A lot of company have decided to end their final salary scheme, including Aviva and Vodafone. I was just wondering what happens to the members if the scheme winds up?
When it all first came out in the news, I was appalled that even big companies are affected. I was really upset and bothered that my own company's final salary scheme would be affected. And I sought ways to prove that it was illegal, but it isn't. Companies ARE allowed to close their schemes on the grounds of cost or insolvency or in rare cases, mergers.
Well it's happened to us. We were given a notice about the wind-up date. For those of you who do not what that is, it is the date when members are no longer eligible to earn benefits under the final salary scheme.
We were told that the trustess would make a detailed assessment of the assets and liabilities of the scheme to see how the remaining assets would be distributed.
If you are curious, try and get the rules by that the trustees would follow in winding up the scheme you're in. These would include a lot of provisions on how to properly wind up the schme and how the assets are to be divided.
Remember that you are required to inform in writing all your members and their beneficiaries that the scheme is being wound up, within one month after the scheme commences the process.
On top of that you should give the reasons for the winding up and clarify to your members if your would still be giving out death benefits. If your company is undergoing insolvency proceedings, you should also inform your members who the independent trustee is.
When a scheme is winding up, you should also expect that you would receive a progress report at least once a year that would detail how the trustees are establishing assets and liabilities, how they are recovering assets. These reports will also bring you the bad news of just how much your benefits and payouts would be reduced, and an estimate date when you could receive your benefits.
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For companies like yours that are winding up their final salary schemes, it helps to first verify the information and data of your scheme. So that all members' benefit claims are taken into consideration and make sure that the data you are working with are accurate.
Then you would have to assess the asset value and stack this up with the liabilities that you have. This would determine your funding level.
The trustees for your final salary scheme would then have to sell the scheme's assets.
I can think of no reason why any one category of member would receive any pay-out earlier than any other .. unless (of course) a member was transferring funds into another scheme or perhaps if (having been a member for less than 2 years).
What if scheme winds up?
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