Earlier this month Steve Webb, the pensions minister, clarified that the Government will introduce new legislation to clarify some of the major concerns raised by the pensions industry regarding Section 251 of the Pensions Act 2004.
The concern was that all occupational pension schemes would have been required to give three months notice to their membership of their wish to pass a resolution, before 6 April 2011, in order to retain any excising powers under their scheme to repay money to the employers. Because of the imprecise wording contained within Section 251, there was a concern that any power which allowed monies to be repaid to an employer, whether from an ongoing scheme, one in winding-up or simply where the trustees were repaying administration expenses would be unenforceable unless the resolution had been passed prior to 6 April 2011. The results of the imprecise legislation had resulted in many employers commencing negotiations with trustees with respect to preserving these powers.
Steve Webb confirmed that new legislation would confirm that it was never Government's intention that Section 251 would impact on rules permitting repayments of surplus to employers on winding-up or to provisions which permit trustees to repay monies to employers through administration expenses.
In addition, and most helpfully, the Government is to extend the deadline for issuing a communication to members and passing the resolution by five years. Resolutions, now dealing only with ongoing surplus repayment powers, therefore need to be passed prior to 6 April 2016.
While we still await the draft regulations, it is worth noting that even if legislation is amended in this way, all schemes that wish to retain an ability to make a surplus repayment while the scheme is ongoing will need to pass the resolution prior to any surplus payment being paid and definitely before 6 April 2016. Schemes with such a power should therefore consider taking advice in this area.
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