Winding Up a Pension Scheme

If a company have been taken over by another firm, has gone out of business or can no longer make the required level of contribution to the scheme, then it’s occupational pension scheme will be wound up. After the wind-up date, members will no longer earn benefits under the pension plan. This is a very lengthy process and can take at least 24 months to complete. In some cases it can take even up to 12 years.

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, which have to 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, and provide them with a progress report at least every 12 months. This report will contain details of the action being taken to establish the scheme's assets and liabilities, the extent of any reduction in value of the member's benefits and the estimated date when final details of benefits are likely to be established.

The Aftermath of a Wind Up

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 they have 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.

The trustees of the pension scheme have to 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, members and beneficiaries have to be informed about 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.