A Guide to a Group Scheme Windup

A Guide to a Group Scheme Windup

2 Thomond Asset Management

Group Scheme Windup

Contents01.01

Introduction

Process

Windingupascheme

InformationrequiredbythePensionBoard

Transferoptionsavailable

Theadvantages&disadvantagesofeachoption

Thenextstep

AboutUs

03

05

06

07

08

10

12

14

02.01

03.01

04.01

05.01

06.01

07.01

08.01

09.01


Group Scheme Windup

Introduction

It’s easy to choose a savings plan, a pension, an investment product or an

insurance policy. It’s almost too easy, in fact. Just fill out the forms, sign your

name, hand over the money without another thought and it’s done - you’re away.

It’s so easy. Which is precisely why you need to stop and think hard about

choosing any financial product, especially a pension or investment plan. Even

someone working in the financial industry will take plenty of time to weigh up

their options before choosing the one that’s right for them, and they know what

to look for when they start out.

Savings plans, pensions and investments come in all shapes and sizes, offering

a wide variety of terms, risk levels, charges and potential returns. There are

literally thousands of financial products and probably hundreds of different

suppliers to choose from. Good products and not so good products, good

suppliers and not so good suppliers. You even need to choose the right time:

what might have made a good investment six months ago won’t necessarily be

the right investment now, and vice versa.

If you’re the type of person who enjoys getting all your facts together –

researching the market, calling around to the different financial houses,

understanding often complicated rules and regulations, as well as developing

a keen insight and understanding of the workings of the savings, pensions and

investment markets – then maybe, just maybe, you’re the right person to choose

the investment or pension plan for you.

What if there were people who would do all the hard work for you? Who would sit

down with you and work out what your financial needs are. Who would use their

in-depth knowledge of the market to draw up a list of suitable products. Who

would know which financial company to turn to for the right savings or pension

plan, the right investment fund. Who would guide you through the paperwork,

help you weigh up the potential risks and rewards, and ensure that no matter

what decision you make, at least you’d be making a well-informed decision.

02.01

Gettingtherightfinancialadvicefromtherightplace.


Group Scheme Windup

IntroductionCont.03.01

The good news is that Thomond Asset Management are such people. We are

independent financial advisers, and it’s our job to do all the financial legwork for

you and give you professional, impartial, financial advice. It’s what we’ve trained

and studied for many years to do, which is why we can do it very well indeed.

A good professional advisor will certainly save you time. That’s because as soon

as we start talking to you, we’ll know more or less what plans and product areas

are and are not right for you. We’ll also know straight away where to look for

the right products. Plus, we’ll probably already have the brochures and other

material to hand so we can talk you through some of your options there and

then. We’ll also answer many of the questions that arise as you go through the

process of weighing up your options, such as explaining the charges, the levels of

risk, the return you should expect to get and so on.

What you may not realise, however, is that using an independent financial adviser

can also save you money, often quite a lot of money. That’s because we are duty

bound to give you what’s called ‘best advice’: the best product at the best price

at the best time, to the best of our professional ability. This can save you a lot

of money in terms of charges and fees and even tax. Of course, by helping you

choose a good product we can also be instrumental in maximising the return you

get from your money – advice that’s literally worth its weight in gold.

Welcome to Thomond Asset Management...

Sincerely,

Neal Kelly – Director


Group Scheme Windup

Restructures and wind ups are currently high

on the agenda for many trustees of Group

Occupational Pension Schemes (Defined Benefit or

Defined Contribution). While scheme restructures

are believed to be complex and time consuming,

much of this perception is down to the paperwork

and administration involved. With this is mind,

you can be assured that Thomond Asset Management has a strong, tried and tested,

offering in the corporate pension market which

will help to ensure a seamless process.

In this report we will outline the following:

— The steps involved in winding up a scheme.

— The transfer options available to a scheme.

Process03.01

Acorporatepensionschemerestructure/windupinvolvestransferringthe

valueofapensionscheme(allorsomeoftheschememembersbenefits),from

onetypeofpensionarrangementtoanother.


Group Scheme Windup

Decision to wind up The trust deed and rules of a pension scheme will

usually set down the various circumstances under

which a scheme may be wound up. The trustees of

a scheme will be responsible for any winding up in

accordance with the rules of the scheme and the

Pensions Act.

At a meeting of the trustees of the scheme, a

special resolution should be recorded in the

minutes of the meeting.

Trustees Duties After the special resolution has been passed by

the trustees, the procedure to wind-up the pension

scheme is as follows:

— The trustees must notify the Pensions

Board, all members and the authorised

trade unions of the decision to wind up

the scheme as soon as possible, but in any

event not later than three months after the

decision has been made. They should also

inform the Revenue Commissioners of the

impending wind up of the scheme.

— The trustees should inform the Registered

Administrator of the decision to wind up.

— The trustees must ensure that all

outstanding contributions to the scheme

are paid into the scheme and must then

proceed to apply the assets of the scheme

in discharging its liabilities without undue

delay.

— In the case of Defined Benefit Schemes

the trustees should seek the advice of the

scheme actuary and, in particular, ask him/

her to establish whether the scheme has

sufficient assets to meet its liabilities and

to advise whether the investment profile of

the fund should be altered in advance of the

wind up.

— The trustees should arrange to have the

value of each member’s benefits calculated

for transfer to a PRSA, a Buy-out Bond or a

new Occupational Scheme.

— As soon as practicable after the transfer

values have been calculated, the trustees

should let the scheme members know their

options with regard to transferring their

transfer values to a PRSA, a Buy-out Bond

or a new scheme. With regard to transfers

from Defined Benefit Schemes they must

inform the members with regard to how any

scheme surplus or deficit has been dealt

with, and whether a reduction in benefits

has been made due to the scheme being in

deficit and the amount of same.

Windingupascheme04.01

WhereanemployerdecidestowindupanOccupationalPensionSchemethe

followingstepsmustbecompleted:

Group Scheme Windup

InformationrequiredbythePensionBoard05.01

— Date of winding up

— Estimate of realisable value of scheme assets.

— Estimate of cost of discharging scheme liabilities.

— Statement of all realisations and disbursements since the winding up

— Summary progress report.

— Such other information as the Pensions Board may require.

This report is due to the Board not later than three months after the latest

date that the Board should have received notification of the decision to wind

up.

Uponmakingadecisiontowindupascheme,areportmustbecompiled

andacopyforwardedtothePensionsBoard–thisreportmustcontainthe

followinginformation:



Group Scheme Windup

FollowingthewindingupofanOccupationalPensionSchemethevalueofthe

member’sretirementfundmaybetransferredtoaPRSA,aBuy-outBond,

oranewOccupationalScheme.

— Transfer to a PRSA

— AVC Benefits

The value of any Additional Voluntary

Contributions (AVCs) can be transferred to a

PRSA without any conditions.

— Main Scheme Benefits When a scheme is being wound up, certain

requirements must be satisfied before the

fund value relating to the scheme benefits

can be transferred to a PRSA.

— If the scheme member has more than 15

years service as a member of the scheme†,

then a transfer of the value relating to the

main scheme benefits is not permitted to a

PRSA.

— If the scheme member has 15 years’ service

or less as a member of the scheme and

the scheme is wound up, the transfer to a

PRSA is permitted, without the need for a

Certificate of Benefit Comparison.

— Transfer to a Buy-out Bond (Personal Retirement Bond) Under a Buy-out Bond the contract is owned

by the former scheme member and is no

longer held in trust by the scheme trustees.

The fund value is subject to the rules of

the scheme from which they came, and

the legislation governing Occupational

Pensions. Therefore, the tax-free cash

payable will be based on salary and service

at the date of transfer, and an annuity

must be purchased with the remaining

accumulated capital. If a former employee

was a 5% Director they may alternatively

take 25% of their fund as tax-free and

the remaining accumulated capital may

be invested in an ARF/AMRF or used to

purchase an annuity. Subject to Revenue

limits, the value of any Additional Voluntary

Contributions may be taken as tax-free cash,

used to purchase an annuity or invested in

an ARF/AMRF.

Thetransferoptionsavailable06.01

† Note: Active scheme membership excludes periods of deferred service. Following the transfer to a PRSA the value of the former scheme member’s pension fund is now owned by the individual and is no longer held in trust by the

scheme trustees. The benefits become payable at retirement in accordance with the legislation governing PRSAs. The tax-free cash will be 25% of the fund, and

the individual will be allowed to buy an annuity with the balance or, subject to certain requirements, keep the balance invested in the PRSA, invest the balance in

an Approved Retirement Fund (ARF), take the balance as taxable cash, or use the balance in a combination of these options.


Group Scheme Windup

TransferOptionscont.06.02

— Transfer to a New Occupational Pension Scheme With this option, if the restructure of a

scheme is to a Defined Contribution Scheme

the individual pension fund values are

transferred to the accounts of the individual

scheme members. If the scheme has been

wound up and the individual employee has

moved to a new employment and joined

their new employer’s Occupational Pension

Scheme, the value of their pension fund

may be transferred to the new employers

scheme.

— Transfer Payments Without the Members Consent Where the scheme is wound up:

The trustees must give the members at

least 30 days notice before the proposed

transfer, and they must subsequently inform

the member the PRSA or Buy-out Bond has

been purchased on their behalf.

There must be no outstanding request from

the member for a transfer payment to be

made to another scheme or a PRSA or for

the purchase of a policy or contract of the

member’s choice at the time the transfer is

made.


Group Scheme Windup

Transfer to a PRSA

It is not always straightforward to transfer

the proceeds of an Occupational Pension to a

PRSA as the pensions legislation has restricted

the eligibility for such a transfer. In general, it

is easy to transfer to a PRSA in the following

circumstances:

Where scheme service is less than 15 years ANDWhere the transfer value is less than €10,000ANDWhere the scheme rules allow it.Similarly if a scheme is being fully wound up it is

permissible, (assuming the scheme rules allow

it) to transfer the full value even if greater than

€10,000 to a PRSA if the members scheme service

is less than 15 years.

Advantages of a transfer to a PRSA

— More flexible retirement options (not

confined to purchasing an annuity)

— Control over investment funds and timing of

benefits.

— A regulated product.

— Superior reporting requirements.

— No charge can be made against the

members fund on transfer. In other words,

a 100% allocation must be attained on a

transfer.

— The full value of the PRSA is payable income

tax free on death before retirement.

Disadvantages of a transfer to a PRSA

— If the scheme is a Defined Benefit and

the scheme is not being wound up, then

valuable guarantees could be forfeited by

accepting a transfer value.

— It may be possible to obtain the entire fund

or most of it tax free under occupational

pension scheme rules, whereas with a PRSA

the maximum tax free cash is restricted to

25% of the accumulated fund.

Advantages&Disadvantages07.01

TheAdvantages&Disadvantagesofeachoption–PRSA

Group Scheme Windup

TheAdvantages&Disadvantagesofeachoption–BuyOutBonds

Advantages&DisadvantagesCont.07.02

Advantages of a transfer to a Buy Out Bond

— The pension benefit comes out of trust and

becomes a contract between the member

and the Financial Institution. It removes the

trustees from the equation altogether.

— The member has discretion over what funds

he/she invests the transfer value in.

— The member has discretion over the timing

of benefits subject to Revenue rules.

— In the event of death before retirement the

value is paid free of income tax to the estate.

Disadvantages of a transfer to a Buy Out Bond

— The trustees have no responsibility for the

Buy Out Bond.

— The Buy Out Bond does not give the member

the new retirement options under the 1999

Finance Act. (ARF/AMRF and drawdown)

— It is not possible to transfer the proceeds

to a PRSA in the future under the current

regulations.



Group Scheme Windup

Under the Disclosure of Information Regulations,

you are entitled to an estimate on leaving service

of this transfer payment. This can be provided on

request.

New Employers Occupational Pension Scheme

Should you decide to transfer your benefit to your

new employers pension scheme, you will require

the following information to process the transfer

of payment.

— The formal title of the scheme to which the

transfer value is to be paid.

— Confirmation that the new scheme is an

Exempt Approved Scheme under Part 30,

Chapter 1 of the Taxes and Consolidations

Act 1997.

— The Revenue Approval Number of the

receiving scheme.

— Confirmation from the new trustees that

you are a member of their scheme.

— Confirmation that the new scheme is willing

and able to receive a transfer value

— Confirmation that the new scheme is

registered with the Pensions Board,

together with a note of the Pensions Board

reference number.

— Completion of an approved Transfer

Agreement Form.

TheNextStep08.01

Asdiscussedyouareentitledtoatransferpaymentequaltotheactuarialvalue

ofyourdeferredbenefits.Thistransferpaymentcanbemadetoanother

ApprovedOccupationalPensionSchemeortoanapprovedinsurancecontract

i.e.aBuyOutBondorPRSA.


Group Scheme Windup

TheNextStepCont.08.02

Typically you will need to contact the Human

Resources Department of your new employer to

arrange for this information to be obtained. This

information should be provided by the trustees/

administrator of your new scheme.

Approved PRSA or Buy Out Bond

Should you decide to transfer your benefit to

an approved insurance contract, the trustees of

your present scheme will effect the contract in

your name by paying the transfer value to the

designated insurance company for investment

in the selected fund(s). The value on retirement

is determined by the investment return achieved

on the transfer value during the period to

normal retirement date. It should be noted

that the investment return is subject to market

fluctuations and therefore cannot be guaranteed.

The accumulated value of your Additional

Voluntary Contributions (AVCs) will also be

transferred to the approved contract on your

behalf.


Group Scheme Windup

Thomond Asset Management82 O’Connell Street

Limerick

Tel: 061 462024

Fax: 061 312033

Email: [email protected]

www.thomondam.com

Regulatory Status with the Central Bank of Ireland

FOLK Asset Management Ltd. t/a Thomond Asset Management (“the Firm”) is

regulated by the Central Bank of Ireland as an Authorised Advisor under Section

10 of the Investment Intermediaries Act, 1995 and as an insurance intermediary

registered under the European Communities (Insurance Mediation) Regulations,

2005. The Central Bank holds registers of regulated firms. You may contact

the Central Bank on (01) 224 4000 or alternatively visit their website on www.

financialregulator.ie to verify our credentials. Our Investment Firm Intermediary

Number is C52926.

Disclaimer This document does not constitute an offer and should not be taken as a recommendation from Thomond Asset Management. Advice should always be sought from an appropriately qualified professional.

The case studies are not real people and are for illustration purposes only.

Whilst great care has been taken in its preparation, this newsletter is of a general nature and should not be relied on in relation to specific issue without taking appropriate financial, insurance or other professional advice. The information contained in this newsletter is based on our understanding of current and intended legislation and Revenue practice as at September 2011.

Warning: - The income you get from an investment may go down as well as up. - The value of your investment may go down as well as up. - Benefits may be affected by changes in currency exchange rates. - Past performance is not a reliable guide to future performance

AboutUs08.01

Documents

A Guide to a Group Scheme Windup