Pensions Regulator requesting more information around flexible apportionment arrangements

Introduced in 2012, an FAA allows an employer remaining in the scheme to take over the liabilities of the departing employer, as valued at the point that the arrangement takes effect. As a result, the departing employer does not become immediately liable to contribute to the scheme by virtue of section 75 of the 2004 Pensions Act.

Originally, trustees only had to provide a simple notification of the FAA to The Pensions Regulator. The regulator now requires trustees to provide additional information in a standard format, including an explanation of their rationale for permitting an FAA rather than seeking payment of the s75 debt. They must also confirm that both limbs of the 'funding test' set out in the Employer Debt Regulations, designed to ensure that the remaining employers can fund the scheme, have been met.

"For some, this initiative will be proclaimed as the regulator taking a positive, proactive approach to protect scheme funding and member benefits," said pensions expert Nick Stones of Pinsent Masons, the law firm behind Out-Law.com. "Others may be less charitable, seeing it as another level of bureaucracy for a scheme and employer to undertake that will become a de facto checklist for the FAA route."

"My concern is proportionality, as there seems to be no appreciation as to risk or scale so this exercise is a one size fits all," he said.

In a statement, a spokesperson for The Pensions Regulator said that the form had been introduced to "make the process more efficient".

"This additional form allows us to gather more detailed information about the arrangement, which helps us consider decisions taken by trustees in line with the regulatory requirements and our guidance," he said.

"We consistently review notifications of FAAs and scheme apportionment arrangements," he said.