OPRA's winding-up powers take effect

New regulations (1) have been introduced to increase the speed with which occupational pensions schemes are wound up. In future, the Occupational Pensions Regulatory Authority (OPRA) will play a significant role in overseeing the winding-up process.

Outline provisions were inserted into the Pensions Act 1995 by the Child Support, Pensions and Social Security Act 2000 (See Child Support, Pensions and Social Security Act). The new Regulations provide the detail, and contain provisions on the appointment of an independent trustee when a company goes into liquidation and the pension scheme is being wound up.

Monitoring by OPRA

The trustees or managers of occupational pension schemes that are wound up will have to report to OPRA on progress. Where the winding-up starts on or after 1 April 2003, the first report will be required during the three months following the elapse of three years, unless the winding-up has been completed. Schemes that have been in winding-up (provided the process started on or after 1 April 1973) for a long time have tighter timetables for submitting their first report. Schemes commencing winding-up more recently or starting the process before 31 March 2003 are given a slightly more relaxed timescale. See accompanying table for the details.

The Regulations specify 10 items that must be included in these reports, ranging from the scheme name and its registration number, to statements about the expected date for completing the winding-up and about any difficulties hindering the process. The Act requires second and subsequent reports on progress to be made on an annual basis in normal circumstances. The Regulations specify the information to be contained in these reports, including reasons for not having completed any steps that an earlier report had expected would have been completed by then. Members will be entitled to a copy of any reports on request.

There are a number of exemptions contained in the Regulations, including single-member schemes, small self-administered schemes and schemes providing only death benefits.

OPRA directs

If OPRA believes that the winding-up of a scheme is being delayed by the non-provision of information, it can give directions to a range of people, including: those responsible for communications; custodians; those holding personnel, payroll or other information; and contractors. Normally the power will apply only in respect of schemes where a periodic report is due. However, from April 2006, OPRA will be able to give directions in respect of any scheme.

Those with responsibility for making decisions about the winding-up of schemes have a new responsibility to keep records of those decisions, irrespective of whether they are trustees. OPRA can impose fines of up to £5,000 for an individual and up to £50,000 for a body or organisation, if this requirement is breached.

Modifications by OPRA

The 2000 Act gives OPRA power to modify schemes, at the request of the trustees or managers, with a view to ensuring that it is properly wound up when the employer is insolvent.

The Regulations specify how such applications must be made. They must set out the effect the requested modification might have and the reasons for it. Before making an application, the trustees or managers must inform all members and advise the insolvency practitioner if it would result in fewer assets being available that might be paid to the employer that might otherwise have been the case.

Independent trustees

The Regulations also tighten the requirements concerning the appointment of an independent trustee to schemes that are winding up where the employer is insolvent. The insolvency practitioner or official receiver, who must appoint an independent trustee if the scheme does not already have one, must do so within three months, or within three months of becoming aware that such an appointment is needed.

Trustees must now report a company's insolvency to OPRA within one month, and administrators have the same period to tell OPRA if a scheme that is winding up is without trustees.

¹Occupational Pension Schemes (Winding Up Notices and Reports etc) Regulations 2002 (SI 2002/459), available from The Stationery Office, or from the HMSO website (at www.hmso.gov.uk/si/si2002/20020459.htm ).