Regulator authorises trustee to modify scheme rules to enable return of trapped surplus to employer on winding-up

In a recent Determination, the Regulator has allowed the trustees of the Littlewoods Pension Scheme to modify scheme rules to free up surplus funds for payment to the sponsoring employer. 

The trustee had applied for an order from the Regulator modifying the scheme rules to allow surplus assets on winding-up to be distributed to the principal employer or authorising the trustee to modify the scheme rules for this purpose. The application was made because the scheme rules did not permit surplus to be returned to the employer and required the employer's consent for any augmentation of member benefits, which was not given.

The Regulator’s Determinations Panel agreed to authorise the trustee to modify the scheme to enable it to distribute the surplus to the employer, on the basis that the surplus resulted from additional contributions made by the employer after the scheme was fully funded on the technical provisions basis. The Panel concluded that the trustee was unable to achieve the distribution through other means without undue complexity or cost. The trustee had explored various options but concluded none were feasible without employer consent.