Pension Case Studies

Problem

Company A had gone into receivership while sponsoring its staff pension scheme. Receivers had been appointed to wind up the company and as part of that process had established that the scheme was still in existence but had received little administrative support since the closure of the company with no contributions made for more than three years. The Receiver also informed the Trustees of the scheme that they were still responsible for its future administration and control.

The problems for the Trustees of this scheme were compounded by the fact that the scheme administrator was a provider that had closed its doors to new business and whose default fund was not attracting any growth. As a result, the Trustees were having great difficulty in meeting the scheme's responsibilities both financially and administratively. It transpired that a number of the members had removed their benefits independently following publicity surrounding the problems with the insurance company concerned and the Trustees were concerned as to the viability and performance of the scheme in the future.

It was at this point that they sought our assistance.

Solution

We were able to advise the Trustees that each had a continuing personal legal responsibility to ensure that the best interests of the members were met. They also had a responsibility to seek professional advice on any matters on which they required help to ensure that member's interests were best served.

Under what were fairly difficult circumstances, we established that earmarked funds were being held for each individual member. Then, with the help of our legal advisers we were able to persuade the receivers that the scheme had in fact moved into the wind up process following notification from the sponsoring employer of it ceasing to trade, as this was deemed to be a trigger to this process under the rules of the scheme.

The Trustees were presented with a number of options as to how they could proceed and following careful consideration they opted to fully wind up the scheme and transfer the member's benefits to another provider. Company records had been lost and the existing provider was unable to provide contact details for many of the members. With the aid of tracing services, known members and other local connections, Caledonia Asset Management Ltd was finally able to contact all members and they were advised of the Trustees decision. They were further advised that unless instructions were received to the contrary each member's benefits would be transferred into individual pension plans with another provider at the end of the statutory three month notice period. Some members appointed independent advisers who we supplied with information and assistance and some appointed us to act independently for them in transferring into new employer schemes but the majority opted to agree with the Trustees decision.

Over a period of six months we were able to broker and implement what the Trustees considered to be the best possible outcome at the time for all members. We were able to ensure that members suffered minimal penalties for transferring away from the existing provider, while maximising the allocation of benefits with the new provider, and retaining the option to transfer on at some point in the future without further penalty. Furthermore, the new contract would benefit from a much more open investment landscape which in the long term would offer greater opportunity for growth in their pension funds.

Thus the transfer achieved the desired result of securing and maximising funds for the remaining members of the scheme while at the same time providing good ongoing administration.

It took a further six months to fulfil all the technical and legal requirements to finalise all matters connected with the scheme, but eventually the Trustees were satisfied that they had fulfilled all their fiduciary duties and we advised the relevant statutory bodies of the closure of the scheme. At this point the Trustees were released from their legal responsibilities.

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