20 June 2006
The Pensions Regulator says it has experienced a high number of
clearance related enquiries and applications in May and June 2006,
and requests that applicants make early contact on potential
clearance and withdrawal transactions.
Under the optional clearance process, which came into effect in
April 2005, companies considering corporate transactions where
there is an underfunded defined benefit pension scheme can apply to
the regulator for a clearance statement. This gives assurance that
the transaction does not contravene anti-avoidance legislation and
that the regulator will not use its anti-avoidance powers in
relation to the transaction once it is completed.
Also since 2 September 2005, employers who withdraw from
underfunded multi-employer schemes must seek approval from the
Pensions Regulator if the full debt is not to be paid. These may
form part of a clearance application or be stand alone.
The regulator requests that organisations that want clearance by
the end of August should submit an application as soon as possible
and preferably by the second week of July at the latest. In
general, the regulator requests that applicants make early contact
on potential clearance and withdrawal transactions (on a no names
basis if absolutely necessary), and allow at least six weeks before
deadlines.
The nature of the transaction, the extent to which the
interested parties are in agreement, the potential detriment to the
pension scheme and the level of mitigation offered by the employer,
are some of the factors that may influence the time that the
clearance process takes. It can vary from just a few days to a
number of weeks.
Also, incomplete and/or inaccurately completed clearance
applications will cause delays in processing. Where applicants
require a time extension to the direction to suspend the trustees'
power for enforcement of the withdrawal debt, allowance must be
made for the 28-day notice period to affected parties before it
becomes effective, as well as the time the regulator requires to
process the application.
In the year ended 31 March 2006, approximately 330 clearance
applications were made including applications that require approval
by the Pensions Regulator of the withdrawal arrangement. Just two
applications were refused last year, and one to date in the current
year.
