First up, we have changes to the existing winding up regulations. The initial proposals date back to 2 November 2006 when the Department for Work and Pensions (DWP) published a report on speeding up the wind up of pension schemes. This was followed up in May 2007 by a consultation on draft regulations. Finally, in July this year, amending regulations were laid. They aim to make the winding up process easier and more streamlined by:

• enabling trustees to discharge small pension entitlements by way of a winding up lump sum, even if the scheme rules don’t allow such lump sums to be paid
• requiring schemes to submit their first report to The Pensions Regulator (TPR) two years after they start wind up, instead of 3 years.

The following key activities in the wind up process are expected to be completed within this new two year window:

• Securing pensioner benefits
• Serving a debt on the employer
• Identifying the individual remaining non-pensioner members share of the assets
• Conducting a final actuarial valuation
• Issuing option letters to non-pensioners.

TPR has also modified its 2008 Scheme Return to collect data on schemes winding up and may target schemes that they think are taking too long to wind up or aren’t doing it right.

Their considerable powers include publishing information on the time schemes take to wind up, appointing independent trustees and issuing directions, improvements and third party notices to bring wind up to a speedier conclusion.

The DWP has identified that winding up a DB scheme is complex for many reasons – no surprise there. But in particular, following feedback, they’ve recognised that the reconciliation and agreement of GMP liabilities is one of the key reasons why DB schemes currently find it a long and arduous process. In a move to improve the situation, National Insurance Services to the Pensions Industry (NISPI) has set up a ‘Shared Workspace’ pilot, where electronic data can be exchanged with scheme administrators. Once this is expanded beyond the pilots, it’s hoped this facility will help solve the GMP issues and make winding up less painful for all concerned.

The new rules will apply to DB schemes that wind up from 1 October 2007. Schemes that started the process before this date will not escape some of the other requirements tho’ and the Government expects them to wind up within 2 years from when their original report was issued on 2 November 2006.

Ultimately, the conclusion of a wind up will result in trustees discharging the scheme’s liabilities. But to get to this point the key activities must be met within a shortened two year period. So trustees will have to keep on top of the wind up and try and make sure everything required is done as quickly as possible. Failure to comply may mean the wrath of TPR but being proactive, TPR is likely provide guidance and support rather than use their considerable powers. TPR has also suggested the introduction of an e-learning wind up module to form part of its online trustee toolkit.