Pension Schemes

Work and Pensions written question – answered on 12th February 2004.

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Photo of Bob Spink Bob Spink Conservative, Castle Point

To ask the Secretary of State for Work and Pensions what obligations are placed on actuaries or trustees who are winding-up pension schemes to pay the guaranteed minimum pension.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

Where a scheme is winding up the trustees will need to realise the assets of the scheme, pay its outstanding debts and expenses and take steps to secure the benefits of scheme members—including members' Guaranteed Minimum Pensions (GMPs).

The assets must be applied in the order set out in scheme rules, or where the scheme is salary-related and subject to the Minimum Funding Requirement, in accordance with the statutory priority order in Section 73 of the Pensions Act 1995. After meeting scheme expenses and debts to third parties, the current (transitional) priority order is Additional Voluntary Contributions, then pensions in payment, followed by accrued contracted-out rights (including GMP), pension increases and finally non-contracted out rights.

If there are insufficient assets to satisfy all of the liabilities in a particular category of the priority order then the liabilities in that category must be satisfied proportionately.

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