Guidance from the Pensions Regulator on s120 and S22
by Andrew Smith | October 21, 2015
What are IPs Obligations for s120 and S22?
For a number of years many Insolvency Practitioners (IPs) believed that submission of an s120 notice to the Pensions Regulator (tPR) was sufficient to cover their obligations under s22 of the Pensions Act 1995. However, a year ago we took specialist pensions legal advice from Ward Hadaway on this matter before asking the Pensions Regulator for its views.
s120 Pensions Act 2004
This is a statutory obligation placed on an IP which requires submission of an s120 notice (online or by post) within 14 days of an IP’s appointment to an insolvent business. The s120 serves as notification of the IP’s appointment to tPR and the Pension Protection Fund (PPF) so that the pension scheme can be assessed for eligibility into the PPF. If an eligible pension scheme is found for PPF assessment then between the PPF and tPR, the independence of the Trustees is likely to be addressed and a panel Independent Trustee appointed.
S22 Pensions Act 1995
As clarified by tPR in its statement last month, this statutory obligation is still in force for IPs. If the IP comes across a Trust Based pension scheme (which is all schemes found on the online s120 facility) then tPR expect a letter from the IP notifying them about their insolvency appointment. This enables tPR to decide whether to appoint an Independent Trustee but most often it will not, and the IP has to decide whether to act as a trustee or to appoint an Independent Trustee, which does not have to be one of tPR’s panel trustees, as long as it meets the independence criteria set out in s23 of the Pensions Act 1995. The final requirement imposed under this act is to write to tPR prior to closure of the insolvency, notifying that you intend to close the case.
Darren Toms, Director of Clumber Consultancy said: “On the one hand we are pleased that tPR has come out and given some clear guidance over the two statutory requirements that are still in force. However, we are aware of IPs that are already doing this but for a large number of insolvency firms this will be another task to add to the to do list. There is an element of overlap here between the two pieces of legislation which we are planning to discuss with tPR, however without a change in law then I suspect that we will just have to get on and do it.”
Tristan Mander of Ward Hadaway said “The notification of appointment of an IP under s120 of the Pensions Act 2004 is addressed to tPR, the PPF and the trustees of any occupational pension scheme. The notification of appointment of an IP under s22 of the Pensions Act 1995 goes to the same persons. So it is understandable that many IPs assume that the later s120 notification simply replaced the earlier s22 notification. That’s not the case.
The s120 notification is a one-off event intended to trigger a Pension Protection Fund assessment period. Rather than being a one-off event, s22 requires a notification when the appointment ceases as well. It serves to notify tPR when the time window for the appointment of an independent trustee under s23 of the Pensions Act 1995 opens and to notify it when that window closes. The statutory power to appoint an independent trustee arguably only applies whilst an IP is appointed.
Particularly in relation to money purchase schemes, the recent tPR guidance makes clear that IPs should not wait to appoint an Independent Trustee if they are not willing to act as trustees themselves. It had been thought by many IPs that the appointment of an Independent Trustee was a jealously guarded regulatory power and that they were “stuck” until tPR took action. That’s not the case either.
By not waiting for tPR to exercise its discretion to appoint an Independent Trustee, especially where money purchase schemes are involved, an IP may be able to close off an appointment without waiting for the procedures of winding-up of the scheme to be completed, thereby saving time and money.”
Breakfast Seminar on s120 and S22
Ward Hadaway and Clumber Consultancy are delivering a joint Breakfast Seminar on this topic in Nottingham on the 21st October 2016.
This is an opportunity to get expert advice on S22 and s120 from Tristan Mander of Ward Hadaway Law Firm, and Darren Toms of Clumber Consultancy, pensions and insolvency specialists. Tristan and Darren will be covering:
- The Pensions Act 2004 and s120 notices
- The Pensions Act 1995 and S22
- The appointment of Independent Trustees
This is a free event but places are limited so please register here.
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