The Employer Debt Regulations, which deal with employer departures and section 75 employer debts, have been around since 1995, but came into force on 6th April 1997. The Scheme was sufficiently well-funded on the basis that applied then, so that when an employer debt trigger occurred, no cash payment to the Scheme was required.
The legislation has changed several times since 1995. The current legislative requirements link section 75 employer debts to the ‘buy-out’ shortfall (based on the cost of buying annuities from an insurance company for all the members to match the Scheme’s benefits), which is much more expensive than the original legislation.
Until now, the Trustee has been unable to calculate section 75 employer debts because:
1. the legislation which the Trustee must follow when determining an appropriate approach to calculate debt payments is not easy to apply to very large non-associated multi-employer pension schemes like the Industry Scheme, and
2. it has not been possible to obtain all the data needed to carry out the calculations.
The Trustee has been in communication with the Pensions Regulator, the Department for Work and Pensions and its own professional advisors since the legislation changed to use the ‘buy-out’ shortfall. The Trustee had always hoped that a change in the law would be possible, or a special exemption granted from the legislation which is fair to employers and protects members.