What you need to do
Shutting down a pension scheme is not a decision that can or should be taken lightly, but unfortunately its a sad fact that sometimes for a variety of reasons an employer needs to wind up and close their pension scheme. Working closely with all interested parties we guide employers through the compliance, governance and communication challenges that have to be addressed if the scheme closure process is going to successfully complete and ensure that your scheme members are treated fairly.
Winding up normally happens when an employer:
- decides it no longer wishes to support the scheme by paying its contributions to the scheme (for example, because it finds the cost too high); or
- can no longer pay its contributions (for example, because it has gone out of business).
The process of closing a scheme
The trustees set a date (the wind-up date) after which members will no longer be able to earn benefits under the scheme or pay into the scheme. The scheme rules may state the notice period that must be given to members if the scheme is winding up.
The trustees will obtain a detailed valuation of the scheme and deal with the wind up of the scheme and the way the scheme money is to be distributed. The scheme rules will state how this should be done.
Typically it will takes at least 18 months to wind up a scheme. During this time, the trustees have a duty to keep all members/beneficiaries informed of what is happening.
The final act that the trustees must complete is to produce a deed of termination and discharge of trustees which is used as the formal record of the termination of an occupational pension scheme. Throughout the closing, winding up and termination process the most important aspect is ensuring a fair settlement is secured for the pension scheme members.
What can Caledonian Trustees do for your scheme?
Winding up a pension scheme is a complex process, there are many aspects to winding up a pension scheme that must be carefully considered, planned for and adhered to, all within the Pensions Regulator’s two year deadline and in compliance with any recent legislative changes on wind-up. Our aim is to assist the board of trustees through the whole process by effectively managing the implications of terminating your pension scheme. Don't forget that throughout the winding up process that the Pensions Regulator requires that all scheme trustees ensure that the scheme is well administered.
As schemes enter into wind up for a variety of reasons it isn't practical to have an 'off the shelf' solution as one size absolutely doesn't fit all. On appointment to manage your scheme termination we will:
- Prepare and produce your scheme's project plan bought into by all advisers to ensure their continuing commitment and to arrive at the best possible outcome as quickly as possible.
- Maintain momentum with regular progress reviews and updates.
- Communicate via the trustee board with pension scheme members.