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When a defined benefit pension scheme winds up or the sponsoring employer becomes insolvent, and there are insufficient funds to purchase annuities for all members, a debt arises amounting to the shortfall. This is known as the Section 75 Debt. In addition, the debt also arises where an employer in a multi-employer scheme ceases to participate in the scheme.
New regulations effective from 6 April 2008 have clarified and/or amended a number of areas of the debt regulations and, in particular, have increased the options available to employers to mitigate the full debt. These amendments provide greater flexibility for the employer, whilst still maintaining a high level of member protection.
This BBS briefing note provides some background on the issues and summarises the key features of the new legislation, the majority of which are concerned with multi-employer schemes.
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