Part 1: Collective Money Purchase Benefits Triggering events and continuity options Section 38: Continuity option 3: conversion to closed scheme
This section makes provision for continuity option 3 under which trustees decide to convert the scheme so that it continues to operate but on a closed basis. A closed scheme is one where either no new contributions are made but the scheme continues to operate in relation to benefits built up prior to closure; or where no new members are admitted to the scheme but existing members can continue to build up new benefits; or a scheme which is closed to both new members and new contributions.
	Trustees must notify the Pensions Regulator when they consider that preparations for conversion to a closed scheme are complete (subsection (2)).
	Subsection (3) allows regulations to set out the timings for notification under subsection (2).
	Subsection (4) provides that where the Regulator is satisfied that the preparations for conversion to a closed scheme are complete and the conversion will resolve the triggering event (and any other triggering event that may have subsequently occurred), the Regulator must notify the trustees of this.
	Subsections (5) and (6) provide that a closed scheme option may only be pursued in accordance with the provisions of the scheme, and that a scheme may only convert to a closed scheme – i.e. begin to operate as one – once the trustees have been notified by the Regulator under subsection (4).
	Once a conversion to a closed scheme has taken effect, trustees may not later reverse the action (subsection (7)).
	Subsection (8) applies financial penalties under section 10 of the Pensions Act 1995 to a trustee who does not comply with the requirements and restrictions of this section.
	Subsection (10) provides a definition of ‘closed scheme’.