Monday, January 12, 2009

Company Pension Scheme being Discontinued ('Wind-up')

In a previous article I wrote about the procedure involved, where the company you work for is 'winding-up' the existing pension scheme and replacing it with an alternative arrangement within the same employment.

Unfortunately, it is looking increasingly likely that more and more companies will be going out of business and that the employees will have to transfer their pension assets elsewhere.

What normally happens in this situation is that the Company resolves to 'wind-up' the pension scheme and stops making contributions to it. They will then advise the scheme 'Trustees' of their intent and appoint a Pensions Consultant to manage the process.

The Consultants will then write to each individual member (active and deferred) and i) advise them of the procedures involved ii) outline the benefits (values of funds) and iii) provide the members with information on the various options available.

The 'Benefits' Statement should include a) the value of your fund in the main scheme b) the value of an AVCs you made while in employment and c) the value of any transfers in to the scheme from previous employment.

The 'Options' available to you for the transfer of these 'Benefits' should include :

1. Transfer your benefit to a new Employer's Pension Scheme
2. Transfer to a Personal Retirement Bond (also referred to as Buy-out-Bonds and Pension Transfer Plans)
3. Transfer to a PRSA
4. Early Retirement Option or
5. Take your benefit as a 'Trivial Cash' payment.

The Consultants will advise you which of these options are open to you and they will probably also include what is referred to as a 'Default Option'. A default option is exercised by the Trustees where they have not received confirmation from a member as to what they wish to do with their benefits.

Thursday, January 8, 2009

Buying Investment Products from a Bank

The following is a comprehensive list of reasons why you should purchase an investment/pension/life insurance product, or expect unbiased financial advice, from a Bank that is a 'Tied Agent' of a Life Assurance Company.


I am struggling to find one. Any Help?

Tuesday, January 6, 2009

'The Ascent of Money'

If you feel that you need to take a step back from the current financial abyss and want to read a broad history on how the financial world has evolved, I would recommend that you get your hands on a copy of this book by Niall Ferguson.

The main appeal of the book is in its educational content. If you have the desire to learn more about the components of finance, in terms of how credit, insurance, banking, property and bonds have 'developed' over the years, this will probably whet your apetite for further information.

It is aimed at those who have a basic knowledge of how 'money' works and I found it entertaining from the point of view of its combination of History & Finance. There was also a TV Series of the same name but I have not seen it.

Monday, January 5, 2009

PRSA - Wealth Warning

Where an employer makes contributions on behalf of an employee to a PRSA, the employer's contributions are treated as a benefit-in-kind in the employee's hands. This benefit-in-kind charge would only apply where the combined contributions (employer's and employee's) exceed the relevant Revenue limits.

Following the introduction of the Income Levy in the recent Budget, combined with the tax treatment of employer PRSA contributions, it is imperative that these Revenue limits are not breached.

If the relevant contribution limits are breached, the full contribution would be subject to benefit-in-kind and would also get hit for the new Income Levy.

NB: This rule does not apply to 'Occupational Pensions', just PRSAs.