There have been a relatively small number of schemes that operate cross-border between the UK and other countries – around 40 in total, as at the end of the Brexit transition period on 31st December 2020. However, the UK laws that previously governed schemes operating cross-border have largely been revoked.
Accordingly, the Regulator has issued guidance that reminds trustees and employers to take appropriate advice to establish if they need to comply with new restrictions.
UK schemes with overseas contributions
The guidance makes it clear that, currently, UK law does not prevent an employer in another country from contributing to a UK scheme. However, it should not be assumed that the laws and regulatory rules applying in the other European Union (EU) or European Economic Area (EEA) country or countries involved in the scheme allow this.
EU / EEA schemes with UK contributions
As for a UK employer contributing to a non-UK cross-border scheme, there are requirements to comply with from the UK law perspective.
An important one is that the non-UK scheme must be established under trust and either have a UK-resident trustee or have a trustee-appointed representative who is resident in the UK. (This applies whether the employees are based in the UK or not). Again, it should not be assumed that the EU or EEA country’s laws and regulatory rules allow the scheme to accept contributions from a UK employer.
Automatic enrolment
It is no longer possible to use a non-UK scheme as an automatic enrolment scheme for new entrants and urgent steps should be taken to correct the position.
For existing members in a qualifying scheme that is a non-UK scheme, this may continue but the position will need to be reviewed.
PPF issues
Eligibility for the PPF does not depend on where the employer of the pension scheme is based. To be eligible for the PPF, a pension scheme must have its main place of administration in the UK.
However, the mechanism for triggering PPF entry requires a UK insolvency event.
Trustees dealing with this kind of situation should take legal advice on how PPF entry could be secured, for example a winding-up order in the UK courts.
All members of an eligible scheme that transfers to the PPF are eligible for PPF compensation regardless of nationality or residence.
Capita comment
This latest guidance reinforces the point that cross-border issues are complicated and, where relevant, employers and trustees are likely to require legal advice.
An area to watch out for concerns seconded employees to an EU or an EEA country who are in a UK scheme, as they will not be in cross-border schemes per se because such secondments were exempt.
However, they could be affected by the operation of EU law in terms of their ongoing membership.