Monday, October 6, 2008

'Winding Up' of Pension Schemes

It is my opinion that there will be a major shift from 'Occupational Pensions Schemes' to 'PRSA Schemes' over the coming months and years. The reason for this movement of pension assets will be because, the obligations on 'Trustees' of Occupational Pensions will become too onerous in terms of what they will have to do to satisfy new legislation. The PRSA Scheme will offer the 'Trustees' the chance to relieve themselves of administrative and training obligations, that were absent up to this point.


Within 12 weeks of the decision to wind up an existing scheme, the trustees will have to notify the Pensions Board and and members of its intentions. If you are an 'active' (currently in the scheme) members, you should receive notification that existing funds and future contributions will be invested in a PRSA with XYZ Co.

If you are a 'deferred' (former employee) member, with pension assets still within the company scheme, you will be notified of the name of the company that the fund will be transferred to and what 'default' investment strategy has been selected for you. It will be up to you to change this strategy if the 'default' one does not suit your risk profile.

If there are employees that were excluded from the main Occupational Pension, for what ever reason, they should be notified that the PRSA Scheme will be available to them also.

It will be up to the employer to notify the existing pension company if the assets are to be transferred to another company. They will also alter the payroll to accommodate employer and employee contributions to the new PRSA Scheme.

There can be no charge on the value of the pension assets that are being transferred to the PRSA Scheme. The only charge that will be attributed to these funds will be the 1% Annual Management Charge. The regular contributions that will now be directed to the PRSA company, may have up to 5% of each contribution deducted, depending on the remuneration structure agreed between the employer and pension advisor.


i) The ownership of the PRSA will be in your own name. This differs from an occupational scheme where the pension benefits were held in trust on your behalf.
ii) Once an employer contribution is made to your PRSA it becomes part of your PRSA account and cannot be refunded to the employer.
iii) PRSAs provide you with a wider range of options at retirement
iv) Depending on the PRSA provider, you may have secure Internet access to your PRSA account to monitor values whenever you wish.
v) Contributions by employer and employee will continue at their current levels (not for deferred members).
vi) You should also be given contact details of the pension advisor to the PRSA Scheme and when they will be available for consultation


Noel Kelly said...


I can't understand why Trustee training is such a bad thing, (admittedly the rules themselves are onerous) but if if means that Trustees gain a better understanding of how pension schemes should/ are meant to operate then that can only be of benefit to their employees in the long run. It seems like transferring to a PRSA is a irish solution to an irish problem. That is not to say that there is anything wrong with a PRSA btw.

Gerard said...


I am not saying that Trustee Training is a 'bad thing'. I am just expressing an opinion as to the direction that some existing schemes may be driven towards. We will have to wait and see what the implications will be for all schemes, irrespective of size or status. Might be a nice opportunity for 'Professional' Trustees, provided the costs are not prohibitive.