Today the DWP launched a consultation [PDF] on draft regulations to amend several pieces of the legislation governing winding up. The amendments stem from an earlier consultation which resulted in a report from the Secretary of State in November 2006, "Speeding up winding up of occupational pension schemes" [PDF], which we discussed here at the time.

The new regs aim to

• enable trustees to discharge small accrued pension entitlements (including pension credit members whose employer contributes to the scheme) by way of winding up lump sum payments, even if members did not have a right to the lump sum under the scheme rules. This will reduce the administrative costs to schemes; and
• require schemes which started to wind up after 1 October 2007 to submit their first report to the Pensions Regulator (TPR) after two years after they start winding up, instead of the current three years.

Presently, a Winding Up Lump Sum (FA 2004 Sch 29 para 10) can only be paid where the member has a right under the scheme rules to a lump sum.

A consequential amendment is required to pension sharing legislation so that pension credit benefit can be paid as a winding up lump sum, where the pension credit member satisfies the conditions for such a payment.

Trustees or managers of both DB and DC occupational pension schemes are currently required under PA 1995 s.72A to report to TPR after three years from the date the scheme starts winding up, and then to make yearly progress updates until the winding up is complete. If TPR thinks that the trustees or managers are not going fast enough or doing it properly, it can issue directions to facilitate winding up. The Secretary of State's report into winding up proposed reducing the current requirement to make reports from three years to two years. This will allow TPR to receive essential data, and if necessary issue directions, at an earlier stage.