Trustees

What does winding-up mean?
Winding-up is the process of ceasing contributions to and terminating an occupational pension scheme and then dealing with its assets and liabilities. This can by done by using the assets in the scheme to secure (in accordance with the scheme documents and current legislation) the benefits by buying annuities from an insurance company or by transferring the assets and liabilities to another pension arrangement. When the winding-up is complete the scheme will cease to exist and the members receive benefits from an insurance company or the other pension arrangement instead.

How long does winding-up take?
This varies from scheme to scheme. Some of the main factors which can delay the process are:

• recovery of unpaid contributions;
  
• scheme funding levels if there is a deficit then this deficit becomes a debt on the employer;
  
• outstanding complaints to the Pensions Regulator, TPAS or the Pensions Ombudsman;
  
• reconciliation of benefits where the members were contracted out of the State Second Pension;
  
• data discrepancy issues in the employer's or administrator's records;
  
• non-compliance with the Pensions Act 1995 and Pensions Act 2004;
  
• time taken to liaise with insurers on buying out benefits.

Corporate Transactions

How should a company deal with situations involving highly confidential information? At what point should they inform the trustees?
From the employer's perspective any corporate transaction is sensitive. The Pensions Regulator believes that Trustees should always be informed about the employer's financial circumstances and plans. One way to give employers comfort that sensitive information will not be disclosed is to ensure that each new trustee signs a confidentiality agreement. Then, when a corporate transaction is on the cards, the employer can involve the trustees at an early stage. We can help to prepare confidentiality agreements. With a large trustee board, the trustees and employer may agree that a committee of trustees (or the chair) is given early information about a corporate transaction and that they then agree when the rest of the trustees are to be given full information.

What are the main powers that The Pensions Regulator has?
The Regulator has powers to act where it feels that an employer is attempting to avoid their pension obligations. A pension scheme in deficit is an unsecured creditor of the employer. In order to protect the benefits of members of pension schemes, and to reduce the risk of schemes needing to be admitted to the Pension Protection Fund, the Regulator may issue:

• financial support directions, when the employer in relation to the scheme is a service company or is insufficiently resourced; and
  
• contribution notices, where, in the Regulator's opinion, there is an act or omission, one of the main purposes of which is to avoid pension liabilities. A very wide class of people, including, e.g., directors and shareholders of a company, can be personally liable if they are party to any such act or omission or if they knowingly assisted it.

When might The Pensions Regulator exercise its powers?
The Regulator will wish to know about all events having a financially detrimental effect on the ability of a pension scheme to meet its liabilities. These include changes in the group structure of an employer and events where a company seeks to return capital or to change the level of security given to its creditors.

What do these powers allow the Pensions Regulator to do?
A contribution notice allows the Regulator to direct that, where, in its opinion, there is a deliberate attempt to avoid the employer's debt, those involved must pay an amount up to the full employer's debt either to the scheme or to the Pension Protection Fund. A financial support direction requires financial support to be put in place for an underfunded scheme where the Regulator concludes that the employer is either a service company or is insufficiently resourced.

How can I be certain that the action I intend will not be found later to fall foul of The Pensions Regulator?
A clearance procedure is available for anyone who wishes to confirm that they will not be subject to either a contribution notice or a financial support direction following a proposed transaction.

Can trustees seek clearance?
Yes, and it is also possible for trustees to alert the Regulator when they consider that the employer should be seeking clearance but is not. The Regulator expects trustees to have been involved in the negotiations regarding an event for which clearance is being sought. The Regulator prefers not to consider a clearance application if the trustees have not been involved.

Dispute Resolution

Do you provide any materials to help clients monitor legal developments?
Yes. You can choose to receive free e-mail briefings twice a month to keep you up to date with developments in pensions law. We also send additional briefings looking at major developments in more detail, especially where pension schemes may have to change their existing practices. To recieve these briefings, pleas e-mail maralyn.thomas@harveyingram.com, or you can view the briefings on News & Briefings page of this website. We also offer the opportunity to attend seminars covering developments in pensions law.

Is there any independent means for a dispute between scheme trustees and the employer to be determined where, for example, they disagree upon the meaning of complex legislation?
People, and bodies such as trustees and employers, can ask the Pensions Ombudsman to decide complaints and disputes relating to the running of pension schemes. The trustees and the employer can also bring proceedings to ask the Court to determine how the matter should be resolved.

In being a party to litigation how can scheme trustees be sure they will not be personally liable for costs?
Trustees will normally be parties to litigation in their own name and could, in principle, be liable for the legal costs of the other side if they lose. To protect themselves from adverse costs consequences, the trustees could rely on an indemnity from the scheme's assets or the employer in respect of costs exposure and indeed there will often be protective wording in the scheme's documents. Trustees can also make a confidential application to the court for directions, known as a Beddoes order. If granted, the trustees will be entitled to an indemnity for their costs out of the scheme assets in relation to the litigation they are subject to.

Self-Invested Personal Pension Schemes (SIPPS)

A Self Invested Personal Pension Scheme is an individual arrangement between the SIPP member and the Insurance Company providing it. Employers are not parties to these contractual arrangements and they generally do not have trustees either.