Complexity has consequences… Who knew?

by | Sep 20, 2022 | Pension History

In September 2005, a significant change took place. An employer leaving a final salary group scheme would now have to meet its share of any scheme deficit on a full buy out basis rather than the MFR basis prescribed in earlier legislation. Although the same obligation on wind up had been included in the Pensions Act 2004, employers who had no intention of winding up their schemes might have regarded the point as academic. They couldn’t afford to take that approach when they discovered that group reorganisations and corporate transactions were fast becoming a legal and practical nightmare as a result of the 2005 changes. The cost of safely navigating the legal hurdles so that the debt could be apportioned or, still worse, falling foul of legal technicalities, was huge. Amendments to regulations have tried to remedy some of the difficulties but calls for further reform continue. This is widely (and rightly) considered to be one of the most complex areas of pensions law.

Earlier in 2005, the ACA had carried out its annual Trends Survey. 300 firms, with over 2.8 million members and scheme assets exceeding £131 billion, responded. 82% said that the Pensions Act 2004 would increase costs, and 62% that it would reduce occupational provision. And that was before they realised the import of what would happen in September! The full text of the survey can be found in the ACA collections at

The Pensions Archive Trust

Jane Marshall (Director)

First published in Pensions Age magazine, September 2022 edition.