A New Addition to the Wind-Up Regime?
Simon Archer, Susan Philpott & Clio Godkewitsch
In this article, Simon, Susan and Clio discuss a problem they see with the current wind-up rules in pension legislation.
Where a defined benefit plan is to be wound-up, individual beneficiaries must choose between (1) purchasing a life annuity in the amount of their benefit; (2) transferring the commuted value to another retirement savings vehicle; or (3) transferring to another plan. The default rule, in the event a beneficiary does not make an election, is the purchase of an annuity.
This is where they believe the system is not working very well. They explain that forced annuitization in a wind-up process creates costs that could be avoided – costs that individual beneficiaries are almost certain to ultimately bear.
They propose an alternative option: the establishment of an independent, not-for-profit institution with a mandate to administer pension plans transferred to it. Click on the link to find out why they think this is a good idea.