Sectionalised pension schemes
Produced in partnership with Squire Patton Boggs and Catherine Lonergan of Eversheds Sutherland (International) LLP
Sectionalised pension schemes

The following Pensions practice 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:

  • Sectionalised pension schemes
  • What is a 'sectionalised' pension scheme?
  • Why sectionalise a pension scheme?
  • Tax treatment of sectionalised schemes
  • Sectionalised schemes and the Funding Requirements
  • Schemes with one or more ‘frozen’ sections
  • Allocation of contributions to provide death benefits
  • Allocation of contributions on winding-up
  • Application of the Funding Requirements
  • Hearn v Dobson
  • More...

Sectionalised pension schemes

THIS PRACTICE NOTE APPLIES ONLY TO DEFINED BENEFIT AND HYBRID OCCUPATIONAL PENSION SCHEMES

What is a 'sectionalised' pension scheme?

A pension scheme can be structured in a number of ways. For example, it may:

  1. have more than one participating employer and provide for different benefit structures for members employed by different employers

  2. be the product of historic mergers or bulk transfers of members’ benefits as a result of corporate transactions, resulting in a single sponsoring employer but with rules providing for different groups of members to receive different benefits

  3. provide for both historic defined benefits and more recent defined contribution benefits

  4. be an industry-wide pension scheme allowing different employers to participate, each with its own section providing benefits for its own employees

The rules of the scheme may provide:

  1. for the scheme assets to be held and administered as a single fund and may, therefore, permit cross-subsidy as between different sections, or

  2. that the assets of each section are to be held and administered separately and used solely for the benefit of the members of each section with no possibility of cross-subsidy as between the different sections

If the rules of a scheme provide for complete segregation of the assets of the different sections, the scheme is often referred to as a ‘segregated’ or a ‘sectionalised’ scheme.

Many industry-wide occupational pension schemes are sectionalised schemes with each

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