Insolvency practitioners face another pensions pitfall
4 Aug 08
CA Conference: “Making Sense of the Future” Venue: Gleneagles Hotel, Perthshire Cost: £550 + VAT For further details Reform including Entrepreneurs' Relief Speaker: James Nelson, Nelson & Co Venue: Merchant's Hall, assets in the pension scheme to cover Pension Protection Fund levels of compensation The Pension Protection Fund must be told if a business with a company pension scheme fails
by Michelle Mullen
For most professionals, UK pension legislation is a complex web of duties, rights and obligations.
For insolvency practitioners who wish to avoid a complaint to their professional body, establishing whether a company has an occupational pension scheme will need to become a priority.
The Pension Protection Fund (PPF) has made several complaints to ICAS in respect of the failure by duly appointed insolvency practitioners to alert the PPF to the existence of an eligible occupational scheme within the statutory timescale.
All insolvency practitioners have a statutory obligation under the Pensions Act 2004 and the Pension Protections Fund (Entry Rules) Regulations 2005 to provide the PPF with certain information relating to an occupational pension scheme within 14 days of their appointment or of their becoming aware that the company has such a scheme.
Of course there can be a number of reasons for a delay in notifying the PPF of the details of a company’s occupational pension scheme.
For example, the practitioner may not be aware of their insolvency appointment for the first 14 days (though this ought to be an exceptional case) or they may not have been made aware of the scheme at the time of their appointment, or otherwise have access to the relevant records in order to comply with the statutory timescale (or the appropriate disclosures may not have been made to their staff).
Whatever the reason, the PPF relies on the insolvency practitioners’ compliance with their statutory obligations and a failure to report will result in the registration of a complaint with their licensing body.
Who is the PPF and why do they need to know?
The Pension Protection Fund was established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation
If a “qualifying insolvency event” occurs in relation to an employer of an eligible scheme this will start an assessment period by the PPF. During this period, the PPF will assess whether it must assume responsibility for the scheme; if the PPF is not advised of the existence of the scheme, the assessment period is unnecessarily delayed.
ICAS members may wish to consult the Pension Protection Fund website for further details: www.pensionprotectionfund.org.uk
What will happen if insolvency practitioners do not comply with their statutory duties?
The ICAS Investigation and Professional Conduct Enforcement Committee has determined that all such complaints ought to be considered in the first instance by the Insolvency Permit Committee but in the case of any insolvency practitioners who repeatedly act in breach their statutory duties, disciplinary proceedings are likely to ensue.
Michelle Mullen is head of investigations, ICAS.