Winding up or transferring a defined contribution scheme

Published: March 2019
Updated: March 2026

See all updates to this guidance

31 March 2026
Guidance revised in its entirety.

23 September 2021
Information added to stage 1 of the guidance about the new legal requirement for smaller DC schemes to carry out a more detailed value for members assessment.

Overview

Who this guidance is for

This guidance is for trustees of defined contribution (DC) occupational pension schemes or DC sections of hybrid schemes (hybrid schemes provide both DC and defined benefit (DB) benefits for example, guaranteed minimum pensions).

Although this guidance is designed for trustees, employers may also find some of the information helpful in understanding the wind up and transfer process for a DC scheme.

Master trusts

If you want to wind up a master trust pension scheme, you will need to comply with the requirements of the authorisation regime. See our guidance on triggering events for more information.

The wind up process

The process to wind up a pension scheme can be divided into three stages:

Stage 1: Decide whether the scheme should be wound up and assess the options available
Stage 2: Prepare to start formal wind up
Stage 3: Complete formal wind up of the scheme and transfer member benefits

This guidance takes you through each stage, with more detailed information about the actions to consider at each stage of the process.

When to consult professional advisers

This guide is illustrative and you should consider carefully how it applies in relation to your own scheme. Although you may find it necessary to seek professional advice at some point during this process, you may wish to read through this guidance first to identify the areas where you can carry out the steps yourself. If you are transferring your members to another pension scheme, such as a master trust, the receiving scheme may offer assistance with this process. You can then work out where you may need additional help from a professional adviser. Read more about managing advisers and service providers in our code of practice.

Stage 1: Decide whether the scheme should be wound up and assess the options available

Who can trigger the winding up of a DC pension scheme?

It is important to check the scheme governing documentation. This will set out who has the power to trigger wind up – it could be the trustees, the employer or one party with the consent or agreement of the other. The scheme governing documentation may also contain provisions about how winding up should happen, transferring members’ benefits or securing them.

Automatic trigger of wind up

If your scheme has automatically triggered wind up (for example, if under the scheme governing documentation, wind up is automatically triggered when the employer becomes insolvent or stops paying contributions), the rest of this section is not relevant to you. Proceed to Stage 2: Prepare to start formal wind up.

Making the decision to wind-up

When making this decision, questions to ask trustees and the employer include:

Whether there are alternative arrangements available that would better meet the needs of employees or scheme members. For example, the trustees may believe that the scheme is not delivering good value for its members. If the trustees cannot make the changes needed to address this, then the trustees might want to work with the employer to identify whether members could benefit from being transferred to another scheme.
Whether the scheme can meet current legal and regulatory requirements and whether it will continue to be able to do so in the future. This will require you to review the costs of running the scheme against the costs associated with winding up and transferring out or securing members’ benefits. You will need to consider this in the context of the best interests of your members and any cost burdens they may have to bear.
Whether the scheme meets the standards set out in our code of practice and other relevant guidance. If it does not, is it capable of meeting the standards in a timely and cost-effective way?
Whether there are good reasons for winding up the scheme – for example, the employer might want to merge it into another pension scheme or replace it with a more cost-effective arrangement.

In some cases, for example where a scheme is not providing good value for members, winding up may be in their best interests.

There will be some situations where trustees think it will be best not to wind up the scheme but to run it as a closed scheme – or decide, along with the employer, to maintain the scheme as an open scheme for some or all employees.

Some examples of these situations:

A scheme offers valuable benefits or guarantees which could not be secured or reproduced in a different arrangement. However, trustees may wish to explore the market to establish whether other providers can offer solutions.
There are penalties for early investment surrender, such as a loss of terminal final bonus. The current investment surrender terms should be reviewed at an early stage to check for any such issues, and consideration given to how they might best be managed.

You may want to consider taking professional advice about the best option for your members before deciding to wind up.

Due diligence activities to support decision-making on winding up

Review the scheme governing documentation

Find out how wind up is formally triggered, who has the power to trigger wind up and whether there is any power to continue to run the scheme as a closed scheme.

If the employer has the power to trigger wind up, then trustees can still assess whether the scheme should be wound up and then approach the employer with the findings.

Consideration could also be given as to whether:

any changes need to be made to the scheme governing documentation
the scheme governing documentation allows the exercise of key powers following the triggering of wind up

Consider who will meet the costs of winding up

Find out whether the employer has any obligation (under the scheme governing documentation or otherwise) or willingness to pay these costs. Under some scheme governing documentation the employer might be required to pay ongoing scheme costs but winding up costs could be deducted from members’ funds. Consideration should be given as to whether it is in the members’ best interest to continue the scheme as a closed scheme (if that is an option). Costs of winding up can vary significantly depending on the size of your scheme and the nature of benefits provided. You should try to identify all costs before triggering formal wind up, but any agreement with the employer to pay the cost should account for the fact that costs may change as the winding up progresses.

Check that member data is accurate and up to date

You should address any issues with data before winding up is formally triggered as poor data may affect the cost and time required to wind up a scheme. Check the following for each of the members:

Personal data, such as address, date of birth and national insurance number is accurate and up to date. If contact with any member has been lost, you will need to make all reasonable attempts to contact them.
Member and employer contributions have been paid and invested, so that members' fund values can be accurately determined.
All benefit data has been checked and reconciled, so you can accurately determine their benefits. This includes checking details of additional voluntary contributions and any unusual entitlements, such as a protected pension age (allowing retirement before age 55) or a protected tax-free lump sum (of more than 25%).

We have produced updated guidance on scheme member data quality. This sets out the practical steps and good practice trustees and scheme managers can take to meet the expectations that are set out in the data monitoring and improvement module of our code of practice.

Guidance on improving data ahead of wind up

Trace all 'missing' members using DWP or tracing agency as necessary

There are a number of different ways in which you or your administrators could try to trace members. These could include:

checking public registers for former employees
using the DWP tracing service (chargeable)
contacting employers who have historically participated in the scheme, and are still in business, to ask them to pass on information to any members they now employ
contacting alumni networks to ask them to pass on information or post it on their website
asking members who can be traced to help find other members
using social media to advertise for or track down former members

If, after all reasonable tracing routes are exhausted, you still don't have a last known address for some of the members, this isn't necessarily a barrier to the scheme winding up. However, you may want to consider taking legal advice on this issue.

Audit member data and reconcile individual accounts

Make sure the member data you hold is accurate. You should also make specific checks to ensure:

all employer and employee contributions have been collected and allocated correctly
all refunds of contributions due have been paid
any additional voluntary contributions and insured benefits held in the plan have been identified

Publish a section 27 notice to establish claims from unknown or missing beneficiaries

If you place a notice in The London Gazette (a government records website) and make other efforts to notify unknown members, including by advertising in at least one newspaper relevant for your membership, you can gain statutory protection from claims to trust property from unknown beneficiaries. This does not protect you against members you are aware of but simply cannot locate (although, as stated earlier, this isn't necessarily a barrier to scheme wind up).

Consider engaging with your members

Consider engaging with your members, where possible, to gather information on their retirement objectives and whether wind up would be in their interests.

Identify trustee policies in trustees' names

If the scheme winds up, any insurance policies you have bought to provide pensioner benefits which are in the name of the trustee will need to be reassigned to the members. This takes time and may have a cost – you may wish to seek legal advice about how this can be done.

Assess the options available for transferring members’ benefits

You should look at all available options for transferring members’ benefits to assess which ones could deliver either matching or improved outcomes for your members.

There are many different ways of doing this and you may want to take professional advice on the best range of options, but it is not necessary to do so.

Some of the more common options are as follows.

Transfer to a new arrangement

If, for example, the employer is continuing to operate and the reason the scheme is being wound up is that it provides poor value for members, it may be appropriate to transfer active members to a new pension arrangement which can continue to receive contributions. New arrangements could include master trusts, group personal pension plans, or an existing scheme associated with the employer.

Find out more about transferring to a master trust.

It’s important to note that you can transfer DC benefits without guarantees in bulk, without member consent, when any of the conditions listed below are met:

The transfer is made to a master trust authorised by us.
The principal employers of both the transferring and receiving schemes are within the same group, and the transferring members are current or former employees of employers in that group (for example, where the need to transfer has arisen from a corporate restructure).
You have taken written advice from an appropriate adviser independent of the receiving scheme.

Read further information on bulk transfers without consent on GOV.UK.

Buy-out policies

One method for securing benefits for deferred members (who are no longer making contributions and have not yet taken their retirement benefits) is some kind of buy-out policy. A DC buy-out policy is usually a contract with an insurer in the member's own name, under which the insurer will invest the member's pension savings until they are ready to access them.

There are a number of providers that offer buy-out policies, and you will need to review the terms and investment options carefully to ensure that the policy you choose is likely to provide equivalent or better outcomes for members than your existing scheme. Most trustees will want to consider getting professional investment advice about the buy-out policy. If you are thinking about a buy-out policy, you will also need to consider the following:

The financial strength of insurer and whether the policy will be covered by the Financial Services Compensation Scheme.
If members can transfer out of the policy before they retire.
Whether the funds contained within the policy are sufficiently matched to current funds.

Other options for members to gain access to their benefits

Retirement: depending on the scheme governing documentation, members over minimum pension age (usually aged 55) may be able to choose to take their benefits.
Uncrystallised funds pension lump sum: members over minimum pension age may choose to take all their fund as a cash payment, which would be subject to tax.
Winding up lump sum: members with fund values of £18,000 or less (the current limits set by HMRC) could be given the option to take a lump sum cash payment.
Short service refund: members with only DC benefits and less than 30 days' accrual could be given the option to have their contributions refunded.
Transfer with consent: members could also choose to transfer their benefits to a new pension arrangement of their choice.

Actions to consider when choosing a new pension scheme or buy-out provider

Set out the scope and purpose of the selection exercise, including the trustees' selection criteria.
Liaise with scheme providers or potential insurers and review a variety of buy-out policy options or new arrangements.
Consider whether it is necessary to appoint a professional investment adviser to provide a report on the options and make a recommendation. Note that, for some options, this may not be necessary.

Selecting a new arrangement or buy-out policy provider

When selecting a new arrangement or policy, you will need to consider all relevant issues, including the overall suitability of the policy or arrangement, any default options, and member-borne charges and transaction costs.

Stage 2: Prepare to start formal wind up

Once the decision has been taken to wind up, the second stage of the winding up process is preparing to formally trigger wind up under the scheme governing documentation.

The following activities are recommended during this phase.

Create a project plan

Prepare and agree a project plan with the key parties involved in the process, such as the employer, and any external administrators or advisers. The project plan should set out anticipated steps, timings and costs.

Check the scheme governing documentation

Ensure that you have reviewed the scheme governing documentation relating to winding up. See Review the scheme governing documentation in stage 1 for more details.

Legal requirements specific to the winding up process only start once wind up has been formally triggered. Therefore, once wind up starts, it is unlikely that changes could be made to the scheme governing documentation. You may therefore want to take legal advice about whether any amendment to the scheme governing documentation is necessary before the wind up starts – for example, to allow amendments during the wind up.

Check what will happen to benefits or benefit accrual on winding up

Find out how benefits will be affected by the wind up for example, if contributions will automatically stop, or if death in service benefits stop being payable.

Prepare to transfer members’ benefits

You will need to ensure that scheme data is up to date (see the ‘guidance on improving data’ section in stage 1), that no employer contributions are owing and that the provisions and benefits of your scheme are understood. You will also need to review whether the scheme governing documentation permits the trustees to offer members options for transferring benefits. If not, you may wish to consider whether it would be helpful (or possible) to amend the scheme governing documentation to permit this.

Check whether trustee exoneration or indemnity protections will remain in place after wind up is completed

If existing trustee protections end, you will want to consider whether any additional protections will be needed once wind up is completed. However, if a power to purchase indemnity insurance is not explicitly mentioned in the scheme governing documentation, you should seek legal advice before paying any insurance premiums from scheme assets. You may also wish to take legal advice on how best to ensure you are fully discharged from your responsibilities to members (whether under legislation or otherwise) on wind up.

Consider extending the scheme's accounting year

A scheme’s accounting year can be extended to up to 18 months when the scheme goes into wind up. Trustees might want to consider this if – assuming deadlines are managed properly under their project plan – it would mean that that only one set of accounts would need to be prepared to complete winding up.

Check the terms of office for member-nominated trustees or non-affiliated trustees

If member-nominated trustees (MNTs) or non-affiliated trustees are coming to the end of their term, you may wish to consider amending the scheme governing documentation to allow them to remain in place until winding up is completed. However, in the case of non-affiliated trustees, this will only be possible if they will not exceed the maximum term permitted by legislation.

Stage 3: Complete formal wind up of the scheme and transfer member benefits

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.