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.

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