Anti-avoidance: TPR’s powers

In order to protect the benefits of pension scheme members and to ensure that pension liabilities are not avoided or unsupported, the PA04 gave TPR the power to issue:

  • contribution notices (requiring payment to be made into a scheme);
  • financial support directions (requiring financial support to be put in place for a scheme); and
  • restoration orders (restoring the scheme to the position it would have been in had a transaction at an undervalue not occurred).

Contribution notices (CN)

TPR can issue a CN (provided it is reasonable to do so) where, in the preceding six years:

  • there has been an act or deliberate failure to act which was designed to avoid or reduce a debt that would otherwise have fallen due from a company to a pension scheme; or
  • with effect from 14 April 2008, an act or failure to act has materially detrimentally affected the likelihood of a scheme being able to pay a members’ benefits.

The CN can be aimed at parent and associated companies, directors or shareholders who were a party to that act (or failure to act) requiring them to pay to the scheme the amount which would otherwise have been paid.

TPR announced its decision to issue its first CN in relation to the Bonas Group Pension Scheme on 29 June 2010. TPR’s Determinations Panel found that Michael Van De Wiele (VDW) (the parent company of Bonas) had retained the Bonas business while avoiding the pension liability, by placing Bonas into a pre-pack insolvency, and had not engaged openly with pension trustees or TPR.

Financial support directions (FSD)

Where TPR believes that the sponsoring employer of a pension scheme is a service company or is insufficiently resourced, it can (if it is reasonable to do so) issue an FSD directing other group companies (or associates) to put financial support in place. For the purposes of the insufficiently resourced test, from 14 April 2008, TPR may take into account the resources of the whole group of companies.

With effect from 6 April 2010, the prescribed period within which TPR can issue an FSD (the “look-back period”) is 24 months.

In February 2008 the first FSD was imposed on Sea Containers Ltd.

Restoration orders

A Restoration order may be issued where TPR believes there has been a transaction at an undervalue involving scheme assets within 2 years of an employer’s insolvency.