Winding up. All the things you need to know, when your pension scheme is winding up

Transcription

1 Winding up All the things you need to know, when your pension scheme is winding up

2 About The Pensions Advisory Service Contacting us Pensions can change people s lives. Most of us would like to be able to choose to stop work one day and choose how we live when we do. A good pension is a good way to achieve that. Our vision is a future where people are empowered to make the most of their pensions. The Pensions Advisory Service (TPAS) is here to give people professional, independent and impartial help with their pensions for free. There are lots of ways you can contact us. Pensions Helpline (Monday- Friday 9:00am- 5:00pm) Web chat live Online enquiry form We are here to: give you independent information and guidance on pension matters mediate and resolve problems you may have with your pension Write to The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB We will always try our hardest to help you with your pension query. Our service is about you and your needs. We will talk to you about the things that are important to you, helping you to navigate through all the options that may be relevant to your personal circumstances. At the Pensions Advisory Service, we understand pensions, and are passionate about making them accessible to you. We will always listen and offer you different ways to use our service. /pensionsadvisoryservice We regret that we are unable to accept visitors at our office. Please note that this guide is for information only. The Pensions Advisory Service cannot be held responsible in law for any opinion expressed, nor should any such opinion be regarded as grounds for legal action. The Pensions Advisory Service Limited. Company limited by guarantee. Registered in England and Wales No Registered Office as shown. 2 11

3 The Financial Assistance Scheme (FAS) If your pension scheme wound up between 1 January 1997 and 5 April 2005, you may be able to get financial help from the FAS. You may get this financial help if your defined benefit scheme was in deficit and either: your employer is insolvent, no longer exists or has entered into a valid compromise agreement with the trustees of your pension scheme to avoid insolvency in some circumstances, your final-salary scheme was wound up because it could not pay members' benefits even if the employer continued trading Pension schemes and winding up If a company can no longer support the workplace pension scheme, or no longer wishes to do so, the scheme rules usually say that it must be wound up. This can be a worrying and frustrating time for scheme members. The process can take a long time as it is complex and there are no short cuts. This leaflet gives an overview of the winding up process. If you satisfy certain other conditions, the FAS will pay assistance to make up 90% of accrued pension (subject to the cap mentioned previously) from either: your normal retirement age or 14 May 2004, when the FAS was set up. winding up can be very frustrating, if you d like reassurance please speak to the trustees first if you re not happy you can call us Normal retirement age is the age you would retire at, as stated in your pension scheme rules. Payments to members who are terminally ill and payments to survivors can begin at any age. Find out more about the FAS, which schemes qualify and what conditions you may have to satisfy at this web address: AmIEligible.aspx. 10 3

4 Why does the process take so long? Nearly all pension schemes have trustees, whose job is to look after the interests of scheme members while acting in line with the scheme s rules. If a scheme is wound-up, the trustees have to find a way to organise members benefits in another way, usually through an insurance policy or by transferring to another approved pension arrangement. If the scheme is being wound-up due to insolvency, you might find that an independent trustee is also appointed. It s their job to ensure all members interests are fully protected: they are there to look after your interest and those of the other beneficiaries. They will work as quickly as possible to resolve the situation and will be dealing with: Data Trustees will have to work through records to make sure basic information is up to date and complete and it includes everyone who may have a pension entitlement. HM Revenue and Customs (HMRC) reconciliation. Trustees will liaise with tax officials to agree levels of pension benefit for periods of contracted out service. The Pension Protection Fund (PPF) Members of defined benefit occupational pension schemes are protected through the Pension Protection Fund (PPF). The PPF will pay regular compensation, based on the amount of pension due to you, if the company becomes insolvent and the pension scheme can't pay your pension. The PPF applies to most defined benefit occupational pension schemes whose employers become insolvent after 6 April If your company's pension scheme meets the PPF conditions, the PPF will pay you regular compensation in place of your pension payments. If you have already reached your scheme's normal retirement age, you may be entitled to compensation equivalent to 100 per cent of your pension, subject to a cap ( 36, a year at age 65 [2014/15]). If you have not yet reached the scheme's normal retirement age, you may receive compensation when you retire equivalent to 90% of your pension entitlement, subject to a ceiling of 90% of the cap. You may not get the full increases promised in your scheme s rules. Read more about this on the PPF s website: If your company's pension scheme has suffered a reduction in assets as a result of an act - or a failure to act - that constitutes fraud, an application may be made to the Fraud Compensation Fund which is managed by the Board of the Pension Protection Fund. The PPF took over this responsibility from the Pensions Compensation Board from 1 September Unlike other aspects of the PPF, this provision applies in respect of most defined benefit and defined contribution schemes. 4 9

5 What happens if there s a surplus? Firstly, the trustees must set aside enough of the surplus to provide for a statutory level of pension increases to all members. After that, they might decide to give some of the money back to the company, even when it is insolvent. If they have discretion over use of the surplus, they will usually consult an actuary or take legal advice before acting. What happens if there s a deficit? It is possible to claim back the shortfall from the company, if it still exists. Under a final salary scheme, the shortfall becomes a debt owed by the employer to the trustees of the scheme. If the company is insolvent trustees claims rank with other non-preferential and unsecured creditors, so repayment is unlikely. They can also claim contributions from the State redundancy fund. More information is available on the Gov.uk website. A shortfall in the fund could mean that you receive a smaller pension. You may however be eligible for financial help from the Pension Protection Fund (PPF) or the Financial Assistance Scheme. (Please see the next page for more details.) Contribution claims It might be possible for the Official Receiver or a Company Liquidator to claim from the State any contributions not paid by the company in the final 12 months of its existence. Trustees have to provide evidence and certification to help with this. Assets Trustees might have to sell assets or recall loans. This can take time. Trustees need to make sure they have a full picture of the pension scheme, its members and their rights before making any payments or other arrangements. Making decisions It is sometimes difficult to trace key individuals when a company has collapsed. This can delay trustees decisions. The Pensions Regulator feels that trustees should aim to complete scheme wind-ups within two years, although this may not be possible if there are complications. 8 5

6 What must they tell me? When a scheme is being wound up, trustees must issue a notice, within a month of the start of the winding-up process, with: details of why the scheme is being wound-up their contact name and address They should also contact you at least once a year with a summary of the current situation. What should I tell them? a statement to active members letting them know whether death benefits will still be provided and, if relevant, name and details of any independent trustee. You should provide information as quickly as possible when requested, to help trustees. You should also inform them of any change of address so you don t miss vital information. What are the options? Option A: Transfer your pension to another pension arrangement or scheme You have an option to take a transfer value to another pension arrangement or scheme. The amount available would depend on whether the scheme is in surplus (it has more than enough money to cover everyone s pension benefits) or deficit (it doesn t have enough money to cover everyone s pension benefits). If the scheme is in deficit, your transfer value may be reduced to take this into account. You can only transfer your pension entitlement if the new scheme will accept the transfer. The new scheme must be registered with HMRC. Option B: Trustees securing your pension entitlement by arranging an insurance policy Your scheme s trustees can arrange for the pension to be bought out by another provider, such as an insurance company. The benefits of the new scheme might not be the same as your old scheme, so read information sent to you carefully. You might also wish to talk to an independent financial adviser. The amount of money transferred into your pension or into the insurance scheme will depend on whether your old scheme was in surplus or deficit. Your trustees will explain how your transfer value has been worked out. 6 7