Deficit meaning

This Checklist This Checklist provides points to weigh up when preparing and seeking sign-off for a company voluntary arrangement (CVA) involving the Pension Protection Fund (PPF). It draws on PPF Guidance Note 5 issued in 2018 (see PPF Guidance Note 5: CVAs). When an employing company (or all participating employers in a last man standing scheme) files a CVA proposal with the court, a PPF assessment period begins. Under section 137 of the Pensions Act 2004, the PPF assumes the pension trustees’ voting entitlement (see Practice Note: The Pension Protection Fund—eligibility and entry). In practice, the PPF will typically cast a vote for or against the proposal rather than refrain. The PPF is consistently focused on avoiding any precedent that might allow pension schemes to be diluted where potential PPF entry could arise in the near future (the PPF observes that this has occurred in numerous prior CVAs). The PPF also anticipates that pension trustees will appoint their financial advisers to produce a report addressing the areas of concern...

When does a section 75 debt arise? An s 75 liability crystallises in respect of an occupational pension scheme that is underfunded on a buy-out basis and: an employment-cessation event happens for a relevant participating employer within a multi-employer scheme an insolvency event occurs in relation to a participating employer of the scheme, or the scheme formally goes into winding up In a multi-employer scheme, an employer’s s 75 debt is its allocated share of the scheme deficit, appropriately assessed on a buy-out basis. As an alternative to immediately paying the s 75 debt in full, an employer may enter into a deferred debt arrangement, an apportionment arrangement, or a withdrawal arrangement. Section 75 does not apply at all to money purchase schemes, unregistered pension schemes, unfunded public sector schemes, and a scheme with only one member. ...

In this issue: Pension Schemes Bill The Pensions Regulator Transfers Daily and weekly news alerts Dates for your diary Trackers Pension Schemes Bill Pensions surplus release plans to be included in Pension Schemes Bill In a statement, the Department for Work and Pensions (DWP) confirmed proposals that would permit defined benefit (DB) pension schemes to distribute a share of their surpluses through the forthcoming Pension Schemes Bill. The purpose is to help sponsoring employers reinvest in their businesses while unlocking extra value for scheme members. With around three-quarters of DB schemes now in surplus and deficit contributions markedly lower (from £16bn in 2010 to under £5bn in 2024), the DWP and pensions minister Torsten Bell emphasised that the reforms will ensure any surplus use is secure, member-centric, and aligned with wider economic ambitions. The precise design of the surplus policy will be detailed in the government’s reply to the Options for Defined Benefit Schemes consultation, which the...

Quantum of assigned claims not limited to administration shortfall (Manolete Partners Plc v Freed & Others) Manolete Partners Plc v Freed & Others [2024] EWHC 2242 (Ch) What are the practical implications of this case? This ruling provides additional reassurance to office-holders and funders when gauging prospective returns from litigation. It confirms that a claimant—whether the office-holder or an assignee—may pursue recovery of the entire sum diverted from the insolvent company, rather than being confined to the deficit remaining in the estate. The judgment therefore supports assessing claims by reference to the value of the impugned transfers themselves, not merely the administration shortfall. ICC Judge Mullen also affirmed the relevance of Manolete Partners Plc v Hope [2022] EWHC 1801 (Ch) at paragraph 134. There, Zacaroli J declined to conclude that the court lacked jurisdiction to impose the ICC Judge’s Proviso; however, he determined that the “assignee steps into the shoes of the assignor” principle did not warrant a recovery cap where an office-holder had assigned claims to...

According to TPR’s press release, the sum recovered acts as compensation for monies removed from Dundee-based packaging firm Discovery Flexibles Ltd (Discovery Flexibles) while its pension scheme was in deficit. The monies exited Discovery Flexibles via management charges and dividends, or as loans to other companies, across the period 2008 to 2019. TPR confirmed that extracting monies from Discovery Flexibles caused ‘material detriment’ to its pension scheme — the Danapak Flexibles Retirement Benefits Scheme (the Scheme). Discovery Flexibles was transferred to new owners in 2019. In the press release, Gaucho Rasmussen, Executive Director of Regulatory Compliance at TPR, stated that this case reflects their commitment to protecting savers and safeguarding the integrity of the pensions system...

This practice note applies to defined benefit occupational pension schemes The importance of identifying a scheme’s statutory employer(s) A fundamental element of the law governing occupational pension schemes, particularly defined benefit (DB) schemes, is that the main burden of supporting the scheme lies with its sponsoring employers, as a matter of law alone indeed. An employer might have exited the scheme previously without settling all liabilities owed to it; in such circumstances they may still be a ‘statutory employer’ even though they no longer participate. They may therefore continue to bear obligations in relation to the scheme. Under the registered pension scheme regime, various specific obligations fall upon those who qualify as ‘statutory employers’, a notion carried over from the earlier tax-exempt approval regime in force before A-day (for further information on the pre A-day regime, see The pre A-day pensions tax regime [Archived]). These duties will typically extend beyond those that a participating employer assumes under the scheme’s trust deed and rules. For...

The nature of the award Where an injured person faces a handicap in the labour market because of a lingering disability caused by their injury, they can seek a head of loss commonly known as a Smith v Manchester award, taking its name from the case that popularised the claim. A Smith v Manchester award is sometimes characterised as compensation for reduced earning capacity. Following an injury, a claimant might resume their previous role on identical pay, or comparable employment on equal or higher wages. In such situations there may appear to be no immediate deficit, yet the claimant could, in fact, still be disadvantaged later; for instance, if they lose their current job, they may struggle to secure employment. A conspicuous eye or hand impairment may invite discrimination, or they may require absences for a painful back or forthcoming surgery. A Smith v Manchester award is ordinarily granted as a separate lump sum. It recognises the risk that future earning prospects are impaired despite current employment continuing on...

ARCHIVED: The Coronavirus (COVID-19) pandemic created significant challenges for employers engaged in pension schemes. This archived Practice Note explains the effects of coronavirus on employers participating in pension schemes, including their automatic enrolment duties and the stance taken by the Pensions Regulator. It also summarises government measures introduced to ease pensions-related pressures (for example, the Coronavirus Job Retention Scheme (CJRS), the Corporate Insolvency and Governance Act 2020 and the Kickstart Scheme), alongside the pensions implications of emergency volunteering leave (EVL) and employers’ obligation to initiate claims following the deaths of certain keyworkers under the NHS and Social Care Coronavirus Life Assurance Scheme 2020. It is not maintained. The Pensions Regulator’s general approach The Pensions Regulator (TPR) adopted a proportionate, risk‑based stance to its enforcement decisions, aiming to help employers restore compliance while protecting both employers and savers. In line with this approach, TPR decided that: until 30 June 2020, it would not pursue regulatory action for a defined benefit (DB) scheme where a valuation submission...