If you’re considering winding up a money purchase occupational scheme, it’s important to understand which aspects of the 1995 and 2004 Pensions Acts still apply to a ‘paid-up’ pension scheme. These are:
Member-nominated trustees
The members have the right to nominate at least one third of the trustees.
Internal dispute resolution procedure
The trustees must have a procedure in place to handle complaints and a way of letting members know about this service, as well as advising who they should contact in the first instance.
Annual report
The trustees must produce an annual report and make it available to members.
Appointment of professional advisers
The trustees are responsible for appointing professional scheme advisers. For money purchase schemes this usually means they must appoint a scheme auditor with added expense.
Audited accounts
The scheme may be required to produce audited accounts. (Fully insured, earmarked money purchase schemes are exempt from producing audited accounts, provided the scheme rules do not require otherwise. However, they may have to obtain information from the insurance companies which provide the policies or contracts for the scheme.)
Scheme bank account
If the trustees are handling scheme money (for example when any refund of contributions is made when benefits are paid out) then this must be channelled through a separate scheme bank account.
Disclosure
Trustees must ensure that they comply with the disclosure rules, which list what information must be supplied every year and what information must be provided on request from members. This includes providing yearly statements to members and notifying them of their possible benefits as they approach retirement age, both of which have specified timescales.
Scheme records
The trustees must maintain adequate scheme records, documentation, minutes of trustees meetings, and so on.
Transfers
Members who leave the scheme before a year from normal retirement date must be provided with a transfer value payment within six months of a request.
Divorce
Trustees need to have procedures in place to deal with any requests for information in relation to divorce proceedings and to deal with any attachment or sharing orders received.
Levy
Occupational schemes are required to pay a levy. The amount is determined by the number of members in the scheme.
Trustees' knowledge and understanding
The Pensions Act 2004 introduced further requirements for trustees of occupational schemes from April 2006.
Your decision to wind up the scheme using a trustee-proposed section 32 buyout relieves you from all these duties, whilst providing the scheme members with an individual pension contract they can manage to their own best interests.
