The Pensions Regulator has approved just 24 regulated apportionment arrangements for pension schemes in the past eight years, new research has found.

Pinsent Masons said when an employer stops participating in a scheme, the payment of its scheme funding debt can be deferred or apportioned among the employers remaining in the scheme. A regulated apportionment arrangement is one way of doing this but according to the law firm is a “rare” and getting one is “like threading a needle”.

"Some corporate advisers tout regulated apportionment arrangements as a magic bullet for solvent restructurings. But employers and trustees need to be aware that getting one is like threading a needle, with very exacting requirements that need to be met,” Pinsent Masons pensions expert Alastair Meeks commented.

“They attract disproportionate hype, perhaps because they have been used in some high profile cases – such as Kodak, Uniq and BMI – but the Regulator has now confirmed they are very rare. Struggling employers need to be wary of wasting management time and money pursuing a goal with low prospects of success."

The attraction of regulated apportionment arrangements lies in the potential to use them to transfer liabilities to the Pension Protection Fund (PPF) without a disruptive business insolvency – normally only schemes with insolvent employers can qualify for entry to the PPF. Regulated apportionment arrangements also mean the employer will not need to meet the full statutory employer debt, calculated by reference to the cost of buying out members benefits with an insurer.

“The Regulator's own guidance statement on regulated apportionment arrangements and employer insolvency makes it clear that this is an "extremely uncommon" way of trying to resolve a scheme's funding problems. The PPF agrees that regulated apportionment arrangements are deliberately rare. The figures now back this up," Meeks added.

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