Out-Law Analysis 3 min. read

Pension buy-outs: concluding the winding-up

As a pension scheme moves towards the completion of its winding-up, there are several things that trustees should be aware of once the scheme has bought out its benefits and only needs to conclude the winding-up of the scheme’s trust.

At this stage the trustees of the scheme will have already taken some steps towards the winding-up such as issuing final communications to scheme members following buy-out and obtaining a statutory discharge under to section 74 of the Pensions Act 1995, and publishing statutory notices under section 27 of the Trustee Act 1925.

To ensure the winding-up can be completed in a smooth and timely fashion following a buy-out, trustees should make appropriate arrangements for the last steps – including residual liabilities, final accounts, deed of termination, final trustee meeting, scheme bank account and final notifications.

Residual liabilities

Even after securing benefits, there may be some residual liabilities relating to members that are left in the scheme. These are likely to be benefits where the trustees have been unable to trace the member or beneficiary. One such example is the top-up payments that are due in respect of the guaranteed minimum pension (GMP) equalisation, a process to ensure that men and women with the same earnings and service history have the same pension benefits.

Until these benefits are paid, the scheme will still have an undischarged liability and this may be an obstacle to completing the winding-up. One solution in these circumstances is to arrange for these liabilities in respect of untraced members to be transferred to the employer. This will allow the employer to take responsibility for paying the benefits if they are claimed and remove these liabilities from the scheme allowing it to wind-up as a scheme with no outstanding known liabilities.

Final accounts

When the decision to wind-up was initially made, the trustees would have made a reasonable estimate of the expenses in winding-up the scheme after members’ benefits have been secured. When looking to set a date to formally terminate the scheme, the trustees should revisit this estimate with the scheme administrators to see if the scheme still has sufficient assets to cover any remaining expenses.

Trustees should arrange for the scheme’s final accounts to be audited, so that they can provide strong evidence in future that at the point of wind-up the scheme had no assets or liabilities.

The trustees should discuss with the administrator and auditors an appropriate date for winding-up the scheme, making sure there will be plenty of time for accounts to be prepared and audited. One way for the scheme to properly budget and lockdown any final costs so that they match the scheme’s remaining assets is to move to final fixed arrangements for all of the scheme’s suppliers and service providers.

The trustees should seek to approve and sign the final audited accounts at least a week in advance of the proposed final trustee meeting to allow time for the accounts to be presented to that and appended to the execution version of the deed of termination.

Preparing deed of termination

The deed of termination should be drafted and agreed with the principal employer of the scheme and include details such as how benefits were secured and a copy of the signed final accounts. The final version should be ready in advance of the final trustee meeting and when all signatories, including those of the principal employer, are lined up to execute the deed of termination at or shortly after the final trustee meeting.

Final trustee meeting and minutes for final trustee meeting

The final trustee meeting should be set for the date on which the scheme will be formally wound-up. Before the final trustee meeting it would be useful to prepare minutes in advance. This will assist in ensuring that all matters are considered and dealt with at the final trustee meeting.

Scheme bank account

The scheme bank account will also need to be closed once all liabilities have been secured and there are no scheme assets left. Closure of the bank account should be flagged to the banking provider well in advance, so that any fees can be deducted and interest added to ensure there are no residual assets or liabilities unaccounted for at the date of winding-up. Failing to do so would prevent wind-up.


When the winding-up is completed, there are several notifications that the trustees and their administrators will be required to make.

Firstly, the Pension Regulator (TPR) will need to be informed by updating the scheme’s status on the regulator’s online service - Exchange. Secondly, the trustees will need to inform the tax authority HM Revenue & Customs (HMRC) that the scheme has been wound-up.

If the trustees have a scheme specific registration with the Information Commissioner's Office (ICO), the scheme will also need to be deregistered.

Co-written by Enda Kerr of Pinsent Masons.

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