Jurisdiction(s):
United Kingdom

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Key definition

Debt definition

What does Debt mean? Debt, in pensions practice, is the sum an employer must pay to an occupational defined benefit pension scheme to meet any funding shortfall when the employer ceases to participate or the scheme winds up. In England & Wales and Scotland, this employer debt (commonly the section 75 debt) is a statutory liability under section 75 of the Pensions Act 1995 and the Occupational Pension Schemes (Employer Debt) Regulations 2005. It is typically calculated on a buy-out basis (the estimated cost of securing members’ benefits with an insurer) and becomes immediately due to the trustees on a trigger such as...

Solvent estates: payment of debts and expenses, statutory order of application, secured debts and contrary intention (England and Wales)

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Practice notes

Meaning of solvent

Rules governing payment of a deceased person’s debts, together with funeral and testamentary expenses, depend on whether the Estate is solvent or insolvent. An estate is treated as solvent when its assets are enough to meet, in full, funeral, testamentary and administration expenses, plus all debts and liabilities. Whether legacies can be settled in full is immaterial when determining solvency.

Where there is uncertainty about solvency, the personal representatives (PRs) should consider applying the statutory hierarchy for insolvent estates in Schedule 6 to the Insolvency Act 1986, which prescribes the priority for paying the deceased’s debts and funeral and testamentary expenses. For guidance on that statutory order, see Practice Note: Payment of debts-insolvent estate. In a solvent estate, the rules for allocating debts and liabilities are contained in section 34 of the Administration of Estates Act 1925 (AEA 1925). AEA 1925, Sch 1 Pt II sets out the order for PRs...

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Web page updated on 26/05/2026

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