19 April 2004 - Ensuring assets are shared more fairly when a pension scheme winds up
Regulations to ensure a fairer sharing of assets when a pension scheme is wound up have been laid in parliament today.
The existing rules can leave working-age members of wound-up pension schemes with little, which can be especially serious for those in the immediate run-up to retirement. The amendments to the Priority Order which will come into effect on Monday 10th May 2004 will help to put this right by strengthening protection for non-pensioner scheme members.
Minister for Pensions, Malcolm Wicks, said:
“We have taken action to ensure that when a scheme is wound up, the assets are shared as fairly as possible between pensioner and non-pensioner scheme members.
“Many scheme members stand to gain up to 20 per cent of their pension, so this is an extremely worthwhile interim change before the Pension Protection Fund, which will offer more comprehensive protection, comes into effect.
“By amending the Priority Order, the Government is taking another important step to further safeguard the rights of company scheme members.”
Under the proposed changes, pensioners will still come first, as they are the least likely to be able to generate an alternative source of income. However, the rights of non-pensioners will be given priority over the future year-on-year inflation increases to pensions.
The changes will affect pension schemes that start to wind up on or after the day the regulations come into force.
Reforming the Priority Order is just part of a package of changes to strengthen protection for final salary pension scheme members. The Pension Protection being introduced as part of the Pensions Bill will ensure that, for the first time ever, individuals in defined benefit pension schemes based in the UK can rest assured they will always receive a meaningful pension, even if their company goes bust and leaves the pension scheme under funded.
Notes for editors
[an error occurred while processing this directive]- Amending the Statutory Priority Order: Occupational Pension Schemes (Winding Up) (Amendment) Regulations 2004 is available on the HMSO website at: www.hmso.gov.uk
- “Working and saving for retirement: Action on Occupational Pensions” was published on 11 June 2003 and copies can be found at: http://www.dwp.gov.uk/consultations/consult/2002/pensions/actionplansummary.pdf (109KB)
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