As an employer, a company in liquidation may have set up and operated a pension scheme for the benefit of employees. As liquidator, the official receiver may have to undertake certain tasks in relation to the scheme to enable it to be wound up and to enable the former employees to receive the benefits to which they are entitled. A bankrupt or partnership may have provided a pension scheme for employees in the same way but this happens less frequently. The guidance that follows may also be applied where a partnership operated a pension scheme.
i) What types of occupational pension schemes are there?
The main types of occupational pension scheme that the official receiver is likely to encounter are;
a) Final salary scheme
This is a scheme where the pension benefits received by the employee are based on the scheme member's position at the date they retire and not on the value of pension contributions. The pension member's benefits will be calculated by reference to their final pay, age of retirement and length of service. It is the responsibility of the pension scheme trustees, acting with advisors to ensure that the funds held are sufficient to pay members' pension benefits.
b) Money purchase scheme
This is a scheme where the pension benefits received depend on the amount paid in on behalf of the member. The contributions are maintained in a separate account for each member and invested by the scheme trustees.
c) Executive pension plans
These are insured occupational schemes (i.e. the assets used to pay the pension are held in insurance policies) designed for a small number of members (e.g. the directors of the company) They work in a similar manner to personal pension plans.
ii) What if the company operated a pension scheme?
In all cases where a pension scheme has been disclosed or discovered, form PNCSTN should be sent to the pension scheme administrator(s) requesting;
a copy of the trust deed or declaration of trust which established the scheme;
a copy of the scheme rules, together with any amendments;
for larger schemes, any explanatory booklets for scheme members;
a list of scheme members, both current and deferred (i.e. those members who left the company's employment but still have a right to benefits from the scheme);
details of payments into the scheme during the two years prior to the winding-up order.
iii) How do I establish what role the company played in relation to the pension scheme?
Once the scheme documentation is obtained it should be possible to establish what role(s) the company had in relation to the pension scheme. For example, the company will almost always be the principal employer (unless the scheme is a group scheme) and may also be a trustee, or sole trustee of the pension scheme. The rules of the scheme will establish the nature of members' benefit entitlements and what the consequences of the liquidation of the employer are for the scheme. If uncertain refer to the B1/examiner.
iv) Does the official receiver have to appoint an Independent Trustee to deal with the pension scheme?
No, the official receiver is no longer required to appoint an Independent Trustee. Instead, under section 36 of the Pensions Act 2004, the Pensions Regulator has the power to appoint an independent trustee while the official receiver is in office.
v) What does the Pensions Regulator do?
The Pensions Regulator is the regulatory body for work-based pension schemes in the UK. It was created by the Pensions Act 2004 and became operational on 6 April 2005.
The Pensions Regulator has wider powers (than its predecessor the Occupational Pensions Regulatory Authority - OPRA) to investigate schemes and take action where necessary.
If the official receiver becomes aware of any breaches of law in relation to the administration of the pension scheme, he/she should report the matter to the Pensions Regulator in writing as soon as practically possible. Any correspondence from the Pensions Regulator should be referred promptly to the B1/examiner. The official receiver should notify Technical Section if the Pensions Regulator contacts him/her about any aspect of a scheme of which the company remains the sole trustee.
vi) Complying with the Pensions Act 2006
Where the company operated a pension scheme and the winding-up order was made on or after 6 April 2005, the official receiver is required under section 120 of the Pensions Act 2004 to send notice of the winding-up order to;
a) The Pension Protection Fund (PPF)
The PPF was established on 6 April 2005 to pay compensation to members of eligible pension schemes. If a winding-up order is made against a company who operated a pension scheme for its employees and there are insufficient assets in the pension scheme to cover PPF levels of compensation, the PPF may pay compensation to scheme members. The section 120 notice should be sent to:
Knollys House
17 Addiscombe Road
Croyden
Surrey
CR0 6SR
Tel: 0845 600 2541
http://www.pensionprotectionfund.org.uk
b) The Pensions Regulator
The section 120 notice should be sent to:
Napier House
Trafalgar Place
Brighton
BN1 4DW
Tel:0870 6063636
Fax: 0870 2411144
http://www.thepensionsregulator.gov.uk
c) The pension scheme trustees or managers
d) Notification of other insolvency events
Under the Pensions Act 2004 the official receiver is also required to notify these parties of other 'insolvency events' but reference should be made to the B1/examiner for further advice.
vii) Sending the section 120 notice
The official receiver should use form 'section 120 notice' which can be accessed by following this link section 120 insolvency event notice to the Pension Protection Fund's website.
The section 120 notice asks whether the pension scheme is a defined benefit, hybrid or money purchase scheme. There is no legal requirement to answer this question. The official receiver should not spend undue time trying to establish the precise nature of the scheme.
In accordance with section 120 of the Pensions Act 2004 the notice must be sent within 14 days beginning with the later of;
the winding-up order, or
the official receiver becoming aware of the existence of the scheme.
viii) What if the company operated more than one pension scheme?
If the company operated more than one occupational pension scheme, a separate notice will be required in relation to each of the pension schemes involved.
ix) What if queries are received from former employees and pensioners?
If the pension scheme is eligible, an assessment period will commence during which the PPF will establish whether they will assume responsibility for the pension scheme. During this assessment period, queries from former employees of the pension scheme should be referred to the trustees of the pension scheme and not to the PPF.
x) Scheme status notice - notice as to whether the rescue of the scheme has or has not been possible
In the majority of cases dealt with by the official receiver there will be no prospect of the employer continuing as a going concern. Provided there is no other person willing to assume responsibility for the pension scheme then, in accordance with section 122(7) of Pensions Act 2004, the official receiver should send notice that a scheme rescue has not been possible as soon as practically possible.
There is no prescribed form but the official receiver should adapt the proforma accessed by following this link section 122 scheme status notice to the PPF website.
xi) Who should the scheme status notice be sent to?
The notice should be sent to;
a) The Pension Protection Fund
b) The Pensions Regulator
c) The trustees or managers of the scheme
If it is uncertain whether a pension scheme rescue is possible, refer to the B1/examiner for guidance.
xii) What if the case is handed over to an IP?
In cases where the company is trading at the date of the winding-up order and the case is handed over to an IP, the official receiver should include in the handover notes a copy of the section 120 notice. It will be the IP's responsibility to issue any further notices once he/she knows whether the scheme will continue.
xiii) What happens to the pension scheme when the winding-up order is made?
When the winding-up order is made, the consequences for a pension scheme operated by the company depend on what the scheme's trust deed or rules specify should happen in that situation.
In most cases the trust deed or rules will specify that the pension scheme should be wound up, either directly because of the making of the winding-up order, or indirectly because of the company has stopped making payments into the scheme. There are exceptions to this general principle as follows;
xiv) Can the official receiver recover any funds from the pension scheme?
Employers are required to operate pension schemes as a separate entity from the employer so pension scheme funds are not normally available to a liquidator to meet creditor's claims. In certain circumstances funds might be claimed for creditors, for example,
Investigation into possible recovery of funds from a pension scheme may require specialist assistance and the B1/examiner may decide to approach creditors to fund advice in order to pursue the matter.
xv) What if there are insufficient assets in the pension scheme?
With certain exceptions, if during the period between an occupational pension scheme being wound up and the date of the winding-up order, the pension scheme liabilities exceed the pension scheme assets, the deficiency is provable in the liquidation.
xvi) What if the employer failed to pay any pension scheme contributions deducted from employees salaries to the pension provider?
Under sections 123 to 128 of the Pension Schemes Act 1993 the administrator of a pension scheme can, within certain limits, make a claim on the National Insurance Fund in respect of any pension scheme contributions unpaid by the employer at the date of the employer's insolvency. This applies to unpaid contributions to personal pension schemes as well as occupational schemes, and the amount can include both unpaid employer's contributions and employees' contributions deducted from pay but not paid into the scheme. The claim has to be made by the administrator of the pension scheme to the Redundancy Payments Service (RPS) of the Insolvency Service. Where the RPS make a claim in respect of unpaid scheme contributions, the Secretary of State will claim in the liquidation for the amount of the payment.
xvii) What does the official receiver have to do when there are unpaid contributions?
The official receiver may be asked by the Redundancy Payments Service (RPS) to provide a statement of any unpaid pension contributions and any other relevant information and to produce relevant documents for examination. The official receiver should comply with any reasonable requests for information made by the RPS and should also provide the scheme administrator with similar information to enable a claim for unpaid contributions to be formulated.
xviii) Dealing with transfer requests
The official receiver may be asked by a scheme member to authorize on behalf of the employer the transfer of the cash equivalent of the members' benefits under the scheme to another occupational scheme or personal pension of the member's choice. A member has a right to such a transfer, which the trustees of the scheme must generally deal with within 6 months of receipt. As dealing with transfer requests is primarily a matter for the scheme trustees, the official receiver should refer transfer requests to them. However, where the official receiver is sole corporate trustee and is being asked to perform a purely administrative function in relation to the transfer, he/she may do so providing he/she obtains sufficient information from the scheme administrator to satisfy himself/herself that the intended transfer is proper.
xix) Tracing scheme members
If the pension company needs to contact scheme members and is unable to locate them, they may use the Letter Forwarding Service operated by the Department for Work and Pensions. The official receiver may be asked to provide the pension company with details of the individual's name, date of birth, last known address and National Insurance number to assist in the search.
xx) Should the official receiver provide information regarding the pension scheme to members of the scheme?
Yes, the official receiver should give what assistance he/she can to pension scheme members pursuing reasonable enquiries. This will usually involve referring them to the pension provider and outlining the pension schemes' financial position if known.
Pension scheme members requesting general help and advice can be directed to The Pensions Advisory Service (TPAS) which operates a nationwide network of volunteer advisors.
Where the company was sole corporate trustee of the pension scheme, members may look for a formal report detailing the status of the scheme but there will usually be insufficient funds in the estate to provide this and the official receiver should contact Technical Section if he/she receives such a request.
xxi) Dissolution of the company
When the official receiver has completed the liquidation of the company, he/she should write to the pension scheme trustees and/or administrator to check that the imminent dissolution of the company will not hinder the administration of the scheme. The official receiver should offer to apply for the dissolution to be deferred if required. If the scheme's trustees or administrator wish the company to remain on the register, the official receiver should agree a suitable period for deferral of dissolution.
The official receiver can still apply for release as liquidator as he/she can exercise the company's functions in relation to the scheme as liquidator ex-officio at any time before he company's deferred dissolution.
Notes
An undischarged bankrupt or individual subject to a disqualification order under CDDA is automatically barred from acting as trustee of a pension scheme and should be notified accordingly, although a disqualified individual can apply to the Pensions Regulator for their disqualification as trustee to be waived.
Where can I find out more?
Pensions Act 2004, section 120
Pensions Act 2004, section 122
Pension Schemes Act 1993, sections 123 -128
Technical Manual
Case Help Manual
Technical Notice
T40/05 Pensions Act 2004 - Information to be provided by official receivers concerning employers with pension schemes
Insolvency Service Leaflet
What will happen to my pension?
Websites
www.opsi.gov.uk - Link to the Office of Public Sector Information (for pensions legislation)
www.pensionprotectionfund.org.uk - The Pension Protection Fund
www.ThePensionsRegulator.gov.uk - The Pensions Regulator
www.dwp.gov.uk - Department for Work and Pensions
www.fsa.gov.uk - Financial Services Authority
www.hmrc.gov.uk/pensionschemes - HM Revenue and Customs
www.opsi.gov.uk - Link to the Office of Public Sector Information (for pensions legislation)
www.opas.org.uk - The Pensions Advisory Service
www.pensions-ombudsman.org.uk - The Pensions Ombudsman
www.pensionprotectionfund.org.uk - The Pension Protection Fund
www.thepensionsregulator.gov.uk - The Pensions Regulator
www.pensionservice.gov.uk - The Pension Service
www.pensionsatwork.gov.uk - The Pensions at Work website
Forms to be used - Company
Click HERE to view the flowchart 3 for Pensions
Procedure C – Pensions in Companies
Company pension schemes can be a very complex area so if at any point you are unsure of the course of action that should be taken, refer to the B1/examiner for guidance.
Receive instructions to deal with company pension scheme.
Check Question 10.11 in questionnaire booklet (PIQC) to ascertain that director has provided full details of the pension scheme operated for employees.
If not, write to director asking for detailed information, including a copy of the scheme rules etc if available. Chase up if necessary.
Once all of the necessary information is available, notify the pension scheme administrator/trustee of the winding-up order (PNCSTN).
Where the winding-up order was made on or after 6 April 2005, send section 120 notice to Pension Protection Fund, Pensions Regulator and pension scheme trustees or managers within either 14 days of either the winding-up order or of the official receiver becoming aware of the pension scheme.
Where scheme rescue is not possible adapt and send section 122 scheme status notice to Pension Protection Fund, Pensions Regulator and pension scheme trustees or managers. This must be sent as soon as practically possible.
If any correspondence is received from the Pension Protection Fund or Pensions Regulator, refer to B1/examiner.
Once reply received from scheme administrator/trustee, refer to B1/examiner for further instruction.
If there are no other trustees, the scheme administrators can be left to deal with the scheme. Once the B1/examiner has confirmed this course of action, written authority should be sent to the administrators (PNCSTL).
If there are trustees of the pension scheme other than the company and the scheme itself provides for the winding up of the scheme following the making of a winding-up order against the company, the scheme trustees can be left to deal with the scheme direct. Once the B1/examiner has confirmed this course of action, written authority should be sent to the administrators (PNCSTL) .
If you are unsure of the information to include in the preparation of the documents, refer to B1/examiner for guidance.
Where the company was the sole corporate trustee, the insurance company dealing with the scheme should be instructed to transfer the members’ benefits to an appropriate personal pension scheme or occupational pension scheme. This matter should be referred to the B1/examiner who is required to satisfy himself/herself that the intended transfer is proper.
Liaise with B1/examiner as to whether there is likely to be any surplus from the pension scheme. If so, issue appropriate letter to the insurance company claiming the surplus as an asset in the liquidation.
Where a scheme member requests transfer of benefits to another pension scheme, it must be dealt with as there is a statutory right to transfer.
If there are other trustees dealing with the scheme, pass the transfer request to them.
If the company was the sole trustee, pass the transfer request to the B1/examiner for approval.
If the official receiver’s administration of the company’s affairs is complete, write to the trustees or administrator of the pension scheme asking whether they require deferral of dissolution to allow them to complete the winding up of the pension scheme.
If the trustee or administrator requests that the dissolution is deferred, follow procedure in Case Help Manual part - Deferral Of Dissolution