The Pensions Regulator issues contribution notice to sole director

The Pensions Regulator has recently issued a contribution notice to an individual director for the sum of £382,136. We review the case and decision which proves that the Regulator is willing to pursue individuals, and even overseas targets, to use its anti-avoidance powers to protect the interests of pension scheme members.

The Pensions Regulator (TPR) has published its report detailing its investigation into the Carrington Wire Defined Benefit Pension Scheme (the Scheme), which lead to its decision to issue a £382,136 contribution notice against an individual who took control of the sponsoring employer.


Carrington Wire Limited (CWL) was the sole sponsoring employer in relation to the Scheme.

CWL was acquired by a company in the Russian based Severstal group (Severstal). As a condition of the acquisition, Severstal was required to provide a guarantee to the Scheme covering all payments due to the Scheme from CWL (including payments due under section 75 of the Pensions Act 1995). A clause in the guarantee provided that it would fall away if Severstal ceased to be associated with CWL.

In 2010, Severstal commenced a solvent wind-down of CWL. Severstal then sold the entire shareholding in CWL to a shell company owned by Mr Richard Williams for £1. There was a purported working capital adjustment of £400,000, the majority of which was received by Mr Williams personally.

The sale was not revealed to the Scheme’s trustees or reported to TPR until after it had taken place. By then, the Scheme had lost the benefit of the guarantee.

Investigation and regulatory action

TPR issued a warning notice indicating that it intended to seek contribution notices against Mr Williams and two companies in the Severstal group.

A settlement was reached with the two Russian companies whereby they agreed to pay £8.5m to the Scheme. However, TPR later issued a contribution notice against Mr Williams in the sum of £382,136 (reflecting the amount that Mr Williams personally received and used for his own purposes).

TPR found that both the "main purpose" and "material detriment" tests under s38 of the Pensions Act 2004 had been satisfied. It held that preventing recovery of a s75 debt from a guarantor fell within the scope of s38 of the 2004 Act just as much as preventing recovery from a sponsoring employer. TPR also recognised that the "main purpose" test is likely to have subjective as well as objective elements.

The determination in this case proves that TPR is willing to pursue individuals, and even overseas targets, to use its anti-avoidance powers to protect the interests of pension scheme members. However, the settlement and the funds sought from the Mr Williams in this case will, unfortunately, not be enough for the Scheme to avoid entering into the Pension Protection Fund

Author: Jennifer Crawford

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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