Clearance: Basics
Clearance is relevant for those considering corporate transactions or scheme-related events which are materially detrimental to a DB pension scheme and its members (known as “type A events”).
Clearance is the term used to describe the voluntary process of obtaining a “clearance statement” from TPR. A clearance statement gives assurance that, based on the information provided, TPR will not use its anti-avoidance powers (for further information see, Anti-Avoidance: TPR’s Powers) to issue to the applicants either CNs or FSDs in relation to the scheme and a particular event. It should be noted that clearance does not apply to the criminal offences of avoidance of employer debt and conduct risking accrued scheme benefits.
Type A events
These are either employer-related or scheme-related events (transactions, agreements, decisions and other acts or failures to act) which are materially detrimental to the ability of the scheme to meet its pension liabilities. Employer-related type A events are events which affect employer covenant. Scheme-related type A events affect the scope of the employer’s legal obligations to the scheme.
It is important that trustees and employers are able to identify such events as TPR expects clearance will be sought for type A events, except where appropriate mitigation is on the table, for example, an additional contribution to the scheme.
Applying for a clearance statement
Applications may be made by those parties who could be subject to a CN or FSD in relation to a scheme, i.e. the scheme’s sponsoring employer and those connected or associated with it. Parties who may become an employer or may become connected or associated, e.g. a purchaser, may also wish to apply.
Although a corporate trustee of a scheme may be connected or associated with an employer it will not usually be appropriate for it to make an application because of the conflicts the application would create between the trustee’s duties to members and the trustee’s personal interests.
Parties may apply by completing an application form. For details of accompanying documentation, please refer to TPR’s guidance.
Commonly used abbreviations in pensions
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