Preferential liabilities on winding up73

1

This Article applies where an occupational pension scheme to which this Article 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 Article 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 paragraph (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 sub-paragraphs of paragraph (4) before the amounts of the liabilities mentioned in later sub-paragraphs, and

b

where the amounts of the liabilities mentioned in one of those sub-paragraphs cannot be satisfied in full, those amounts must be satisfied in the same proportions.

4

The liabilities referred to in paragraph (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 sub-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 sub-paragraph (a) or (b);

d

any other liability in respect of pensions or other benefits.

5

For the purposes of paragraph (4)—

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

  1. 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 III of the Pensions (Northern Ireland) Order 2005 (pension protection), and

  2. 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—

  1. 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

  2. b

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

6

For the purposes of this Article, 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 paragraph (4).

8

For the purposes of that paragraph—

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 sub-paragraph (a) or (b) of that paragraph;

b

no pension or other benefit which is attributable (directly or indirectly) to a pension credit is to be regarded for the purposes of sub-paragraph (c) of that paragraph 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 Chapter 5 of Part IV of the Pension Schemes Act (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 Article—

• “assets” of a scheme to which this Article 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 III of the Pensions (Northern Ireland) Order 2005 (see Article 146 of that Order);

• “scheme rules” has the same meaning as in the Pensions (Northern Ireland) Order 2005 (see Article 2 of that Order);

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

  1. a

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

  2. b

     ends when the winding up of the scheme is completed.

Operation of scheme during winding up period73A

1

This Article applies where an occupational pension scheme to which Article 73 applies is being wound up.

2

During the winding up period, the trustees or managers of the scheme—

a

must secure that any pensions or other benefits (other than money purchase benefits) paid to or in respect of a member are reduced, so far as necessary, to reflect the liabilities of the scheme to or in respect of the member which will be satisfied in accordance with Article 73, and

b

may, for the purposes of sub-paragraph (a), take such steps as they consider appropriate (including steps adjusting future payments) to recover any overpayment or pay any shortfall.

3

During the winding up period—

a

no benefits may accrue under the scheme rules to, or in respect of, members of the scheme, and

b

no new members of any class may be admitted to the scheme.

4

Paragraph (3) does not prevent any increase, in a benefit, which would otherwise accrue in accordance with the scheme or any statutory provision.

5

Paragraph (3) does not prevent the accrual of money purchase benefits to the extent that they are derived from income or capital gains arising from the investment of payments which are made by, or in respect of, a member of the scheme.

6

Where a person is entitled to a pension credit derived from another person's shareable rights under the scheme, paragraph (3) does not prevent the trustees or managers of the scheme discharging their liability in respect of the credit under Chapter 1 of Part V of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (sharing of rights under pension arrangements) by conferring appropriate rights under the scheme on that person.

7

Regulations may require the trustees or managers of the scheme, in prescribed circumstances—

a

to adjust the entitlement of a person to a pension or other benefit under the scheme rules where the entitlement arises as a result of a discretionary award which takes effect during the winding up period;

b

to adjust the entitlement of a person ( “the survivor”) to a pension or other benefit under the scheme rules where—

i

a member of the scheme, or a person who was (or might have become) entitled to a pension or other benefit in respect of a member, dies during the winding up period, and

ii

the survivor's entitlement is to a pension or other benefit in respect of the member (whether arising on the date of that death or subsequently).

8

Regulations under paragraph (7) may, in particular—

a

prescribe how the required adjustments to entitlement are to be determined and the manner in which they are to be made;

b

in a case where the commencement of the winding up of the scheme is backdated (whether in accordance with Article 138 of

the Pensions (Northern Ireland) Order 2005 (requirement to wind up schemes with sufficient assets to meet protected liabilities) or otherwise), require any adjustment to a person's entitlement to be made with effect from the time the award takes effect;

c

without prejudice to Articles 10(3) to (9), 73B(2) and 113, make provision about the consequences of breaching the requirements of theregulations.

9

If the scheme confers power on any person other than the trustees or managers of the scheme to apply the assets of the scheme in respect of pensions or other benefits (including increases in pensions or benefits), it cannot be exercised by that person but may, subject to the provisions made by or by virtue of this Article and Articles 73 and 73B, be exercised instead by the trustees or managers.

10

For the purposes of this Article—

• “appropriate rights” has the same meaning as in paragraph 5 of Schedule 5 to the Welfare Reform and Pensions (Northern Ireland) Order 1999 (pension credits: mode of discharge);

• “discretionary award” means an award of a prescribed description;

• “shareable rights” has the same meaning as in Chapter 1 of Part V of the Welfare Reform and Pensions (Northern Ireland) Order 1999 (sharing of rights under pension arrangements);

and paragraph (10) of Article 73 applies as it applies for the purposes of that Article.

Articles 73 and 73A: supplementary73B

1

Any action taken in contravention of Article 73A(3) is void.

2

If any provision made by or by virtue of the winding up provisions is not complied with in relation to a scheme to which Article 73 applies, Article 10 applies to any trustee or manager of the scheme who has failed to take all reasonable steps to secure compliance.

3

For the purposes of paragraph (2), when determining whether Article 73A(3) has been complied with paragraph (1) of this Article is to be disregarded.

4

Regulations may—

a

prescribe how, for the purposes of the winding up provisions—

i

the assets and liabilities of a scheme to which Article 73 applies, and

ii

their value or amount,

are to be determined, calculated and verified;

b

modify any of the winding up provisions as it applies—

i

to prescribed schemes or prescribed descriptions of schemes;

ii

in relation to a scheme where only part of the scheme is being wound up;

iii

in relation to a case where any liability of the scheme in respect of a member has been discharged by virtue of regulations under Article 119(4) of the Pensions (Northern Ireland) Order 2005 (power to make regulations permitting discharge of scheme's liabilities during an assessment period).

5

Without prejudice to the generality of paragraph (4), regulations under sub-paragraph (b)(i) of that paragraph may, in particular, modify any of the winding up provisions as it applies in relation to a scheme in relation to which there is more than one employer.

6

The winding up provisions do not apply—

a

in relation to any liability for an amount by way of pensions or other benefits which a person became entitled to payment of, under the scheme rules, before commencement of the winding up period,

b

in prescribed circumstances, in relation to any liability in respect of rights of a prescribed description to which a member of the scheme became entitled under the scheme rules by reason of his pensionable service under the scheme terminating before the commencement of the winding up period,

c

in relation to any liability in respect of rights of prescribed descriptions to which a member of the scheme had become entitled under the scheme rules before the commencement of the winding up period, or

d

in relation to any liability the discharge of which is validated under Article 120 of the Pensions (Northern Ireland) Order 2005 (power to validate actions taken during an assessment period to discharge liabilities of a scheme).

7

But nothing in paragraph (6) prevents the winding up provisions applying in relation to a liability under Chapter 4 of Part IV of the Pension Schemes Act (transfer values) which—

a

arose before the commencement of the winding up of the scheme, and

b

was not discharged before the commencement of the winding up period.

8

Regulations may provide that, in prescribed circumstances, where—

a

an occupational pension scheme to which Article 73 applies is being wound up,

b

a member of the scheme died before the winding up began, and

c

during the winding up period a person becomes entitled under the scheme rules to a benefit of a prescribed description in respect of the member,

his entitlement to payment of all or part of the benefit is, for the purposes of paragraph (6), to be treated as having arisen immediately before the commencement of the winding up period.

9

If, immediately before the winding up period in relation to an occupational pension scheme to which Article 73 applies, a person is entitled to an amount but has postponed payment of it, he is not, for the purposes of paragraph (6), to be regarded as having become entitled to payment of the amount before that period.

10

For the purposes of this Article—

a

“winding up provisions” means this Article and Articles 73, 73A and 74, and

b

paragraph (10) of Article 73 applies as it applies for the purposes of that Article.