MILKING AND DUMPING

pensionactuaryg

MilkingAndDumping

Theme

Example/Remarks

Relieving Payroll

Scheme receives inwards bulk transfer from other

underfunded scheme/s of employer

Scheme assumes hitherto unfunded pension

obligations

Scheme assumes overseas pension obligations

Scheme assumes health, death-in-service, accident,

redundancy benefits hitherto met from payroll

“Augmented” benefits used to pay for departure of

single or multiple employees ad hoc, thus relieving

payroll

“Augmented” benefits replace bonus and golden

hellos

Aids Balance Sheet

Promise of generous bulk transfer increases saleability

and sale price of divested subsidiary

Scheme buys employer asset, property or securities on

sweetheart terms

Scheme makes “investment” loan to (external) buyer of

asset from employer

Scheme makes “investment” in securities of business

sold-off by employer

Scheme enters into sale and leaseback of property in

favour of business sold-off by employer

Inter vivos cash refund

Because buyer is thus

subsidised/benefited,

he pays a higher

price to employer

Now tax-discouraged

Possible breach

of Investment

Regulations

May not be “selfinvestment”

May not be “selfinvestment”

May not be “selfinvestment”

Rare, often precluded

by trust deed. Receipt

would be “trading

receipt” taxable,

later subject to 40%

standalone charge.

Could be available

where scheme

“overfunded” by

very generous GAD

surplus valuation

criteria.

Milking and Dumping

More magazines by this user
Similar magazines