Winding up or transferring a defined contribution scheme
Stage 3: Complete formal wind up of the scheme and transfer member benefits
On this page
- Formal trigger of wind up
- Communicate with members
- Actions to consider when transferring members’ benefits
- Other actions to consider when winding up
Formal trigger of wind up
When you have completed the steps to prepare to wind up the scheme as set out in stages 1 and 2 (and assuming wind up has not been triggered automatically), the next stage is to formally trigger the wind up. You will need to make sure that you comply with any formal requirements set out in the scheme governing documentation.
On formal trigger of wind up, you will need to let us know that the scheme status has changed to 'winding up'. You can do this online using Exchange.
Once wind up is triggered, the process should be completed efficiently, and we would anticipate that in most cases, the key activities can be completed well within two years. However, if your scheme is not wound up within two years, you will need to submit a report to us on the progress of the wind up and provide further reports on an annual basis. You can use the Section 72A Pensions Act 1995 winding up report template for this purpose:
Section 72A winding up report, Word 35KB, 3 page(s)
You must also keep written records of any decision to wind up the scheme (or postpone winding up), and of any decisions about the timing of any steps being taken for the purposes of the wind up.
Communicate with members
Once the wind up has been formally triggered, you must notify all members and beneficiaries that the scheme is winding up. This notification must be issued within one month of formally starting the wind up and contain the following information:
- A statement that the scheme is being wound up and the reasons for the wind up.
- Whether death in service benefits will continue to be payable for active members.
- A summary of the action that has been and is being taken to establish the scheme's liabilities and recover any assets, estimated timeframes and an indication of whether benefits are likely to be reduced.
- If the official receiver or an insolvency practitioner has been appointed to the employer, a statement that at least one of the trustees of the scheme is required to be an independent person.
It is important that you communicate with your members throughout the wind up process. As a minimum, you must give members the information in point 3 above every 12 months while the scheme is winding up. Depending on the option you choose for transferring your members’ benefits, the trustees of the receiving vehicle, such as a master trust or an insurer, may assist you with your communications to members.
If the wind up is not completed within two years, copies of the Section 72A winding up reports made to us must also be provided to members on request.
Actions to consider when transferring members’ benefits
Issue member option forms
Issue option forms to members, setting out all options and informing them how their benefits will be transferred if no express instructions are received (for example, via a buy out policy). The form should alert members to any specific consequences of the default option. You may also wish to recommend that members take financial advice.
When you present the available options to members, you should encourage them to consider carefully which option will be best for their particular circumstances. You may wish to refer them to MoneyHelper or suggest that they seek independent financial advice.
Process any member requests for alternative options
Process any member requests for options other than the default option. This might, for example, include requests to transfer out (with consent), for winding up lump sums, or for retirement options. This will normally be done by the scheme's administrators.
Provide confirmation to members
Confirm to members once personal options have been processed.
Transfer remaining scheme assets and members to the selected new arrangement
Transfer remaining scheme assets and members to the selected arrangement – this might be a new pension scheme, or a buy out policy.
Other actions to consider when winding up
Consider options for indemnities and insurance, agree this with the employer (if appropriate) and implement the insurance
If this is not being funded by the employer, or specifically permitted by scheme governing documentation, you should consider taking legal advice about whether it is possible to obtain indemnity cover or take out insurance for liabilities.
Formally document completion of the winding up
This is normally done by way of a deed of termination.
Notify us
Tell us that the scheme has been wound up. You can update the scheme registration online through Exchange.
If there were any untraceable members you should also add a 'pensions tracing service contact' to the scheme roles. Any untraced members who contact the tracing service will be directed to this contact.
Notify HMRC
Notify HMRC by submitting an Event Report.
Remove your entry from the Data Protection Register
You will need to notify the Information Commissioner that you (as trustee) have ceased to be a data controller.
Produce final accounts
A final set of accounts will need to be produced and signed off.
Close the trustee bank account
You will want to make sure all banking and investment arrangements in place for the scheme are properly closed.
Final trustee meeting
Review the actions taken to wind up the scheme and check that you have taken all necessary steps to conclude the wind up.
Provide statutory information to members and beneficiaries
You will need to comply with statutory requirements to provide certain information to members and beneficiaries once the winding up is complete. The information that must be provided includes:
- who has or will become liable for the payment of the member's or beneficiary's benefits
- if the member or beneficiary is entitled to payment of benefits, the amount of benefit that is payable and (if it is payable periodically) any conditions for continuing to make payments or provisions which would allow the payments to be altered
The information needs to be provided to each member or beneficiary as soon as practicable after and in any case, within three months of the date the trustees have done what they could to discharge the scheme’s liabilities to pay benefits to that member or beneficiary.