Llandaff Engineering Company Limited Pension and life assurance ...

DETERMINATION NOTICE
under section 96(2)(d) of the
Pensions Act 2004 (“the Act”)
The Pensions
Regulator
case ref:
10988/01
To:
Scheme: Llandaff Engineering Company Limited Pension and Life Assurance
Scheme
Mr David Worthy
Of:
To:
Of:
XXXXXXXX
XXXXXXXXXX
XXXXXXXX
XXXXXX
XXXXXXXX
Mr P R Dewey, Administrator
Dewey & Co
Chartered Accountants & Business Advisors
17 St Andrews Crescent
Cardiff CF10 3DB
Date: 17 August 2006
TAKE NOTICE that the Pensions Regulator of Napier House, Trafalgar Place,
Brighton BN1 4DW (“The Regulator”) has made a determination on
16 August 2006.
1. Determination
1.1 An application by the Regulator for the variation of the order of appointment
dated 19 April 2006 to allow for the fees of the appointed independent
trustee, Mr David Worthy, to be paid:
i. out of scheme resources (section 8(1)(b), or in the alternative
ii. partly by the employer and partly out of scheme resources (section
8(1)(c)
and
iii. that any fees or expenses paid out of scheme funds be treated for all
purposes as a debt due from the employer to the trustee for the scheme
(section 8(2)).
1.2 The application was granted in respect of 1.1i and iii.
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2. Procedure Followed: Standard
2.1 By its Warning Notice dated 7 July 2006 (“the Warning Notice”) the Pensions
Regulator gave notice that it proposed to take the above action pursuant to
the application of the Regulator.
2.2 The Regulator determined that the following parties are directly affected by
this determination:
1. Mr David Worthy In his role as the appointed independent trustee.
2. Mr P R Dewey In his role as administrator for Llandaff
Engineering Company.
(collectively referred to as “the directly affected parties”)
These directly affected parties were entitled to make representations to the
Pensions Regulator about the determination.
2.3 Following the issue of the Warning Notice Mr P R Dewey, administrator
exercised his right to make representations to the Pensions Regulator.
2.4 The Pensions Regulator has taken those representations into account and
has considered those materials carefully but has nevertheless determined to
take the action as detailed in 7 below for the reasons set out in 6 below.
3. Relevant Statutory Provisions/Legislation
Pensions Act 2004
Section 101 Powers to vary or revoke orders, notices or directions etc
(1) The Regulator may vary or revoke-
(a) any determination by the Regulator whether to exercise a regulatory
function, or
(b) any order, notice or direction made, issued or given by the Regulator in
the exercise of a regulatory function.
(2) not applicable to this matter.
(3) A variation or revocation of an order, a notice or a direction must be
made by an order, a notice or a direction (as the case may be).
(4) A variation or revocation made under this section must take effect from a
specified time which must not be a time earlier than the time when the
variation or revocation is made.
(5) The power to vary or revoke under this section-
(a) is not to be treated for the purposes of subsection (1) as a regulatory
function, and
(b) is in addition to any such power which is conferred on the Regulator by,
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or by virtue of, this or any other enactment.
Section 8 of the Pensions Act 1995 Appointment of trustees:
consequences
‘(1) An order under section 7 appointing a trustee may provide for any fees
and expenses of trustees appointed under the order to be paid-
(a) by the employer,
(b) out of the resources of the scheme, or
(c) partly by the employer and partly out of those resources.’
‘(2) Such an order may also provide that an amount equal to the amount (if
any) paid out of the resources of the scheme by virtue of subsection (1)(b) or
(c) is to be treated for all purposes as a debt due from the employer to the
trustees of the scheme.’
‘(3) Subject to subsection (4), a trustee appointed under that section shall,
unless he is the independent trustee and section 22 applies in relation to the
scheme, have the same powers and duties as the other trustees.’
‘(4) Such an order may make provision-
(a) for restricting the powers or duties of a trustee so appointed,
(b) for powers or duties to be exercisable by a trustee so appointed to the
exclusion of other trustees.’
Section 5 ‘Regulator's objectives’
(1)The main objectives of the Regulator in exercising its functions are-
(a) to protect the benefits under occupational pension schemes of, or in
respect of, members of such schemes,
(b) to protect the benefits under personal pension schemes of, or in respect
of, members of such schemes within subsection (2),
(c) to reduce the risk of situations arising which may lead to compensation
being payable from the Pension Protection Fund (see Part 2), and
(d) to promote, and to improve understanding of, the good administration of
work-based pension schemes.
Section 100 of the Pensions Act 2004 ‘Duty to have regard to the interests
of members etc’
‘(1)The Regulator must have regard to the matters mentioned in subsection
(2)-
(a) when determining whether to exercise a regulatory function-
(i) in a case where the requirements of the standard or special
procedure apply, or
(ii) on a review under section 99, and
(b) when exercising the regulatory function in question.’
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‘(2)Those matters are-
(a) the interests of the generality of the members of the scheme to which the
exercise of the function relates, and
(b) the interests of such persons as appear to the Regulator to be directly
affected by the exercise.’
4. Relevant Guidance
The Determinations Panel has discretion as to whether or not it varies its
order under s101 of the 2004 Act. A discretionary power must be exercised
for proper purposes which are consistent with the legislation which has given
the power. When exercising a discretionary power, the Determinations Panel
must take into account all relevant considerations and ignore any irrelevant
considerations. Some of the relevant considerations are set out in section
100 of the Pensions Act 2004 (as explained above) but these are not the only
considerations that may be relevant. Whether a particular consideration is
relevant must be determined by reference to the implied purpose of the
legislation.
4.1 The legal adviser present advised the panel that page 1 of the Warning
Notice, paragraph 3 ‘Power to be used’ should have read as follows: “The
Regulator’s power to vary its orders is a reserved function under Part 4 of
Schedule 2 of the Pensions Act 2004, [paragraph 44], and therefore can only
be exercised by a Determinations Panel”.
5. Background to the Application
1. An independent trustee was appointed to this scheme by the Regulator
with effect from 19 April 2006 because the Determinations Panel was
satisfied that it was necessary to do so to secure that the trustees as a
whole have or exercise the necessary knowledge and skill for the proper
administration of the scheme and to secure the proper use or application
of the assets of the scheme. The order provided that his fees and
expenses would be paid by the employer.
2. The background to the application considered on 19 April 2006 is as
outlined at point 4 of the determination notice exhibited with the warning
notice sent in relation to the application now being made.
3. There had been a history of disputed and unpaid contributions to this
scheme by the employer and the previous trustee (Llandaff Engineering
Ltd) was ineffectual in dealing with these issues.
4. Notification of an insolvency event under section 120 of the Pensions Act
2004 was received from the insolvency practitioner confirming that
Llandaff entered into administration on 19 June 2006.
5. On 26 June 2006 the Independent Trustee provided details of his actions
since appointment by the Pensions Regulator and asked about payment
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of his fees in view of the fact that the employer was now in
administration.
6. Following the issue of the warning notice, one response was received
from the Insolvency Practitioner pointing out he was appointed
Administrator, not Administrative Receiver. A copy of his appointment
and estimated statement of affairs of the insolvent company was
enclosed.
6. Facts, Matters Relied Upon and Conclusion
1. While Mr P R Dewey of Dewey & Co, as Administrator of Llandaff
Engineering Co, could choose to pay the ongoing expenses of the
company during the administration, it was extremely unlikely that he
would do so.
2. From the information supplied by the Administrator in his ‘Estimated
Statement of Affairs as at 31 May 2006’ in his response to the Warning
Notice there was only a very limited likelihood that there would be any
recovery of any deficit.
3. It was still necessary, and essential to protect the interests of members,
for there to be an independent trustee to be in place for this scheme. It
was appropriate that his proper fees and expenses should be provided
for. In the circumstances there was no other available source of funds
than the resources of the scheme.
4. As this determination affected the financial position of the scheme, the
Independent Trustee was requested by the Panel to inform members of
this determination.
7. Details of Determination
That the order of appointment effective from 19 April 2006 should be varied
with effect on and from 16 August 2006 in relation to the payment of the
appointed trustee’s fees (now detailed at point 4) to read as follows.
1. Mr David Worthy is hereby appointed as trustee of the Llandaff
Engineering Company Limited Pension and Life Assurance Scheme with
effect on and from 16 August 2006.
2. This order is made because the Pensions Regulator is satisfied that it is
necessary to do so in order to secure that the trustees as a whole have,
or exercise, the necessary knowledge and skill for the proper
administration of the scheme pursuant to Section 7(3)(a) of the Pensions
Act 1995 and to secure the proper use or application of the assets of the
scheme pursuant to Section 7(3)(c) of the Pensions Act 1995.
3. The powers and duties exercisable by Mr David Worthy shall be to the
exclusion of all other trustees of the scheme pursuant to section 8(4)(b)
of the Pensions Act 1995.
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4. Mr David Worthy’s fees and expenses shall be paid out of the resources
of the scheme pursuant to section 8(1)(b) of the Pensions Act 1995 and
those fees and expenses shall be deemed to be a debt due from the
employer to Mr David Worthy, pursuant to sections 8(1) and 8(2) of the
Pensions Act 1995 .
5. This order:
a. will take immediate effect on the date of this order
b. may be terminated at the expiration of 28 days notice from the
Pensions Regulator to the trustee, pursuant to section 7(5)(c) of the
Pensions Act 1995.
8. Decision Maker
The determination which gave rise to the obligation to give this Determination
Notice was made by the Determinations Panel.
9. Scheme details
Name of scheme
Type of scheme
Status of scheme
Membership
Llandaff Engineering Company Limited Pension and Life
Assurance Scheme
defined benefit,
Closed to accrual
9 deferred, 1 pensioner
Size of fund Estimated £302k as at 6 April 2004
Contracted in/out
Contracted out
10. Scheme trustees
Name Period of office Status of trustee
1.
Llandaff Engineering
Company Limited
From inception to 22 April 2006
Corporate
2.
Mr David Worthy 22 April 2006 ongoing Independent appointed by the Pensions
Regulator
11. Scheme advisers
Type Name Period of office Company
1.
2.
3.
Actuary Mr J Sojitra May 2002 to date JLT Benefit Solutions
Limited
Auditor Mr M Warren FCA Unknown A W G Warren & Son
Administrator Norwich Union Unknown Norwich Union
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12. Employer details
Name
Llandaff Engineering Company Limited (in Administration)
Address
Nature of business
Number of
employees
Company registered
number
Status
Paper Mill Road, Canton, Cardiff, CF11 8PH
Current carrying wiring device and industrial control manufacturers
90
00798364
in Administration
13. Important Notices
This Determination Notice is given to you under sections 96(2)(d) of the Act.
The following statutory rights are important.
14. Referral to the Pensions Regulator Tribunal
14.1
You have the right to refer the matter to which this Determination Notice
relates to the Pensions Regulator Tribunal (“the Tribunal”). Under section
103(1)(b) of the Act you have 28 days from the date this Determination
Notice is given to you to refer the matter to the Tribunal or such other period
as specified in the Tribunal Rules or as the Tribunal may allow. A reference
to the Tribunal is made by way of a written notice signed by you and filed with
a copy of this Determination Notice. The Tribunal’s address is: 15-19
Bedford Avenue, London WC1B 3AS (tel: 020 7612 9649). The detailed
procedures for making a reference to the Tribunal are contained in section
103 of the Act and The Pensions Regulator Tribunal Rules 2005 (SI
2005/690).
15.2
You should note that the Tribunal Rules provide that at the same time as
filing a reference notice with the Tribunal, you must send a copy of the
reference notice to The Pensions Regulator. Any copy reference notice
should be sent to Determinations Support at The Pensions Regulator, Napier
House, Trafalgar Place, Brighton BN1 4DW.
Signed: Michael Maunsell......................
Chairman: Michael Maunsell ..........................
Date: 17/8/06 ..........................................
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