Great Christmas pension returns at Arnotts...

Why are they seemingly paying money out to pension scheme members even if they are not retired? How is this possible given that pension funds are normally locked away until retirement?!
Arnotts, on Dublin's Henry Street, employs 1,200 people. Staff must be with the company for two years to receive the windfall, while those who are not members of the pension scheme will miss out.

But all former staff members who are members of the scheme will benefit, with the windfall likely to be distributed on the basis of members' contributions.
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But are they getting respect??!!

'Current and former stuff at Arnotts.....' First line of second paragraph of article quoted above!!
 
In an occupational scheme, the company can take a refund if the scheme is overfunded (in the case of a Defined Benefit Scheme - like this one).

How the employer treats the surplus is up to the employer - distributing some or all of the surplus to employees is fine.

The payments will be taxed though!
 
Interesting - thanks MMilken. I thought that it might be something peculiar to DB schemes or something like that. Wonder why the SKY report was circumspect about the taxation issue?
 
Why are the shareholders getting it. Would have been nice to buy some shares there in the last week or so.
 
ClubMan said:
Interesting - thanks MMilken. I thought that it might be something peculiar to DB schemes or something like that. Wonder why the SKY report was circumspect about the taxation issue?
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I doubt Sky employ many pension experts - the guy was probably hedging his bets!
 
niceoneted said:
Why are the shareholders getting it. Would have been nice to buy some shares there in the last week or so.
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Because surplus accrues to the Sponsoring Company usually (well they are halving it with Members in this case) - and the shareholders own the Company.
 
What kind of payments though will employees actually recieve? I can't imagine them all getting 50k- would be nice but sounds too good to be true??
 
does anybody know what kind of tax have to pay on the payouts? some say 20 some say 41!! makes a big difference/
 
I would have assumed that whatever income tax rate applies to their income situation (normal income plus this windfall)? Unless it could somehow be classed as a capital payout in which I presume that CGT would apply? Remember when First Active did a capital restructuring and made capital repayments to shareholders who were then liable for CGT? Could they also be liable for PRSI?
 
Not sure there is any precedent for this. The return to the Co. will be taxed as a Trading Receipt (as with normal refunds to the Co).

Therefore should the payment to employees be taxed at their marginal tax rate (41%)?

On the other hand, refunds to employees who leave service and opt for a refund of personal contributions (with less than 2 years service) are taxed at 20%.

If the funds were taken out as pension income (on retirement) then they would be taxed at marginal rate. So I cannot see a justification for a lower rate on distribution of the surplus. Pension funds dont pay CGT so I cannot see this being a rational basis (but you never know what agreement might be reached with Revenue).
 
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