Pension Protection Fund: reapportioning employer debt does not make scheme ineligible

Resource type: Legal update: case report

Status: Law stated as at 17-Jan-2007

Jurisdictions: England, Scotland, Wales

In L and others v M Limited, the High Court has held that the trustees of a defined benefit scheme may enter into an agreement with the scheme's participating employers without making the scheme ineligible for entry to the Pension Protection Fund. The agreement was part of a wider restructuring plan designed to avoid insolvency and release the company from its financial obligations to the scheme. The plan involved the reapportionment of the deficit in the scheme between M Limited and a newly established company. That company would become insolvent, thereby triggering the winding-up of the scheme.

The court held that the agreement would not be caught by regulation 2(2) of the Pension Protection Fund (Entry Rules) Regulations 2005, as it would not have the effect of reducing an employer debt due to the scheme under section 75 of the Pensions Act 1995. This was because regulation 2(2) only applied to a debt that had arisen and was due when an agreement was executed. It did not apply to an agreement that related to an employer debt that may become due in the future.
PLC Pensions

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  • Resource ID: 5-211-7963
  • Law stated date: 17-Jan-2007
  • Products:  PLC UK Employment, PLC UK Pensions, PLC UK Public Sector
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