Proposed changes to the Employer Debt Regulations risk missing opportunity to facilitate corporate restructurings

The Employer Debt Regulations provide the detail about debts that become due from employers that exit from underfunded defined-benefit pension schemes. They can cause issues on restructurings, particularly in circumstances where an employer is changing its legal status but in all other respects remaining the same — for example changing from an unincorporated charity to an incorporated company. In such situations, the intention is often that the new legal entity simply takes over responsibility for any debt that might become due to the pension scheme in future, but this is easier said than done under the regulations.

The government attempted to address this problem by amending the Employer Debt Regulations in 2010 so that, in prescribed restructuring situations, a restructuring easement would apply so as to help achieve this aim. However, the ‘easement’ is very prescriptive and complicated to apply, such that in practice other mechanisms have been used to achieve the same result…

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