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5th November 2008 - The Credit Crunch, Financial Turmoil and Recession
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In recent months there have been unprecedented disruptions in the financial markets,with a whole host of global players facing financial stress as the record leverage of recent years unwinds at speed.Unfortunately, there has been no where to hide for UK defined benefit pension schemes and they have been caught up in the turmoil.
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1st March 2008 - Section 75 Changes Confirmed
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When an employer ceases to participate in a multiemployer defined benefit pension scheme a debt on the exiting employer (known as a Section 75 debt) is triggered. The debt is effectively the exiting employer’s share of the buyout deficit. This can, however, include a share of debt that truly belongs to employers no longer associated with the scheme in question, so called "orphan debt".
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1st February 2008 - Regulator Imposes First FSD
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Early February saw the Pensions Regulator formally impose its first Financial Support Directions ("FSDs") almost three years after coming into existence. The FSDs were originally issued to Sea Containers Limited in respect of two pension schemes of its subsidiary, Sea Containers Services Limited, back in June 2007 and earlier this year SCL withdrew its appeal against them.
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1st February 2008 - Balance Sheet Bombshell?
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"Explosive" and "bombshell" are words used in the financial press to describe the changes mooted by the Accounting Standards Board ("ASB") as it issued its discussion paper concerning the reform of defined benefit accounting disclosures. Some have estimated that this could increase defined benefit scheme liabilities on FTSE 100 balance sheets by up to £90 billion, as assumptions used to account for pension scheme liabilities move more into line with those used by bulk-annuity providers.
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10th September 2007 - Proposed Revisions to the Pensions Regulator’s Clearance Guidance
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On 10th September the Pensions Regulator issued a consultation document on proposed revisions to its existing guidance on clearance statements. The initial guidance was intended to give clarity on the approach the Regulator would take towards the clearance process and explain in more detail how the process would operate in practice. The revisions follow on from the Regulator’s comments earlier in the year that clearance should be considered when there was a significant weakening of the employer’s covenant regardless of the funding level of the pension scheme.
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7th August 2007 - Proposed Changes to the Employer Debt Regulations
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On 7th August 2007 the Department for Work and Pensions (the “DWP”) issued its consultation document on draft amendments to the Occupational Pension Schemes (Employer Debt) Regulations 2005. These regulations are commonly known as the "Employer Debt Regulations" and arise from Section 75 of the Pensions Act 1995 which places a debt on the employer where an employer withdraws from a pension scheme.
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1st May 2007 - Sting in the Tail for DC Schemes?
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In recent years a significant number of companies have switched from defined benefit to defined contribution pension provision in order to reduce their pension risks and reduce costs. However, there may be a potential unfunded contingent liability being stored up for these companies that has not yet come within the corporate radar.
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1st May 2007 - Pensions Regulator Clearance
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What is clearance?
Clearance is a process whereby a company provides compensation for the weakening in their covenant towards their pension scheme that makes the payment of pension benefits in full less likely. This is usually as a result of a corporate transaction, for example where a highly leveraged transaction occurs and/or the assets to which the scheme currently has recourse are being removed from the employer group. It is a voluntary process for companies considering corporate transactions, and Trustees cannot force a company to go for clearance if they do not wish to do so. Clearance is not an approval of a transaction as such, but an assurance that the Regulator will not use its moral hazard powers against the company in relation to that transaction.
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1st January 2007 - Solvency II & Occupational Pension Schemes
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Solvency II is the European Commission’s new review of the regulatory capital regime of the insurance industry which is intended to replace the current requirements set out under Solvency I. Implementation is not expected before 2010, however, advanced discussions have taken place and it is expected that a formal framework directive will be published in the summer of 2007.
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1st January 2007 - Beware the Accidental Pension Debt on the Employer
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Businesses often have complex corporate structures where employees of multiple group companies may participate as members of a group wide defined benefit pension scheme. Should one of those companies stop having any employees as members in the pension scheme, the consequence can be significant, resulting in an unexpected and legally enforceable cash call on that employer from the Trustees of the pension scheme.
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