Throughout our various discussions on occupational pension schemes, we have explored in detail the different types of occupational pension schemes, the type of benefits that are payable therein, the rights of members and, more recently, taxation. Remember that an employer sets up an occupational pension scheme for the provision of pension benefits for their employees.
Occupational pension schemes can be either defined benefit (a defined benefit is promised at retirement) or defined contribution — determined by the scheme trust deed and rules and the benefit at retirement depends on the member’s accumulated contribution balance. But what happens if the employer ceases to exist for one reason or another? What happens to your pension benefits? The good news is that the members’ pension benefits are protected. There are a couple of things that members’ need to know.
A scheme might be wound up when an employer can no longer support it by paying its contributions. For example, because it has gone out of business. If a company is insolvent, the pension plan will be terminated and the same can happen in the case of reorganization of a company. For starters, all registered schemes are set up under irrevocable Trust. This means that the scheme is a separate legal entity from the employer that establishes the scheme and its assets do not belong to the employer. The assets are, therefore, protected and cannot revert to the employer in instances of insolvency. In other words, the employer’s creditors cannot make a claim on the scheme assets.
Furthermore, registered retirement schemes are regulated by the Retirement Benefits Authority (RBA) under the Retirement Benefits Act and Regulations.