Part 3: The Pensions Regulator Contribution notices where avoidance of employer debt etc Section 103: Grounds for issuing a section 38 contribution notice S38F: Section 38 contribution notice issued by reference to employer resources test: defence
New section 38F provides a defence in respect of new section 38E.
	Subsection (1) of new section 38F applies where the Regulator believes that the conditions of new inserted section 38E have been met, and a warning notice in respect of a contribution notice under section 38 of the Pensions Act 2004 has been issued wholly or partly because in its opinion, the employer resources test has been met.
	Subsection (2) provides that where a defence has been raised, a contribution notice must not be issued if the Regulator is satisfied that certain conditions under this section are met.
	Subsections (3) to (5) set out the conditions for the defence: this provides that the person who wishes to raise the defence must satisfy the Regulator that he or she has met conditions A and C, and where relevant condition B. Those conditions provide for a three step process.
	Condition A is that before becoming a party to the act or failure, the person gave due consideration to the extent to which the act or failure to act might reduce the value of the resources of the employer relative to the estimated section 75 debt.
	Condition B is that where, as a result of the consideration outlined in condition A, the person took all reasonable steps to eliminate or minimise the potential for the act or failure to have such an effect.
	Condition C is that, having regard to all circumstances prevailing at the time of the act or at the time when the failure to act first occurred, it was reasonable for the person to conclude that the act or failure to act would not reduce the value of the resources of the employer and would also not materially reduce the value of the resources of the employer relative to the estimated section 75 debt.
	Subsection (6) gives further detail about what will be required in order for a person to be regarded as having given the consideration referred to in condition A. This is that the person must have made enquiries and done the other acts that a reasonably diligent person would have made or done in the circumstances.
	Subsection (7) sets out that the person’s assessment of whether or not an act or failure might materially reduce the value of the resources of the employer, is to be judged by reference to the circumstances prevailing at that time and of which that person was aware or ought reasonably to have been aware at the time of the act or the time when the failure to act first occurred. This includes acts or failures to act which have occurred before that time and expectations at that time of other acts or failures to act occurring.
	Subsection (8) provides that, for the purposes of conditions A and C, the "estimated section 75 debt" means:
the amount which a reasonable estimate of the amount of the debt which would become due from the employer to the trustees or managers of the scheme under section 75 if section 75(2) applied, and the time designated by the trustees or managers of the scheme for the purposes of section 75(2) were the time immediately before the act occurred or the failure to act first occurred; and
the amount of any debt due at the time in question from the employer under section 75 of the Pensions Act 1995 is to be disregarded.
	Subsections (9) to (12) set out how the defence applies in relation to a series of acts or failures to act.
	Subsection (9) provides that the person must show either that the three conditions are met in relation to each of the acts or failures in the series, or that in relation to each of those acts or failures, it formed part of a group of acts or failures (as selected by the person raising the defence) in relation to which the matters set out in subsection (10) are shown.
	Subsection (10) sets out the matters to be shown to meet conditions A, B and C in relation to a group of acts. They are that before becoming party to the first act or failure in the group, the person must show that condition A is met in relation to the overall effect of the group, condition B must be met in relation to that overall effect, and condition C must be met in relation to each of the acts or failures in the group.
	Subsection (11) provides that if at any time the person considers that condition C will not be met in relation to any particular act or failure to act in the group, the previous acts or failures in the group are to be regarded as a separate group for the purposes of subsection (9), and the person may then select another group consisting of the particular act or failure concerned and any subsequent act or failure, in relation to which the person shows the matters mentioned in subsection (10).
	Subsection (12) states that if the person is unable to show in the case of each of the acts or failures to act in the series that the matters set out in subsection (9)(a) or (b) are met, but does show in the case of some of them that those matters are met, the acts or failures to act within paragraph (b) are not to count for the purposes of new section 38E as acts or failures to act in the series.
	Subsection (13) provides the definition of terms used in this section, including "a warning notice" and "party to an act or failure to act". It also sets out that section 38E(2) (the resources of the employer and their value) has effect for the purpose of this section as it has effect for the purposes of section 38E.