Anti-avoidance: Material Detriment Test

The Pensions Act 2008 enhanced TPR’s anti-avoidance powers by enabling it to impose a contribution notice, in certain circumstances, where an act or failure to act has a materially detrimental effect on the likelihood of members’ benefits being received (“the material detriment test”).

As TPR’s power under the test is potentially very wide, safeguards were introduced, designed to ensure that the material detriment test is appropriately targeted. These included:

  • a requirement for TPR to publish a code of practice on the circumstances in which it expects to issue a contribution notice based on the new material detriment test; and
  • a statutory defence

Although the relevant provisions of the Act and the code of practice were brought into force on 29 June 2009, TPR may apply its new powers retrospectively to 14 April 2008 (the date on which they were announced).

The Code

In TPR’s view, these circumstances pose a significant risk to members’ benefits or to the PPF:

  • a transfer of a scheme out of the of the UK; the transfer of a sponsoring employer out of the UK or the replacement of a sponsoring employer with an entity that does not fall within the UK; “sponsor support” is removed, substantially reduced or becomes nominal;
  • the transfer of scheme liabilities to another pension scheme or arrangement which leads to a significant reduction in sponsor support in respect of these liabilities or funding to cover them; and
  • the operation of the scheme in a way which creates or is designed to create, from the scheme, a financial benefit for the employer or some other person where proper account has not been taken of members’ interests, including increased risks to members.


TPR has published illustrative examples that show how the code and the material detriment test might be considered in practice.