The following Pensions guidance note Produced in partnership with Squire Patton Boggs and Catherine Lonergan of Eversheds Sutherland (International) LLP provides comprehensive and up to date legal information covering:
THIS PRACTICE NOTE APPLIES ONLY TO DEFINED BENEFIT AND HYBRID OCCUPATIONAL PENSION SCHEMES.
Before 6 April 2006 (A-Day), trustees of ongoing schemes that were in surplus on an ongoing basis were required to take steps to eliminate that surplus in accordance with the Income and Corporation Taxes Act 1988 (ICTA), Sch 22, para 3 (now repealed).
Paying a refund to the sponsoring employer(s) was one of the permitted methods of reducing a surplus, provided the conditions set out in the Pensions Act 1995, s 37 ('Section 37') were met. Section 37 sets out the conditions on which an ongoing scheme may make a payment of surplus to a scheme employer.
The Pensions Act 2004, s 250 removed the obligation to eliminate surplus and amended Section 37 with effect from A-Day.
There is a separate statutory regime under the Pensions Act 1995, s 76, for the payment of surplus to the employer where a scheme is being wound up. For more information, see Practice Note: Payment of surplus to the employer—pension schemes in winding-up.
Trustees of ongoing schemes cannot pay surplus to the employer unless:
the scheme rules contain a power for the trustees or another person to pay surplus to the employer, and
certain statutory requirements are met
Trustees must also act in accordance with their duties
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