Hello I might be over-analysing here but I just wanted to be clear.... Chapter 26, Page 16 states the priority order on wind up. "First: Expenses / tax / loans Second: Pensions and other benefits already payable and secured before 6.4.1997 by insurance policies... Third: ....." My question is around this part.... "Pensions and other benefits already payable and secured before 6.4.1997 by insurance policies..." Does this mean pensions in payment which are already covered by a buy-in which occurred prior to 6.4.1997? Why only prior to 6.4.1997? Was this like a phasing in period after the 1995 Pensions Act? Thanks
Hi! I can't give a definitive answer to this question, but maybe someone with more experience of wind ups will be able to confirm or correct my thoughts below? My interpretation of the benefits that would be covered by the second stage in the priority order is similar to yours. However, note that it applies only to insurance policies that cannot be surrendered. Why do we have this? I think the statutory priority was first introduced with effect from 6 April 1997. We can see that the broad aim of this priority order is to apportion assets according to benefit level - the PPF level of benefits is higher priority than benefits in excess of the PPF level. So, on wind up, the value of annuities bought against specific members may need to be re-apportioned. This may be difficult or impossible to do if they cannot be surrendered. So when the statutory priority order was written, I think that second level of priority was included to take account of that, ie to avoid the need to try to re-apportion these policies that couldn't be surrendered. By 6 April 1997, everyone knew that the statutory priority was going to come into effect and so should have taken it into account when deciding whether to take out insurance policies. And the rules of the policies themselves probably evolved take account of requirements as a result of the statutory priority order. So, the provision doesn't apply for annuities purchased after 6 April 1997. That's my gut feel anyway! Hope that helps. Gresham
