Winding Up a Pension Scheme

If a company has gone out of business, been taken over by another business or can no longer make the required level of contribution to the scheme, then its occupational pension scheme will be wound up. This is a very lengthy process and can take at least 18 months to complete, although it can take up to 10 years. After the wind-up date, members will no longer earn benefits under the scheme.

The Winding-Up Process

If an occupational pension scheme must be wound up, the scheme's trustees must issue a notice to inform all beneficiaries and members within a month. This must include information regarding the reasons for the winding up and whether death benefits will continue to be provided, along with contact information for further enquiries.

A progress report must be issued to members at least every 12 months, containing details of the action being taken to establish the scheme's assets and liabilities, the extent (if any) of any reduction in value of the member's benefits and the estimated date when final details of benefits are likely to be known.

Your Benefits on Wind-Up

The trustees of the pension scheme must calculate whether they have enough money to provide for the cost of securing immediate annuities for those that have retired, and the transfer value of the entitlement of each member who has not yet retired.

Once this has been assessed, beneficiaries and members must be told their benefit entitlements within 3 months, together with any details as to the extent to which any benefits were reduced because the assets were insufficient.

Members may transfer their benefits to an alternative pension arrangement such as a personal pension or stakeholder pension plan, or into another occupational pension if the member has changed jobs.

If you reach retirement age during the winding up process, and the trustees have not completed their calculations of the scheme's funding level, then you may not receive your full benefit entitlement.