Pensions News


As a respected and leading pensions law firm, other law firms and their clients appreciate our sound advice on all matters relating to pensions.

The pensions aspects of transactions are increasingly playing a more commercially important role than ever before. We have considerable experience of working with other law firms and are aware of their needs and those of their clients. Our commitment to excellent client service means that we are always practical and act in accordance with commerical objectives.

In this Alert:

TPR Round-up

  • TPR continues to be a major player in corporate activity, including insolvency proceedings.
  • TPR broke new ground in the case of Sea Containers, by issuing its first ever “Financial Support Direction” (FSD) against the Sea Containers group of companies, which had filed for Chapter 11 bankruptcy in the United States. An FSD may require not only those employers participating in a pension scheme, but also connected parties including other group companies and even directors, to provide support for DB pension liabilties.
  • However, the Delaware bankruptcy court was not so easily pursuaded in the Nortel Chapter 11 proceedings. In Nortel, the court has now ruled that TPR’s proceedings to issue an FSD would breach the automatic stay under Chapter 11. The judgment has been appealed. So will the first FSD turn out to be TPR’s high water mark?
  • TPR has also made headlines over the UK arm of Reader’s Digest (RDA). RDA’s US parent had already filed for Chapter 11 protection. But in order to avoid insolvency, RDA thought it had sewn up a deal whereby the UK pension scheme would be transferred to the PPF in return for the PPF taking a 33 per cent stake in the ongoing RDA business. TPR stepped in to torpedo the deal.

Changing Pension Benefits

  • Changing pension benefits can be a tricky process – but we have extensive experience steering employers and trustees through it.
  • Pensions legislation does not permit employers to reduce benefits which staff have already accrued except in very limited circumstances. Therefore, in practice, employers looking to reduce the level of pension benefits can only do so for the future (for example, by reducing the rate of accrual, capping pensionable salary or closing to accrual altogether).
  • The main options available to an employer are to amend the terms of the trust under which the scheme is established (this often requires trustee consent) or to alter the contractual terms and conditions of members’ employment (which might require members’ consent).
  • A recent case1 has highlighted some of the pitfalls of both routes and the need for specialist advice. In particular, an employer seeking to establish a contractual change needs to demonstrate that members knew the full facts and understood the implications of agreeing to the change.
  • In addition, an employer is required to consult with its affected staff for a period of at least 60 days for many future service changes. Failure to do so can result in a fine from TPR.

Employer Debt

  • When a company exits an underfunded multi-employer DB scheme, its share of any deficit generally becomes a debt due to the trustees (the employer debt).

New easements

  • From 6 April 2010, two new easements have been introduced to facilitate one-to-one internal group restructurings between two employers participating in the same DB scheme – the general easement and the de minimis easement.
  • Provided certain statutory steps are taken “without undue delay”, no employer debt will arise.
  • The key step in the general easement is the “Restructuring Test”. This requires the trustees to be satisfied that, following the restructuring, the receiving employer will be at least as likely as the exiting employer to meet all the exiting employer’s liabilities, as well as its own.
  • The de minimis easement will be of more limited application. It only applies to schemes which are fully funded on a PPF basis, involving transactions affecting relatively small numbers of scheme members.

The Pilots’ case2

  • We are expecting the judgment in the Pilots’ case to be handed down imminently. This case addresses a number of outstanding technical issues on employer debt. We will keep you updated.

1 See HR Trustees Limited v German and International Management Group (UK) Ltd [2009] EWHC 2785 (Ch) – this case is subject to appeal
2 Sackers is acting for the Port of London Authority in this case, please see our press release for further details