Insolvency and pensions

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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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Latest Pensions News

Public Accounts Committee report sounds alarm over inadequate CSPS administration

The Public Accounts Committee (Committee) inquiry into the Civil Service Pension Scheme (CSPS) has published a report highlighting concerns about the management of the CSPS, warning of declining service standards, weak oversight, and risks surrounding Capita’s upcoming takeover from current administrator MyCSP in December 2025. The Committee’s latest report found deep-rooted operational failings, long delays for pension members, and uncertainty over whether the Cabinet Office can ensure a smooth transition of services. The Committee’s findings underscore the risks inherent in outsourcing core pension administration and the need for stronger governance and oversight mechanisms. It has called on the Cabinet Office to demonstrate how it will safeguard service quality, protect member interests, and ensure continuity as Capita prepares to take control of one of the largest public sector pension schemes in the UK.

Government announces consultation on proposed reforms to Local Government Pension Scheme in England and Wales

Pensions analysis: The UK government has announced a consultation on a range of proposals relating to the Local Government Pension Scheme (LGPS) in England and Wales, including an increase to the Normal Minimum Pension Age (NMPA) and the extension of the scheme to mayors and councillors. Written by James Smith, barrister at Outer Temple Chambers.

Government confirms no change to pre-1997 defined benefit pension indexation

The government has confirmed that it has no plans to change the current approach to indexation for pre-1997 defined benefit (DB) pension scheme benefits. In response to a Written Question from Dr Al Pinkerton MP, Work and Pensions Minister Torsten Bell MP stated on 22 October 2025 that altering the minimum legal requirements for indexation would raise costs and liabilities across all DB schemes. The clarification indicates that the government’s earlier review of pre-1997 indexation will not result in reform, and trustees will need to rely on discretionary increases where appropriate.

Pensions UK recommendations to Third State Pension Age Review notes healthy life expectancy should guide future pension age increases

Pensions UK has submitted recommendations to the Third State Pension Age Review, proposing that State Pension age increases should only occur with corresponding improvements in healthy life expectancy and 10 years advance notice to savers. The submission recommends maintaining a single State Pension age to avoid confusion whilst allowing flexibility for early retirement in certain circumstances. Pensions UK acknowledges that the Triple Lock mechanism cannot be sustained indefinitely, noting Office for Budget Responsibility projections indicating state pension spending could reach 7.7% of GDP by the early 2070s from around 5% currently. The organisation recommends establishing a clear adequacy level for the State Pension and transitioning to a more sustainable uprating mechanism once this baseline is achieved. The State Pension age is currently 66 and is scheduled to increase to 67 by April 2028, with the government having launched the independent review in July 2025 to assess appropriateness based on updated life expectancy data and financial pressures.

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