Winding up a scheme may present the trustees with a number of administrative problems. If accurate and up-to-date membership records have not been kept, particularly where deferred members may have left the scheme many years previously, there may be a risk that unknown beneficiaries will come forward in future and make claims against the trustees personally.

Where unknown beneficiaries may be a potential problem, section 27 of the Trustee Act 1925 (Section 27) gives the trustees the power to advertise in the London Gazette and local newspapers inviting claimants to come forward within a period of not less than 2 months from the date of the advertisement. Once the period for making a claim specified in the advertisement has expired, the trustees may then distribute the fund to those of whom they have had notice, and are generally not liable to any person of whom they have not had notice.

In the MCP v Aon case, the High Court held that the placing of advertisements under Section 27 by MCP did not protect it from claims of which it had actual or imputed knowledge, even though it may not have known about the claims. The case arose after some £868,000 was paid out under an insurance policy to a group of transferred-in members who had been overlooked and whose benefits had not been included in a bulk buyout.

The insurers brought subrogated proceedings against Aon as the scheme administrator, alleging that Aon had been negligent in overlooking the members covered by the policy. As none of the overlooked members in question had responded to the advertisements, Aon argued that the trustee had no notice of these members’ claims and that the insurance monies should not have been paid out. In finding against Aon, the court held that the overlooked members were entitled to have the scheme correctly administered and to receive the appropriate benefits when the scheme was wound up. It was held that the trustee did have notice of these members’ claims for the purposes of Section 27, even though the members had not responded to the trustees’ advertisements. The court held that the trustee had been aware of the relevant transfer, even if it had subsequently forgotten about these members’ existence, and therefore it was correct that the insurance monies were paid out.

This case represents the first judgment confirming that Section 27 applies to occupational pension schemes established under trust.

Comment: trustees should consider taking out insurance when winding up pension schemes. They should also be careful in ensuring member records are kept accurately and contain up-to-date information, as Section 27 will not protect them against claims of which they already have notice, even if those members’ records are subsequently lost.