A recent determination of the Deputy Pensions Ombudsman has provided further guidance on the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678) ("Employer Debt Regulations"), especially where there are notification and certification delays of a section 75 debt after an employment cessation event.

Employer Debt Regulations

If a multi-employer occupational pension scheme is underfunded, the overall deficit is treated as a debt due from the employers to the scheme's trustees under sections 75 and 75A of the Pensions Act 1995 ("section 75 debt"). The debt is triggered in specific circumstances, including employment-cessation events such as when an employer leaves the scheme, restructures their business, or becomes insolvent.

Once triggered, the debt is calculated by the scheme's actuary as the departing employer's share of the overall deficit, unless the employer has entered into an alternative arrangement to reduce or apportion its liability or defer triggering the debt.

Non-associated multi-employer pension schemes

In 2005, a change in the methodology for calculating section 75 debts created difficulty for non-associated multi-employer pension schemes. The change placed a higher value on pension liabilities which significantly increased the level of the debt. Debts which cannot be attributed to a participating employer (for instance, if an employer left the scheme before the Employer Debt Regulations came into force), or if a departing employer is unable to pay their section 75 debt, so called "orphan liabilities", become the responsibility of the remaining participating employers - leaving them to face significant and often unexpected bills upon leaving their scheme. This is particularly problematic for those with non-segregated funds such as the Plumbing and Mechanical Services (UK) Industry Pension Scheme (the "Scheme").


This is the context to the complaint brought against the Scheme's trustee and administration company by Mr S, a former participating employer of the Scheme. A section 75 debt was triggered when Mr S changed the legal status of his business to a limited company with effect from 1 July 2010, despite having received written assurances from the administration manager before proceeding that no financial or practical consequences would arise from the restructuring. The Trustee delayed taking any action for 7 years and Mr S was only made aware of the debt in November 2017. It took a further 2 years to estimate Mr S' section 75 debt.

The trustee and administration company reasoned that, during that time, they lobbied the Government to make a special exemption from the Employer Debt Regulations for non-associated multi-employer schemes, and had difficulties calculating section 75 debts due to insufficient information. They also claimed that the trustee had no obligation to advise Mr S about the consequences of leaving the Scheme, and that the administration manager did not owe a duty of care to Mr S for the correctness of information supplied to him.

Mr S argued that the trustee had run out of time to recover the debt under the five and six year prescription and limitation periods set out in Scots and English Law, respectively, and that the delay in calculating and certifying the debt amounted to maladministration. Mr S also argued that the administration manager and trustee had provided misinformation and made negligent misstatements, despite a duty of care to inform Mr S of the correct position.


The Deputy Pensions Ombudsman partially upheld the complaint.

Once it became clear that change to the Employer Debt Regulations was unlikely, and that the Scheme's section 75 debts could be calculated, the trustee should have initiated the process for collecting the section 75 debt – including informing Mr S that a section 75 debt had been triggered. The failure to do so constituted maladministration.

Whilst the administration company, as agent for the trustee, did not have a duty under the relevant legislation to notify an employer in advance of the consequence of leaving the Scheme, by providing this information, it had assumed a duty of care in relation to the accuracy of information provided to Mr S, given it had specialist knowledge of the Scheme and the trustee's legal obligations. The administration company breached its duty of care by providing inaccurate information, causing financial loss to Mr S. However, crucially the recovery of the debt was not time-barred. Following the court's approach in Phoenix Venture Holdings Ltd v Independent Trustee Services Ltd [2005] EWHC 1379 (Ch), the Ombudsman confirmed that although a section 75 debt falls due at an employment cessation event, it is not payable until the scheme actuary certifies it. It is the date of certification, rather than the employment cessation event, which triggers the start of the relevant limitation or prescription period. In this case, the Scheme was established and governed under Scots Law and so the relevant prescription period was 20 years, which had not yet started to run.

Accordingly, the trustee was directed to finalise the section 75 debt and partially discharge it, less the sum of £35,638 (representing the sale value of Mr S's business and for which he remained liable). The debt should also be reduced by a non-financial injustice award of £2,500.

Key takeaways

The determination is helpful confirmation that, in Scotland, the prescriptive period for recovering a section 75 debt is 20 years and that this runs from the date on which the debt was certified rather that the date is triggered.

However, this does not shield trustees from delays in the certification process. Good and timeous communication is key where problems arise during the process to ensure that trustees comply with their statutory obligations under the Employer Debt Regulations.

If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the pensions team or your usual Brodies contact.


Juliet Bayne


Maureen Burns

Senior Associate

Lauren Smith

Trainee Solicitor