Employers want to wind up Staff Pension Scheme

[Moneytalks]

My husband is in a defined contribution pension scheme and the company he works for are the trustees. They want to wind up the pension scheme and replace it with arrangements that the employees will own their pension personally and the company will no longer have this responsibility. We are told that this will give employees increased control over their entitlement. This is the deal for my husband:
One man occupational plan that either the insurer or the individuals themselves can act as trustee on.
These can be established with a number of insurers in the Irish market including the current provider.
The same charges will be available on the new contracts. There will be no penalty for transferring existing funds. Can negotiate a 1% enhancement on the transfer of the existing fund value to the new arrangement.
Is this a good or bad deal? What about pension bonds? I've been told that in the event of death they are a better option for the family of the deceased. any advice would be much appreciated. Thanks

 

[LDFerguson]

This sounds odd to me. Are you sure that it is a Defined Contribution scheme that is being wound up and not a Defined Benefit scheme?

A Defined Contribution scheme is an Occupational Pension Scheme and is a trust fund, with each employee being a beneficiary of the trust. Your post suggests that the employer is proposing to replace one Occupational Pension Scheme with a series of other ones. Moving from one OPS to another does not confer any additional ownership rights on the employees.

If the employer no longer wants to be trustee, they don't have to wind up the original scheme. They can simply appoint a third-party trustee.

Perhaps the object of the exercise is to offer the employees more choice of where their funds are invested?

 

[Moneytalks]

Thanks so much for your reply-it all sounds odd to me too-thats why I'm concerned about it.
It is a Defined Contribution Scheme-I'm 100% sure about that- the employees are not financial people so having more choice of where their funds are invested would be a nightmare for them as they would need to be directed. There is a very good death in service/critical illness insurance policy attached to their existing pension- would they lose this? There are only three active people in the scheme?

 

[LDFerguson]

There are numerous reasons why a scheme trustee would decide to switch providers from one company to another - better fund choice, more suitable funds, better service proposition etc. But whatever the reason, the trustee must always strive to act in the best interests of the scheme members. I think it would be a fair question to ask the trustee (or perhaps the broker if there is one) to outline in writing or by e-mail what the reasons for the change are.

If the death in service / illness benefits are operated as a separate insurance policy, they can be continued if the employer wants to do so. On the other hand, if they're bundled into the existing pension scheme and paid for by cancelling units in the pension fund, they can't. There's no obligation on the employer to continue to pay for these benefits if they're not in the employees' contracts.