The UK government this week indicated that charities are not to be given special exemptions from the employer debt provisions of the Pensions Act 1995.
Concerns were expressed following an English High Court judgment in December, which confirmed that the historic Wedgwood Museum collection could be sold off to finance a £134 million employer debt due from the Wedgwood Museum Trust (the "Trust") to the Pension Protection Fund (the "PPF").
The Trust participated in a 'last man standing' multi-employer pension scheme. Following insolvencies of other scheme employers and despite only having employed 5 of 7,000+ scheme members, it became responsible for the full funding shortfall (the debt). The PPF is required to seek payment of the debt.
In light of this, on Tuesday, Lord Flight posed a question in the House of Lords to clarify whether the Government intends to legislate to prevent the 'last man standing' rule applying to charitable museums and other charities. On behalf of the Government, Baroness Rawlings replied that it would be "inappropriate" to restrict the ability of charities to choose this model of pension scheme, and emphasised that charities should seek appropriate advice when considering what pension arrangements to make. In a similar vein, many employers can benefit from obtaining advice on how to address pension issues (including funding obligations) that they face in relation to the arrangements that they have in place.
The Department for Work and Pensions has not long consulted on the 'employer debt' legislation, but it could further consult in light of this turn of events.
For the moment, the Government intends to wait on the publication of the High Court's written judgment in the Wedgwood case before deciding on the next steps to take.
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