# What happens if pension co. goes under?



## stugots (26 Jul 2011)

I have a PRSA with Custom House Capital. I understand that they are currently being investigated by the Central Bank for some 'unusual activities'. The suggestion from the Irish Times is that funds were moved from some customer accounts to prop up some ailing property funds. No funds are allowed into or out of CHC PRSA accounts while the investigation is ongoing.

My PRSA is a little unusual in that it is entirely invested in an illiquid asset with a maturity horizon of 15 years from now. Therefore, there were no funds that could have been extracted directly from my account. If it turns out that there is a deficit in the accounts of some CHC customers, how will this be handled? Is the burden shared by all CHC customers? Does the FSA insure against this circumstance?


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## Baracuda (26 Jul 2011)

Very interesting but of course regretful situation. If this is the case and I am no expert in this area I would believe that CBI would move on the company as it has and if any iregularties are found, the CBI would take legal proceedings against the company and move in its own administrators like it did with Quinn Insurance. If the deficit could not be covered by it's current assets the CBI may move to shut down operations and liquidate it assets. In this senario you would be making a claim under the Investor's Compensation Fund which all companies in financial services pay into.


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## stugots (27 Jul 2011)

Baracuda said:


> If the deficit could not be covered by it's current assets the CBI may move to shut down operations and liquidate it assets. In this senario you would be making a claim under the Investor's Compensation Fund which all companies in financial services pay into.


 
The difficulty that arises in this situation is that the assets in my account cannot be liquidated. The assets consist of shares in a company that is not publicly quoted and therefore there is no market for them. 

It's not clear to me what if any action the CB coul dtake on this account if liquidation occurs.


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## Baracuda (27 Jul 2011)

stugots said:


> The difficulty that arises in this situation is that the assets in my account cannot be liquidated. The assets consist of shares in a company that is not publicly quoted and therefore there is no market for them.
> 
> It's not clear to me what if any action the CB coul dtake on this account if liquidation occurs.


PRSA must invest in pooled/unit linked funds only which must be able to be made liquid with in 12 months of the switch request (could be 6 months cannot remember to be certain). So it would seem that there may a compliance failure for this as well


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## stugots (27 Jul 2011)

Baracuda said:


> PRSA must invest in pooled/unit linked funds only which must be able to be made liquid with in 12 months of the switch request (could be 6 months cannot remember to be certain). So it would seem that there may a compliance failure for this as well


 
Wow - interesting information. I wasn't aware of this. How would this work in a property syndicate situation for instance? I believe that lots of these were being funded via non-standard PRSA accounts. Is there some obligation on the syndicate organiser to provide liquidity?

I'll have a look into this, but if you have any online docuemtns you could refer me to, I would greatly appreciate it.


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## stugots (27 Jul 2011)

Baracuda said:


> PRSA must invest in pooled/unit linked funds only which must be able to be made liquid with in 12 months of the switch request (could be 6 months cannot remember to be certain). So it would seem that there may a compliance failure for this as well


 
Does thi sapply to non-standard, self directed PRSA also?


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## Baracuda (27 Jul 2011)

Cant have a self directed PRSA full stop even if is a non-standard. Cant invest in a property syndicate either. However a PRSA can invest in a Pooled/unit linked fund where the provider gives a guarantee the the units will be purchased back by the PRSA fund manager within either 6 or 12 months again cant remember the correct time limit. 

Sorry to ask the obvious question but are you sure that your invested in a PRSA and not a Personal Pension as the funding options you refer to would be available in a PP?

Cannot post the info as this is contained within the Lia members site although i would think that this would be available on the Pension Board website.


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## stugots (28 Jul 2011)

Baracuda said:


> However a PRSA can invest in a Pooled/unit linked fund where the provider gives a guarantee the the units will be purchased back by the PRSA fund manager within either 6 or 12 months again cant remember the correct time limit.
> 
> Sorry to ask the obvious question but are you sure that your invested in a PRSA and not a Personal Pension as the funding options you refer to would be available in a PP?


 
Thanks for your patience - I'm demonstrating an obvious lack of knowledge here! Yes it is a PRSA and it is non-standard. The PRSA invested funds (along with many other PRSAs) in an investment operated by another company. My understanding was that this investment was illiquid and there was no possible exit for several years. Based on your comments, it would seem that this would then raise compliance issues with the PRSA. If CHC provided some 'wrapper' in the form of a pre-maturity exit guarantee to allow compliance with this requirement, it might explain things. Or alternatively, the other company may have provided this guarantee. If this was provided by CHC, then my question still remains - what happens now that CHC could not fulfill this guarantee? If provided by the other compnay, then I assume the buck is passed....


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## Conan (28 Jul 2011)

Baracuda,
Can I disagree with your comment that one "cant have a self directed PRSA....". In fact a number of providers have this facility as part of their PRSA offering.

As for the CHC, illiquid investment etc, I cannot comment. The OP will just have to await the outcome of the Central Bank investigations. It is not clear from the OP whether the illiquidity refers to syndicated property investments or some form of Private Equity structure.


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## Baracuda (28 Jul 2011)

Conan

You are right and I stand correctted, I was thinking of standard PRSA's.

Just to be clear, standard PRSA's can only be invested in Pooled Funds where as non-standard PRSA's can invest in pooled funds as well other assets in regulated markets .


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