Repayment of Surplus: Take Steps Now
16 July 2010
Does your pension scheme documentation contain a power to repay a surplus to an employer? Under Section 251 of the Pensions Act 2004 this power will be lost unless the Trustees pass an appropriate resolution by 5 April 2011.
The resolution has to comply with certain conditions, one of which is that members have to be given 3 months’ notice which means the resolution should be passed before the end of the year.
At first glance section 251 only applies to surpluses in ongoing schemes but it is arguable that it may also apply to schemes which have power to repay a surplus on winding up.
Why is this relevant?
Whilst repayment of a surplus is not a concern for many schemes just now, it may be an issue in the future and if Trustees do not act now they will not be able to do so at a later date. Therefore the surplus may be trapped. It may also impact on company accounting figures.
Action to be taken
If your scheme has a power to repay a surplus and the Trustees wish to preserve this, action will need to be taken before the end of the year. For more information, please contact:
June Crombie, Iain Talman, or Colin Greig (0141 228 8000)
The information contained in this article is given for general information only, reflects the current law on the date of this article, and does not constitute legal advice on any specific matter