Case Studies - Scheme Wind-up Assignments
Case Study 1 - Unfunded benefits
A defined benefit scheme with approximately 300 members, which had gone into wind up as a result of the principal employer entering administrative receivership.
Through our forensic administrative investigations, it was discovered that enhanced benefits had been given to a number of senior executives, who had since retired or transferred out, without any funding having been provided for the enhancements, as the rules of the scheme required. This had contributed to a significant funding deficit, which considerably reduced the level of benefits that could be settled for the remaining members.
Acquainted of this situation, the Independent Trustee, on legal advice, decided to pursue the former trustees, who were deemed personally liable for the granting of unfunded benefits, and recovered a proportion of the costs concerned through an out-of-court settlement.
Case Study 2 - Understated assets
A defined contribution scheme with approximately 160 members, which was being wound up as a result of the principal employer having sold the substantial part of its business to a competitor.
We were recruited by the incumbent administrator to conclude the wind up on its behalf, which we were informed, was virtually complete. As a result of our investigations, the assets available for distribution to members were significantly increased for two reasons:
- We established that a significant amount of tax deducted from investment income had not been reclaimed;
- We discovered that distributions from the underlying investments hadn't been allocated to members and were being treated as surplus.
The identification of these additional assets increased the benefits for the remaining members and led to a substantial distribution of "surplus" funds.
Case Study 3 - Unrealised investments
A defined contribution scheme with approximately 600 members, which was in the course of being wound up as a result of the principal employer's decision to replace the scheme with a group personal pension arrangement.
We were appointed to undertake an audit of the wind up of the scheme. The incumbent administrator (from whom we subsequently took over) led us to believe that the wind up was complete and that only the final documentation formalities were outstanding.
Upon carrying out a sample reconciliation of benefit calculations, it became clear that significant assets remained with one of the investment managers. Our investigations revealed that the disinvestments of assets in a unitised with-profits fund had been carried out incorrectly and that a terminal bonus remained to be realised. The benefits of a number of members, who had chosen to invest their contributions in this fund, were significantly increased as a result.
Case Study 4 - Cost reductions
A defined benefit scheme of approximately 1600 members, which had entered partial wind up following the liquidation of one of the participating employers. Shortly after our appointment, the parent company entered administration.
At the time of our appointment, the future of the scheme was uncertain and a firm of solicitors was advising the trustees. When appointed, we agreed a project plan with the trustees, which was updated upon the appointment of an Independent Trustee.
The trustees were then able to reduce the (very costly) involvement of the solicitors and we were able to steer the progress of the wind up ensuring that tasks were undertaken by the appropriate disciplines and at the right level. This will have had a substantial effect on the winding-up costs.
We were also able to reduce the cost of preparing and auditing the accounts of the scheme from over £5,000 for the year prior to our involvement to less than £1,000 for the subsequent year.