01 February 2011

Insolvency and pension deficits: a Bonas for groups?

Big cut in the threat of contribution notices

An important case for the insolvency world when dealing with pension scheme deficits: the Pensions Regulator has been knocked back in its demand for a substantial contribution (£20m claimed, £5m originally ordered) by way of a contribution notice against a parent company, following a pre-pack that resulted in the business being sold back to a member of the same group. In Re the Bonas Group Pension Scheme the Tribunal effectively held that a contribution notice can only be used to recover actual loss caused by the parent company’s conduct. Unless the pre-pack sale was at an undervalue (and since the subsidiary was insolvent and the parent had no other obligation to contribute to the scheme) the Pensions Regulator had no grounds for recovery of the scheme deficit from the parent by way of a contribution notice. This greatly reduces the threat of contribution notices is associated companies are allowed to go down with pension deficits, and  slashes the Pension Regulator’s bargaining power when negotiating contributions from groups.
Contribution notices can require a person connected to or associated with the employer to make a contribution to a scheme deficit. Financial support directions are not affected by the case, and there have been some legislative changes that could affect the result, but this is a big and unexpected reduction in the Pension Regulator's powers.

No comments:

Post a Comment

enter your comment or greeting