This article briefly summarises three new sets of regulations relevant to schemes winding up which have been published in the last few days.

(A) The Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678)

Section 75 of the Pensions Act 1995 (PA 95) states that any deficiency in a salary-related occupational pension scheme becomes a debt on the employer should the scheme wind up or its sponsoring employer become insolvent. Section 271 of the Pensions Act 2004 (PA 04) amends s.75 to align it with the legislation on the Pension Protection Fund (PPF), and in particular

• changes and expands the definition of insolvency events that are relevant; and
• makes the debt that arises on the sponsoring employer's insolvency contingent rather than actual.

The new regs, which replace the Occupational Pension Schemes (Deficiency on Winding Up etc.) Regulations 1996 (SI 1996/3128),

• set out the level of debt due from an employer on insolvency, scheme wind up or withdrawal from a multi-employer scheme; and also
• state when there is a debt due to a money purchase pension scheme and when schemes are to be treated as being more than one scheme.

No consultation was required on these Regulations as they were made before the end of the period of six months beginning with the coming into force of any enactment on which the Regulations are consequential. However, the DWP did consult last September on some earlier draft amending regs.

(B) The Occupational Pension Schemes (Winding up etc.) Regulations 2005 (SI 2005/706) [PDF]

Section 270 of PA 04 replaces s.73 of PA 95 and sets a new priority order which will apply to occupational pension schemes which commence winding up on or after 6 April 2005, when the PPF starts. These regulations contain new regulations that are required to ensure that the winding up provisions work broadly in harmony with those concerning the PPF. It is therefore necessary for these regulations to come into force on 6 April 2005.

Since PA 04 received royal assent only on 18 November 2004, and given the admitted complexity of these Regulations (laid on 16 March but only in fact published today), and their interaction in particular with PPF regs, the DWP regrets it has been necessary to breach the 21 day rule mentioned in paragraph 5.4.13 of Statutory Instrument Practice. This requires that an SI subject to annulment should normally not be brought into force until 21 days after laying, to give the relevant Committee of Parliament a chance to consider it.

The Regulations amend the Occupational Pension Schemes (Winding Up) Regulations 1996 (SI 1996/3126) and introduce new regulations. They also amend

• the Transfer Values Regulations 1996 (SI 1996/1847),
• the Contracting Out Regulations 1996 (SI 1996/1172),
• the Minimum Funding Requirement and Actuarial Valuations Regulations 1996 (SI 1996/1536),
• the Disclosure of Information Regulations 1996 (SI 1996/1655),
• the Payments to Employers Regulations 1996 (SI 1996/2156),
• the Assignment, Forfeiture, Bankruptcy, etc. Regulations 1997 (SI 1997/785),
• the Pensions Sharing (Valuation) Regulations 2000 (SI 2000/1052),
• the Pension Sharing (Implementation and Discharge of Liability Regulations) 2000 (SI 2000/1053),
• the Pension Sharing (Pension Credit Benefit) Regulations 2000 (SI 2000/1054) and
• the Winding Up Notices and Reports Regulations 2002 (SI 2002/459).

The opportunity has also been taken to re-draft for the sake of greater clarity some provisions relating to the calculation of cash equivalents both for transfer values and for pension sharing on divorce. These regs might prove helpful bedtime reading for insomniacs.

As with the previous SI, no consultation was required on these Regulations, although some earlier draft amendments were part of the September 2004 consultation.

(C) The Occupational Pension Schemes (Contracting-out) (Amount Required for Restoring State Scheme Rights and Miscellaneous Amendment) Regulations (SI 2005/891)

The background to this one lies in the abolition (in PA 95) of the facility for paying a state scheme premium by which, prior to 6 April 1997, trustees winding-up a contracted-out salary-related scheme could buy back some members' GMPs into the state scheme; the members were then treated as if they had never been contracted-out. A new facility known as 'deemed buy-back' was introduced instead via SI 1998/1397, to allow certain members of underfunded pension schemes to restore all or some of the state additional pension forgone while a member of a contracted-out pension scheme.

However, the regulations proved unusable in practice, leaving some schemes whose funds were insufficient to secure the GMPs unable to wind up. Furthermore, they did not cover contracted-out service after 5th April 2002 (when state second pension was introduced) at all.

This SI amends the 1998 regs. It amends the factors used to calculate the amount required to restore state scheme rights in these circumstances. The new regs also set out for the first time how to put a value on contracted-out service after 5th April 2002 to the date of using deemed buyback.