New government regulations are set enable charities currently in multi-employer defined benefit pension schemes to stop accruing more liabilities and pay off pension debt.
The regulations, which will come into effect on 6th April 2018, follow a government consultation, which was launched last year on the draft Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2018.
The Department for Work and Pensions (DWP) launched the consultation in April 2017, to look at a new option to enable employers in multi-employer pension schemes to defer the requirement to pay an employer debt on ceasing to employ an active member.
The provisions identified in the consultation were in response to a call for evidence on section 75 (employer debt in non-associated multi-employer pension schemes), which was originally published in March 2015. This consultation received 77 written responses to a call for evidence.
At present, a section 75 debt is automatically required when a charity loses an active member. Instead, the DWP will amend the rules to enable schemes to give charities an extended amount of time to pay when they leave a scheme.
Charity Finance Group said the regulations are welcome after “several years” of campaigning with members and corporate experts for the government to change the rules to prevent charities from being trapped with unsustainable debts.
“This isn’t everything we wanted, but it is solid progress and will provide a pathway for many charities to stop accruing more pension debt and to get on top of their liabilities," CFG director of policy and engagement, Andrew O’Brien said.
“We are also pleased that the government has listened to our concerns about the potential barriers that the previous draft regulations could have created for mergers between charities with multi-employer pension scheme debts. We believe that the assurances in this response will ensure that the new rules do not create barriers to charities coming together where that makes sense for beneficiaries.
“This has been a long road and we need to make sure that pension trustees make use of the flexibility provided by these new regulations. However, this is good news for charities and demonstrates the value of persistent campaigning with government.”