If the funding of a pension scheme is not sufficient to satisfy the Funding Standard, the trustees may apply to the Pensions Authority for a direction under section 50 of the Pensions Act 1990. Under such an order accrued benefits relating to members’ past service can be reduced. Prior to making an application to the Pensions Authority, trustees must have undertaken a comprehensive review of the scheme with a view to the long term stability and sustainability of the scheme. Before making an application for a section 50 direction, the trustees must notify in writing, all members of the scheme and any other person in receipt of benefits under the scheme, and also notify any authorised trade union representing members, or any representative group that meets certain requirements.
Scheme members subject to a Section 50 amendment must be notified in advance of the proposed reductions. This notification must include the circumstances of the Section 50 application, and the proposed reductions, including general illustrations of their effect.
Pension schemes are run for the benefit of all its members, active, deferred, and retired. It is important to note that all pension scheme members, not just pensioners, have one month to make written observations to trustees on proposed section 50 applications to the Pensions Authority. Trustees must consider these observations before making an application to the Pensions Authority.
The provisions in section 50 of the Pensions Act have been reviewed on a number of occasions in recent years. Changes to this section of the Act were made in 2009 and again in 2013. The Social Welfare and Pensions Act 2013 amended section 50 of the Act to broaden the options available to the trustees of a pension scheme when considering a restructure of scheme benefits. These changes were designed to spread the risk of scheme underfunding across all scheme members and beneficiaries in any consideration of an application by the trustees of the scheme to restructure scheme benefits. It is a matter for the trustees of a scheme, who are required under trust law to act in the best interests of all scheme members, to determine how the provisions in section 50 of the Act might be applied.
I hope this clarifies the matter for the Deputy.
