Insolvency and pensions

What happens to the assets in a pension scheme on a company insolvency?

On a company’s insolvency, the funds in its pension scheme do not automatically form part of the assets of the company. They are not automatically available to pay the company’s creditors unless an office-holder has an action against the scheme for the return of funds, eg if a preference transaction has occurred.

An insolvency practitioner appointed over the company must give notice of the insolvency to the Pensions Regulator (TPR), the Pension Protection Fund (PPF) and the trustees or managers of the pension scheme (see Pensions Act 2004, s 120). For further information, see Practice Note: What happens to a pension scheme on a company’s insolvency?

What if there are employer or employee contribution arrears at the insolvency date?

Employee contributions

If the insolvent employer has deducted contributions to a DB or DC scheme from an employee’s pay in the four months before its insolvency, but failed to pay them to the scheme, the amount of the unpaid contributions will be a preferential debt in the employer’s insolvency (Schedule 4 to the To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

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