Winding up and Opra - the proposed new regime

The Child Support, Pensions and Social Security Act 2000 contained certain new powers for Opra to become involved in scheme wind ups. The Department for Work and Pensions has recently issued draft regulations containing the detail behind those new powers.

Comments on the draft regulations are due by 23 October 2001. The regulations are due to be laid before Parliament by December and to come into force on 6 April 2002. The main provisions of the draft regulations are as follows:

• Trustees are given the power to apply to Opra to request a time extension for the requirements to provide funding information to scheme members every twelve months during winding up.
• The insolvency practitioner is required under the regulations to appoint an independent trustee within three months of his appointment. Trustees and administrators must report to Opra any failure of the insolvency practitioner to do so within one month of becoming aware that an independent trustee should be appointed and having reasonable grounds for believing that one will not be appointed.
• The procedure for requesting Opra to modify schemes in wind up is set out. Prior notice of the modification must be given to scheme members, and to the insolvency practitioner if the modification would reduce the assets which might be paid to the employer. Members have one month to make representations to Opra.
• The timetable for the implementation of the requirement to submit progress reports to Opra during wind up is shown in the table on the opposite page.
• The contents of progress reports are set out. This includes a list of the steps being taken by the trustees and details of when each step is to be completed. Members are entitled to request a copy of any report submitted to Opra.
• Under the Child Support Act, Opra is given powers to make directions to those involved in the administration of a scheme in order to assist the winding up process. However, under the Act this power did not come into play until after the first winding up progress report had been submitted. The draft regulations provide exceptions to the requirement for a report to have been submitted before Opra may give directions. These exceptions are that directions may be given at any time where the trustees have applied for directions, where Opra thinks the winding up is unlikely to be completed within a reasonable timeframe unless they make a direction, or where winding up commenced before 1 April 2006.
• The Child Support Act inserts into the Pensions Act a definition of when winding up is deemed to commence. The regulations disapply this definition for the purposes of Section 73 and Section 74 of the Pensions Act (dealing with winding up priorities and securing benefits).
• The requirement to keep records of winding up resolutions is slightly expanded. In particular, where a decision is taken to defer winding up, that resolution must specify the date on which it is proposed to wind up the scheme (even though it is unlikely to be known for definite at that stage).

For further information, please contact Keith Webster by e-mail at keith.webster @cms-cmck.com or by telephone on +44 (0)20 7367 2387.