Pensions Act 1995

[F1 73 Preferential liabilities on winding up. E+W+S

(1) This section applies where an occupational pension scheme to which this section applies is being wound up to determine the order in which the assets of the scheme are to be applied towards satisfying the liabilities of the scheme in respect of pensions and other benefits.

(2) This section applies to an occupational pension scheme other than a scheme which is—

(a) a money purchase scheme, or

(b) a prescribed scheme or a scheme of a prescribed description.

(3) The assets of the scheme must be applied first towards satisfying the amounts of the liabilities mentioned in subsection (4) and, if the assets are insufficient to satisfy those amounts in full, then—

(a) the assets must be applied first towards satisfying the amounts of the liabilities mentioned in earlier paragraphs of subsection (4) before the amounts of the liabilities mentioned in later paragraphs, and

(b) where the amounts of the liabilities mentioned in one of those paragraphs cannot be satisfied in full, those amounts must be satisfied in the same proportions.

(4) The liabilities referred to in subsection (3) are—

(a) where—

(i) the trustees or managers of the scheme are entitled to benefits under a relevant pre-1997 contract of insurance entered into in relation to the scheme, and

(ii) either that contract may not be surrendered or the amount payable on surrender does not exceed the liability secured by the contract,

the liability so secured;

(b) any liability for pensions or other benefits to the extent that the amount of the liability does not exceed the corresponding PPF liability, other than a liability within paragraph (a);

(c) any liability for pensions or other benefits which, in the opinion of the trustees or managers, are derived from the payment by any member of voluntary contributions, other than a liability within paragraph (a) or (b);

(d) any other liability in respect of pensions or other benefits.

(5) For the purposes of subsection (4)—

• “corresponding PPF liability” in relation to any liability for pensions or other benefits means—

  (a)

  where the liability is to a member of the scheme, the cost of securing benefits for or in respect of the member corresponding to the compensation which would be payable to or in respect of the member in accordance with the pension compensation provisions if the Board of the Pension Protection Fund assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Pensions Act 2004 (pension protection), and

  (b)

  where the liability is to another person in respect of a member of the scheme, the cost of securing benefits for that person corresponding to the compensation which would be payable to that person in respect of the member in accordance with the pension compensation provisions if the Board assumed responsibility for the scheme in accordance with that Chapter;

• “relevant pre-1997 contract of insurance” means a contract of insurance which was entered into before 6th April 1997 with a view to securing the whole or part of the scheme’s liability for—

  (a)

  any pension or other benefit payable to or in respect of one particular person whose entitlement to payment of a pension or other benefit has arisen, and

  (b)

  any benefit which will be payable in respect of that person on his death.

(6) For the purposes of this section, when determining the corresponding PPF liability in relation to any liability of a scheme to, or in respect of, a member for pensions or other benefits, the pension compensation provisions apply with such modifications as may be prescribed.

(7) Regulations may modify subsection (4).

(8) For the purposes of that subsection—

(a) regulations may prescribe how it is to be determined whether a liability for pensions or other benefits which, in the opinion of the trustees or managers of the scheme, are derived from the payment by any member of voluntary contributions falls within paragraph (a) or (b) of that subsection;

(b) no pension or other benefit which is attributable (directly or indirectly) to a pension credit is to be regarded for the purposes of paragraph (c) of that subsection as derived from the payment of voluntary contributions.

(9) Where, on the commencement of the winding up period, a member becomes a person to whom [F2 Chapter 2 of Part 4ZA] of the Pension Schemes Act 1993 (early leavers: cash transfer sums and contribution refunds) applies, that Chapter applies in relation to him with such modifications as may be prescribed.

(10) For the purposes of this section—

• “assets” of a scheme to which this section applies do not include any assets representing the value of any rights in respect of money purchase benefits under the scheme rules;

• “liabilities” of such a scheme do not include any liabilities in respect of money purchase benefits under the scheme rules;

• “the pension compensation provisions” has the same meaning as in Part 2 of the Pensions Act 2004 (see section 162 of that Act);

• “scheme rules” has the same meaning as in the Pensions Act 2004 (see section 318 of that Act);

• “winding up period”, in relation to an occupational pension scheme to which this section applies, means the period which—

  (a)

  begins with the day on which the time immediately after the beginning of the winding up of the scheme falls, and

  (b)

  ends when the winding up of the scheme is completed.]

Textual Amendments

F1 Ss. 73-73B substituted for s. 73 (10.2.2005 for specified purposes, 6.4.2005 in so far as not already in force) by Pensions Act 2004 (c. 35), ss. 270(1), 322(1) (with s. 313); S.I. 2005/275, art. 2(3)(a)(b), Sch. Pt. 3 (with art. 2(8)(9))

F2 Words in s. 73(9) substituted (6.4.2015) by Pension Schemes Act 2015 (c. 8), s. 89(3)(b), Sch. 4 para. 30 (with s. 87)

Modifications etc. (not altering text)

C1 Ss. 73-74 applied (with modifications) by The Occupational Pension Schemes (Winding Up) Regulations 1996 (S.I. 1996/3126), regs. 1(1), 12 (as amended (6.4.2005) by S.I. 2005/706, reg. 1(2), Sch. paras. 6, 7)

C2 Ss. 73-73B modified in part (6.4.2005) by The Occupational Pension Schemes (Winding up etc.) Regulations 2005 (S.I. 2005/706), regs. 1(2), 10(2)

C3 S. 73 excluded (6.4.2005) by The Occupational Pension Schemes (Winding up etc.) Regulations 2005 (S.I. 2005/706), regs. 1(2), 3 (with reg. 1(3)) (as amended (1.8.2022) by S.I. 2022/337, regs. 1(3), 10)

C4 S. 73 modified (24.7.2014) by The Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014 (S.I. 2014/1711), regs. 1(1), 11(2), 13(2)

C5 S. 73 applied (24.7.2014) by The Pensions Act 2011 (Transitional, Consequential and Supplementary Provisions) Regulations 2014 (S.I. 2014/1711), regs. 1(1), 14(2), 15(5), 16(4)

C6 S. 73 modified (6.4.2017) by Pensions Act 2014 (c. 19), s. 56(1), Sch. 20 para. 15(2) (with Sch. 20 paras. 9, 11); S.I. 2017/297, art. 2(b)

Commencement Information

I1 S. 73 in force at 6.4.1997 in so far as not already in force by S.I. 1997/664, art. 2(3), Sch. Pt. 3 (with art. 11(1))