will set out the implications for the scheme in relation to specified corporate events relating to the employer, and how any risks to the scheme will be mitigated. This new information will be required at a later point in a corporate transaction than a notifiable event notification, when there is greater certainty as to whether a transaction is going ahead, its nature and the implications for the scheme.
The new Notifiable Events
- Where the employer is a company—
- a decision in principle by a controlling company to relinquish control of the employer company, or
- an offer to acquire control of the employer company, where the employer company has not made a decision in principle to relinquish such control
- A decision in principle by the employer to sell a material proportion of its business or assets
- A decision in principle by the employer to grant or extend a relevant security over its assets, where the grant or extension would result in the secured creditor being ranked above the scheme in the order of priority for debt recovery.
Transactions such as those above may indicate a change in covenant support for a pension scheme or impact the order of priority for debt recovery. Under the draft regulations, a material proportion of the business of the employer is one that accounts for more than 25% of its annual revenue and a material proportion of the assets of the employer is one that accounts for more than 25% of the gross value of its assets. Revenue and assets in this context are either those recorded in the most recent annual accounts and the definition of material proportion will include other disposals made or agreed in the twelve months prior to the date of the notifiable event.
'Relevant security' means a security granted or extended by the employer, or one or more subsidiaries of the employer. The level of the security will be of a level of more than 25% of either the employer’s consolidated revenues or its gross assets. This includes both a fixed charge or floating charge over assets of the employer or the wider employer group, and an all assets floating charge which gives the charge-holder the right to appoint an administrator. It does not include the refinancing of an existing debt, security for specific chattels, or financing for company vehicles.
The ‘section 69A’ Notice and Statement
Events requiring a ‘section 69A’ Notice and Statement
- The intended sale by the employer of a material proportion of its business or assets, in respect of which the main terms have been proposed
- The intended granting or extending of a relevant security by the employer over its assets, where the grant or extension would result in the secured creditor being ranked above the scheme in the order of priority for debt recovery, in respect of which the main terms have been proposed
- Where the employer is a company—
- the intended relinquishing of control by a controlling company of the employer company, in respect of which the main terms have been proposed, or
- Where the controlling company relinquishes such control without a decision to do so having been taken, the relinquishment of control of the employer company by the controlling company.
As soon as reasonably practicable after becoming aware of the prescribed notifiable event, an appropriate person (e.g. the employer) must give a notice to TPR of:
- any prescribed notifiable event;
- any material change in, or in the expected effects of, a prescribed notifiable event;
- when a prescribed notifiable event is not going to, or does not, take place.
A ‘material change’ includes, where applicable, a change in the proposed main terms and a change in steps taken to mitigate any adverse effects of the event.
In relation to a. and b. above, there must be an ‘accompanying statement’ to these notices. The statement will set out the implications for the scheme in relation to the specified corporate event relating to the employer, and how any risks to the scheme will be mitigated. The draft regulations set out the information that this statement must describe, including the event and, where relevant, the main terms proposed, any adverse effects on the scheme and employer covenant, steps to mitigate those effects and any communication with the trustees.
Where a person gives TPR a notice, a copy of the notice and the accompanying statement must be provided to the trustees of the scheme at the same time.
While PSA2021 has outlined a widening of reporting requirements under the notifiable events regime, this particular section of the Act is not in force as yet. The draft regulations do provide details of what may be expected, but the final details are not known and may change from what has currently been outlined.
The final regulations are expected to be implemented later this year and it would seem sensible at this stage not to commit to implementing a new process until the final regulations are published.