UK: Pensions Legal Update

Last Updated: 27 October 2010
Article by Edward Jewitt

Originally published 11 October 2010

Keywords: pensions, update, RAA, pensions regulator, Equitable Life, policyholders

Regulated Apportionment Arrangements

Summary. The Pensions Regulator (the Regulator) has issued a statement on regulated apportionment arrangements (RAA) and employer insolvency (the statement).

Background. A section 75 debt may be triggered against employers participating in a pension scheme where the employers suffer an insolvency event (section 75, Pensions Act 1995). Unless an alternative arrangement recognised by legislation is agreed, the amount of the section 75 debt is a prescribed share of the scheme's buy-out deficit. The insolvency event of the employers may also trigger an assessment period (assessment period) for the purposes of the Pension Protection Fund (PPF).

An RAA may only apply where an assessment period commences or is reasonably likely to commence in the next 12 months. Under the RAA, the amount of the section 75 debt payable by an employer can be reduced or increased with a corresponding increase or reduction for other employers. An RAA requires the approval of the Regulator, and the Board of the PPF must not object to it.

Facts. The statement's key points are that:

  • An RAA will be rare. The Regulator's decision is highly u nlikely to have an impact on the level of members' benefits.
  • Where there is a serious risk of insolvency, employers, trustees and advisers should engage in discussions at an early stage. Trustees and advisers should consider alternatives to an RAA and whether insolvency is inevitable. The independent financial advice the trustees receive will be fundamental.
  • Engagement with the Regulator should also happen at an early stage. An application to the Regulator for an RAA must be accompanied by a clearance application.
  • The Regulator may take some time to carry out its due diligence to assess whether an RAA is appropriate and will work closely with the PPF. The Regulator will consider: whether insolvency of the employer would otherwise be inevitable without the RAA; whether the scheme might receive more from an insolvency than it would from the PPF; whether a better result might be obtained through the use of the Regulator's powers; the position of the rest of the employer's group; and the outcome of the proposals for other creditors.
  • The Regulator will first decide whether an RAA might be appropriate and reasonable, and then whether the proposed level of mitigation is appropriate. An approval notice cannot be issued until 28 days after the Regulator determines to approve an RAA.

Comment. This is useful guidance as to where an RAA may become relevant.

Source: The Regulator: regulated apportionment arrangements and employer insolvency, 12 August 2010, .

Equitable Life

Summary. Sir John Chadwick has issued his report on a compensation scheme for Equitable Life policyholders.

Background. The Equitable Life Assurance Society closed to new business in 2000, and by 2002 had reduced policy values on all with-profit policies including with-profit annuities (WPA). In 2008 the Parliamentary and Health Service Ombudsman issued a report on the prudential regulation of Equitable Life by public regulators. She made findings of ten findings of maladministration against the regulators, which led to four findings of injustice suffered by policyholders. Following this report, the Government asked Sir John Chadwick for his advice on five issues:

  1. the extent of relative losses suffered by Equitable Life policyholders;
  2. what proportion of those losses can be attributed to: (a) the maladministration accepted by the Government; and (b) the actions of Equitable Life and other parties;
  3. which classes of policyholder have suffered the greatest impact;
  4. what factors arising from this work the Government might wish to take into account when reaching a final view on determining whether disproportionate impact has been suffered; and
  5. if the accepted maladministration had not occurred, what difference would it have made to the performance of Equitable Life?

Facts. With regards to the five issues:

  1. WPA holders suffered a relative loss of 25% and all other policies a loss of 20%. Chadwick bases these figures on his contention that without the maladministration, new investments in Equitable Life would have dropped by between a sixth and a quarter.
  2. As the Government accepted the findings of maladministration, these losses could not appropriately be apportioned between Equitable and other parties.
  3. The greatest sufferers were WPA policyholders.
  4. The Government should take into account three factors. Firstly, any policyholders who suffered "real loss", by receiving less from the policy than they paid in premiums. Secondly, any ability policy holders had to mitigate the results of maladministration. WPA policyholders had the most limited ability to mitigate. Thirdly, Chadwick argues that some policyholders (such as those with guaranteed annuity rates) in fact benefited from maladministration.
  5. With no maladministration, Equitable Life would still have closed to new business in 2000. It would have declared lower bonuses at some points in the 1990s and a slightly weaker solvency position to regulators, but would have declared a better solvency position in 2000.

Comment. This report will be taken into account by the Government in developing the compensation scheme for Equitable Life policyholders.

Source: Advice to Government in relation to the Equitable life Payment Scheme published by Sir John Chadwick in July 2010

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2010. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.