3 Ways the Pensions Act affects insolvency practitioners

It would be a mistake for an insolvency practitioner to think that only an appointment taker working for one of the big four accountancy firms is likely to be affected by the Pensions Act 2004.  Any insolvency practice with the resources to deal with a going concern sale in an administration could however be instructed in respect of the type of company that had a defined benefit pension scheme and most  smaller firms have the resources to deal with the insolvency of a smaller subsidiary of a group that had one multi-employer defined benefit scheme. Few appointment takers could say that they would never have to deal with the implications of the  Pensions Act and all should be aware of the risks involved.

Notification of insolvency event

Under S120 of the Pensions Act 2004 if an insolvent employer has a defined benefit pension scheme then the insolvency practitioner must notify the Pension Protection Fund and the trustees of the occupational pension scheme of the insolvency event within 14 days. The notification procedure is straight forward using the online procedure at the Pension Protection Fund.

Notification of the scheme status

Under S122 of the Pensions Act 2004 if an insolvent employer has an occupational pension scheme then the insolvency practitioner must notify the Pension Protection Fund and the trustees of the occupational pension scheme of the status of the scheme – basically whether the scheme has been or can be rescued.

The notification procedure is again straightforward using the online procedure at Pension Protection Fund.

The role of the Pension Protection Fund as a creditor

After receiving notification of an insolvent event the Pension Protection Fund will assess whether the defined benefit scheme is a creditor of the insolvent employer. If it is then the Pension Protection Fund will take over the rights of the defined benefit pension scheme from the trustees and effectively act as a creditor on behalf of the defined benefit pension scheme. The Pension Protection Fund will take a keen interest in the administration of the insolvency, including the remuneration of the appointment holder, in order to obtain the best results for creditors.

The existence of a defined benefit occupational pension scheme in an insolvency is low risk in terms of its occurrence but extremely high risk in terms of the impact that it could have on the management of the insolvency and the remuneration of the appointment taker.

The existence of a defined benefit occupational pension scheme in an insolvency is low risk in terms of its occurrence but extremely high risk in terms of the impact that it could have on the management of the insolvency and the remuneration of the appointment taker.

Caroline Clarks insolvency career started over 30 years ago and since 1994 RMCS has been handling insolvency compliance, specialising in regulation and compliance.

SignUp to receive exclusive articles







Caroline Clark RMCSC LinkedIn Caroline Clark
Contact: Caroline Clark
M: 07854 967976