THIS PRACTICE NOTE APPLIES TO DEFINED BENEFIT OCCUPATIONAL PENSION SCHEMES

When an underfunded defined benefit occupational pension scheme winds up, trustees must secure members' benefits by applying the scheme's assets towards meeting its liabilities in accordance with the statutory priority order set out in the Pensions Act 1995, s 73.

The statutory priority order overrides any priority order contained in a scheme's governing documentation.

The statutory priority order has undergone a number of changes since 6 April 1997, when it was first introduced, and varies according to the date on which a scheme commenced winding up. The current statutory priority order set out in the Pensions Act 1995, s 73, applies to schemes that began to wind up on or after 6 April 2005.

Schemes that began to wind up before 6 April 2005 should check previous versions of the legislation to ensure that they are applying the correct priority order. A different statutory priority order applies for schemes which began winding up:

1. •

   between 10 May 2004 and 5 April 2005 inclusive