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Clearance: Scheme-related events
Clearance may be requested for events (transactions, agreements, decisions and other acts or failures to act) which are potentially materially detrimental to a defined benefit pension scheme and its members (known as “type A events”). (For more information, see Clearance: Basics.)
Type A events are either employer-related or scheme-related.
The method for assessing whether a scheme-related event is materially detrimental will vary depending on the specific event. Some scheme-related events will be directly detrimental to members' benefits rather than to the ability of the scheme to meet its pension liabilities. These may also be type A events, depending on the particular circumstances. Employers and trustees should always consider an event in terms of:
- its immediate impact on the scheme and members' benefits; and
- the event's possible impact in the future.
In its guidance on clearance, the Pensions Regulator notes that assessing the impact of a scheme-related event can be very complex and independent professional advice will often be appropriate.
The following scheme-related events could be type A events:
- compromise agreements – an agreement entered into by the trustees to compromise an employer debt and reduce the amount that will be paid to the scheme;
- apportionment of a scheme's deficit – the rules of some multi-employer schemes, and any scheme apportionment arrangement, may determine how the total scheme's deficit will be apportioned between employers, for example when an employer exits the scheme or when the scheme winds up. The effect of the apportionment is to modify the amount of an employer debt that would otherwise become due.
- non-payment of all or any part of an employer debt for an unreasonable period (for example, more than 12 months); or
- an arrangement that has the result of preventing an employer debt from triggering.