As reported in last month’s Legal News, section 50 of the Pensions Act has recently been amended.

The Pensions Board has recently published guidelines about the approach of the Board on issuing a direction. The guidelines include the following points:

• the Board will consent only where it is satisfied that the proposed future operation of the scheme is robust enough to make any further application unlikely;
• the nature and amount of the reduction in benefits is a matter for the trustees;
• the Board may require copies of the legal advice obtained by trustees;
• trustees of schemes permitted to amend their rules subject to section 50A may have to provide ongoing detailed information to the Board; and
• prior to any application, scheme trustees must provide information to scheme members of the implications and rationale for the reduction in benefits.

The Pensions Board has also produced a section 50/50A application form, which is available to download on its website.  The form requires statements by the scheme trustees, the sponsoring employer and the scheme actuary.  Trustees must confirm, amongst other things, that they have undertaken a comprehensive review of the structure and management of the scheme with the objective of long-term stability and sustainability, and have taken legal advice in relation to the application. 

The form allows scheme trustees to apply for a section 50 direction only, a section 50A amendment only, or both. The funding and investment policies to be adopted by the scheme must be outlined, along with the main short and long-term risks to which the scheme is exposed and the responses the trustees will adopt in the event of such risks materialising.  Details must also be given in relation to the member communication process adopted.