The Pensions Regulator

Final wind-up approach and guidance published

Ref: PN08-12
30 June 2008

Following consultation, the Pensions Regulator has published guidance to help trustees of occupational pension schemes meet Government expectations that key wind-up activities are completed within two years; an approach broadly welcomed by industry.

This expectation, set-out in a joint statement by the regulator, PPF and FAS (as part of DWP), forms part of an aligned approach aimed at speeding up both the wind-up and passing through a PPF assessment period of schemes to ensure that:

• scheme assets are maximised, and levy payments reduced, by not incurring the costs of unduly lengthy wind-up or passage through PPF assessment period; and
• members have certainty from the earliest opportunity, for schemes winding up, about the benefits they will receive.

The regulator’s guidance outlines suggestions of good practice on, for example: administration, planning scheme wind-up and buying out annuities.

Alongside the guidance and the statement, the regulator, PPF and FAS have published a joint consultation report explaining that the majority of respondents supported our overall approach, particularly our commitment to joint working.

The regulator has also developed e-learning modules as part of its Trustee toolkit, covering the key elements of the wind-up and PPF assessment period processes.

Tony Hobman, chief executive of the Pensions Regulator, said: “The wind-up guidance, alongside our Trustee toolkit learning modules, provides trustees with the support they will need when preparing for and undertaking a scheme wind-up.

“The aligned approach between the regulator, PPF and FAS will ensure consistency between the three organisations and maximise regulatory impact.”

Minister for Pensions Reform Mike O’Brien, said: “This guidance is welcome, not just for the clarity it brings to trustees, but for the reassurance it can bring scheme members. Members can now know that the activities of wind-up should be completed within two years, the best practices their scheme should follow and the benefits they can receive.”

Peter Walker, director of delivery at the Pension Protection Fund said: “Our own experience shows that a two-year target for shepherding schemes through the assessment period is achievable. We will now continue to work with DWP and the Pensions Regulator to make the process as effective as possible.

“A major step to achieving this will be the publication of our new trustee guidance –which is currently out for consultation. This guidance, which sets out the principles the PPF expects trustees and their advisors to adhere to throughout the assessment process, will be published later in the year.”

Editor's notes

1. The publication of the final wind-up statement and guidance, and consultation report follows a six-week consultation, launched on 3 March 2008. There were 17 responses from a cross-section of interested parties. To view the consultation report, visit: www.thepensionsregulator.gov.uk
   
   The consultation followed a DWP review on the winding up of DB schemes under which two-year timeframes were proposed. A report setting out these proposals was published by DWP in November 2006. 
2. The Pensions Regulator has developed three e-learning modules for its Trustee toolkit covering the key elements of the winding up and the PPF assessment processes. Between them the modules cover the activities and decisions which need to be carried out to:
   • wind-up a DB scheme with a solvent employer,
   • wind-up a DC scheme with or without a solvent employer,
   • take a DB scheme with an insolvent employer through the PPF assessment process.
   Lay trustees and those trustees who are new or inexperienced in winding up occupational pension schemes are recommended to undertake the relevant learning module as a first step in understanding winding up or the PPF assessment process. The regulator’s good practice guidance has further information on the key barriers to wind-up and how these can be overcome. The PPF’s good practice guidance deals with the PPF assessment process. The learning modules are available in the winding up section of the trustee toolkit at http://www.trusteetoolkit.com/
3. Enforcement in relation to schemes winding up will be through the use of existing statutory powers, those that are the most likely to be used in this context are listed below.The Pensions Regulator can:
   • issue directions, for example where parties are failing to take all reasonable steps to wind-up a scheme;
   • remove or appoint trustees where necessary;
   • publish information, for example a decision by the Determinations Panel; and
   • take action against schemes which fail to provide the regulator with registrable information about starting or completing wind-up.

   The PPF can:

   • issue directions, for example in respect of the investment of the scheme's assets, incurring expenditure, the instigation or conduct of legal proceedings; and
   • require relevant information to be provided.
4. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
   • collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
   • issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
   • direct pension schemes as to how to calculate their liabilities and the contributions required;
   • issue a contribution notice where there is a deliberate attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.