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Employer  >  Trustee Zone  >  OPS Matters  >  Further Clearance

Further Clearance

The Regulator’s consultation on Clearance closed on 2nd November last year but it’s taken more than 5 months for them to tell us about their revised guidance reflecting the level of response shown by the industry. You can have a look at the Regulator’s revised guidance here and if you want a little refresher on Clearance, we covered this in Issue 12.

Why the change?
The Regulator has updated their original guidance not only reflecting the fact that corporate transactions are complex but also as a result of their experience of operating Clearance over the last 3 years. The original guidance focussed on the process whereas the revised guidance presents a shift towards a more principles-based approach, aimed mainly at advisers, whose role will be to raise awareness with you.

A concern which emerged during the consultation was that this principle-based approach may add less certainty to Clearance procedures. With this in mind, case studies included in the previous guidance have been removed by the Regulator as they believe case studies “could undermine the successful reinforcement of a principle-based approach as there is a risk these could be interpreted restrictively”.

What’s changed?
The Regulator has not changed its approach to Clearance but there are some key differences:

- an emphasis on a principles-based approach encouraging parties to focus on the real impact of the event on the scheme  - as their experience shows that simple tests and categories often do not reflect the complexity of corporate transactions

- updated guiding principles that trustees and employers should apply

-more detailed information on the types of mitigation that could be considered

- removal of type B and C events as these were rarely used

- division of type A events into employer or scheme-related

- updated information on how to decide upon relevant deficit

What now?
The Regulator’s revised guidance runs to 47 pages and it’s complex so you’re encouraged to seek professional advice to interpret its effects. If a corporate transaction is on the horizon, we’d suggest the Clearance procedure is entered into early in the process.

Finally, the Regulator has indicated that later on in the year they’ll be publishing further guidance on assessing the employer covenant so once it’s been published we’ll let you know.