New legislation will affect charity insolvency discussions

The Pension Protection Fund will be offered a seat at the table of any charity insolvency discussions to safeguard the interests of employee pension schemes, under new legislation. 

A statutory instrument was agreed in the House of Lords last week that follows on from previous amendments made to the Corporate Insolvency and Governance Act 2020.

SIs are a form of legislation that allow for new provisions to be subsequently brought into force or altered without parliament having to pass a new act.

Peers discussed extending the role of the PPF, a statutory public body, to allow it to represent trustees in insolvency discussions to help secure their pension schemes.

The regulations give the PPF new rights relating to charitable incorporated organisations and other community businesses, in addition to the limited liability partnerships dealt with in the original measure.

The Conservative peer Baroness Ros Altman said: “To allow the PPF to represent the trustees and managers in negotiations is an important measure, since it has to safeguard the interests not only of each pension scheme, but of all other schemes too.”

Altman said that if pension sponsors could more easily find ways to walk away from their liabilities without putting extra funds into the schemes in the current crisis, the PPF could be forced to take on extra liabilities.

Baroness Barbara Janke, a Liberal Democrat peer, said: “Under the new provisions, the PPF can end up picking up liabilities – for example, if the pension is underfunded. It is therefore reasonable that it should have a seat at the table, as it does for insolvencies. 

“Given that these regulations will give the board of the PPF rights normally exercised by pension schemes’ trustees or managers, it is good to know that the PPF is required to consult with the trustees and managers who will lose their rights as a result.”

John Wilson, head of technical, research and policy at Spence and Partners, told Third Sector that charities needed to be aware of how the legislation might affect them, and be transparent about any decisions made during any moratorium period.

He warned that pension pots could end up worse off.

Wilson said: “Trustees should ensure they are up to date and understand the legislation. If they have any concerns about how a moratorium period might affect their pension scheme, they should seek advice on what they may be able to recover.”

Last week, new regulations were passed that would stop creditors attempting to take legal action against charities with defined new funds or grants.

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