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Continuity option 1: discharge liabilities and wind up

CDC code in force: 1 August 2022

We are more likely to be satisfied where the continuity strategy shows that trustees have considered each continuity option and addresses how they will protect members’ interests during a triggering event period.

Key issues to consider when pursuing Continuity option 1

Continuity option 1 is for the scheme’s liabilities to be discharged and for the scheme to be wound up.

Key issues to consider when pursuing continuity option 1 are set out in the table below. We are more likely to be satisfied that the continuity strategy is adequate if it addresses these points:

Requirement Matters more likely to satisfy TPR
When choosing continuity option 1, details of how the trustees wouldCI1
  • consider the interests of active, deferred and pensioner beneficiaries when identifying suitable options for discharging liabilities
  • assess and decide on the relevant factors when selecting the default discharge option(s)CI2
  • carry out due diligence checks before choosing an alternative arrangement
  • secure benefits for members already receiving a periodic income
Details of scheme rules on how continuity option 1 is given effect, includingCI3
  • the time when winding up is formally triggeredCI4
  • how the value of available assets will be determined
  • how the realisable value of accrued rights to benefits will be quantified during wind-up, noting that the rules for valuing accrued benefits must be applied to all members without variationCI5
  • how the amount or rate of periodic income payable during wind-up is to be calculated and adjustedCI6
A plan on how the trustees would implement the following actions, from the winding-up commencement dateCI7
  • stopping admission of new members
  • ceasing receipt of contributions by or on behalf of members
  • dealing with late payments and transfers into the schemeCI8
  • stopping the payment of benefits, including transfer payments
  • discharging trustee liability in connection with pension sharing orders and short service refundsCI9
Details of how the trustees willCI10:
  • quantify the realisable value of each beneficiary’s accrued rights, on an actuarial basis, in accordance with regulations and scheme rules at the following timepoints:
    • Within 28 days of commencing wind-up (initial estimate)
    • Within six months of the date we notified the trustees that the implementation strategy was approved
    • No less than one month before the proposed discharge date (final estimate)
    • Immediately before discharge, with any final figure reduced to reflect any periodic income paid in winding-up period (final quantification)
 A plan for how the trustees will provide periodic income to pensioner beneficiaries during the wind-up periodCI11

From the wind-up commencement date, until initial quantification of accrued rights has taken place:

  • How the trustees will provide a periodic income to pensioner beneficiaries, in place of any pension they were in receipt of before wind-up commenced (periodic income during this period must fall on the same day and be an equivalent amount to pension received before wind-up started and remain in place until the value of rights has been initially quantified).

After initial quantification of accrued rights:

  • How the trustees will provide periodic income to pensioner beneficiaries, following the quantification of accrued rights on an initial estimate basis (after any adjustments), and as revised by subsequent winding-up quantifications.
  • The principles the trustees will use to prepare beneficiaries for the transition from the periodic income paid during wind-up and the benefits to be secured through one of the permitted discharge options
 Data cleansing and member tracingCI12
  • Details of the trustees’ approach to identifying and rectifying any data issues, including how they will conduct tracing member exercises, an estimate of costs and how they will meet them.
 Dealing with investmentsCI13
  • A summary of the trustees’ approach to making decisions and dealing with investments during wind up, including identification of assets that may be transferred in specie, or will need divestment.
  • Applicable timescales – for example, when disinvesting, and whether there is a need to manage any specific conditions under the terms of contracts with investment providers.
  • A summary of costs and how these will be met, including disinvesting; including exit fees, early redemption penalties or costs for advice.
  • A summary of assumptions used for any estimated figures providedCI14.
  • How the trustees would securely transfer the value of beneficiaries’ accrued rights to benefits to a receiving scheme or alternative discharge option, including:
    • a summary of any checks or approvals before the transfer takes place
    • a summary of timelines and costs, and how they will meet those costs
  • How the trustees would securely transfer beneficiaries’ personal data, including details of any quality controls and checks to ensure the integrity of data on transfer.
Details of communication strategiesCI16

How trustees would communicate with employers, beneficiaries and TPR, including:

  • the information to be provided
  • how the trustees will assess whether their communications are understood
  • stages at which communications will take place
  • how trustees will deal with members communicating with them
  • a timetable for how the trustees will ensure statutory noticesCI17 are sent to employers and beneficiaries
  • estimates of the costs of communication and how they will be met
  • strategies for communicating with us, which should include the types of communications, owners and timescales

Legal references

CI1 Section 36(2) of the Act and Paragraph 2 of Schedule 6 to the Regulations

CI2 By transferring the value of the beneficiaries’ accrued rights to benefits under the scheme to one or more alternative arrangements

CI3 Paragraph 3 of schedule 6 to the Regulations

CI4 Paragraph 4 of schedule 6 to the Regulations

CI5 Paragraph 5 of schedule 6 to the Regulations

CI6 Paragraph 7 of schedule 6 to the Regulations

CI7 Paragraph 6 of Schedule 6 to the Regulations

CI8 Regulation 15(1)(q) of the Regulations

CI9 Paragraphs 6(5) and (6) of Schedule 6 to the Regulations

CI10 Section 36(1)(a) of the Act, Regulation 15(1)(m) and Paragraph 5 of Schedule 6 to the Regulations

CI11 Regulation 15(g) and Paragraph 7 of Schedule 6 to the Regulations

CI12 Regulation 15(1)(l) of the Regulations

CI13 Regulation 15(1)(p) of the Regulations

CI14 Regulation 15(2)(a) of the Regulations

CI15 Regulations 15(1)(h), (i) and (k) of the Regulations

CI16 Regulations 15(1)(c) and (d) of the Regulations

CI17 Schedule 6 to the Regulations