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.

TAKE A FREE TRIAL

Latest Pensions News

Pension deal insurance capacity outstrips demand

Law360: Eight out of ten pension deals in 2024 involved a scheme with less than £100m in assets, due to a major increase in insurer capacity, a consultancy said on 2 May 2025.

TPR updates guidance on third-party applications for pension scheme powers

The Pensions Regulator (TPR) has published updated guidance covering third-party applications for regulatory powers, including independent trustee appointments, trustee disqualification waivers and prohibition order revocations. The guidance introduces bespoke application forms and clarifies the roles of applicants, TPR's case team and the Determinations Panel. TPR's Executive Director emphasised that applications must demonstrate evidence that using these powers serves members' interests. The guidance aims to streamline the application assessment process while maintaining regulatory standards.

US tariffs spark concerns for unhedged pension assets

Law360, London: European pension funds that have significant unhedged dollar assets could be in trouble, experts warned on 2 May 2025, as unprecedented market volatility was sparked by imposition of US trade tariffs.

Government continues to mull public consolidator role for PPF

Law360: The Labour government has confirmed that there are still plans to continue to explore whether a small, focused government consolidator, run by the Pension Protection Fund (PPF), is still a possible consolidation option for those defined benefit (DB) schemes less attractive to commercial providers.