Ch34 Provision of benefits if benefit scheme is discontinued

[DC92]

Hello

I am referring to pages 18 and 19 of Chapter 34 which describes the different options that may exist for the provision of the outstanding benefit payments, on the event that a benefit scheme is discontinued.

The last point made is that the liabilities can be transferred to a provider who will guarantee to pay a specified level of the benefits.

I just need clarity on who exactly the "provider" is? Is it referring to a different sponsor?

Thanks
DC92

 

[Mark Willder]

Hello

I am referring to pages 18 and 19 of Chapter 34 which describes the different options that may exist for the provision of the outstanding benefit payments, on the event that a benefit scheme is discontinued.

The last point made is that the liabilities can be transferred to a provider who will guarantee to pay a specified level of the benefits.

I just need clarity on who exactly the "provider" is? Is it referring to a different sponsor?

Thanks
DC92

I think it could be another sponsor (particularly for members that are deferred pensioners because they have moved to another employer).

However, the provider is more likely to be an insurance company that will pay a specified benefit, ie an annuity.

Note that in both the fourth and fifth bullets, an insurer could take over the assets. In the fourth point, the insurer takes the assets and invests in perhaps a unit-linked fund - so the investment risk is then passed to the individual. In the fifth point, the insurer takes the assets as a premium for an annuity - so the investment risk is then taken by the insurer.

I hope this helps to clarify the different possibilities on discontinuance.

Best wishes

Mark

 

[DC92]

Thanks Mark. Your explanation is very clear.

Regards
DC92