Are you a trustee or an employer that needs legal advice on the clearance application procedure? Contact our pensions experts today.
Do Pitmans' Clearance Applications lawyers have any particular areas of expertise?
A clearance procedure was introduced with effect from 6 April 2005 to provide companies with advance assurance that certain proposed commercial activities will not give rise to the imposition by the Pensions Regulator of a Contribution Notice or Financial Support Direction. It is an optional procedure. We act for employers and trustees in this area.
The Regulator is bound by any clearance statement issued, provided that the information given to the Regulator was accurate and there were no relevant material omissions.
Both of the following conditions must be satisfied in order for the clearance procedure to be applicable:
The scheme must be in deficit on a relevant basis
The activity in respect of which clearance is sought should be a “type A event”
Type A events
Type A events are "all events which are materially detrimental to the ability of the scheme to meet its pension liabilities”. The onus is on trustees and employers to interpret this test in the context of corporate actions but particular emphasis is on any event that weakens the employer covenant.
The Regulator’s guidance suggests trustees seek mitigation (ie extra funding or security for the scheme) on the occurrence of a type A event, regardless of whether the parties seek clearance.
Examples of potential type A events include:
- Change in priority of security to creditors
- Return of capital out of the employer
- Change in the control structure of employers
- Changes to scheme employers
- An increase in debt
- Compromising a section 75 debt
Deficit on the "relevant basis"
Clearance should be sought only where the scheme is in deficit on the "relevant basis" being the higher of:
- The FRS17/IAS19 basis
- The scheme-specific funding basis
- The section 179 Pension Protection Fund basis
- The ongoing basis
Why choose Pitmans' Clearance Applications lawyers?
Pitmans’ Pensions lawyers can:
- Advise whether a type A event has occurred
- Advise on whether seeking clearance is appropriate
- Advise on appropriate mitigation
- Assist with negotiations
- Draft a clearance application if appropriate
- Advise on the scope of the Regulator’s powers and its policy