Ineffective Scheme Wind-Up: A Cautionary Tale For Pension Trustees

• Jurisdiction: Ireland
• Law Firm: William Fry
• Subject Matter: Employment and HR, Retirement, Superannuation & Pensions
• Author: Mr Ian Devlin, Ciara McLoughlin and Jane Barrett
• Published date: 03 July 2023

The recent High Court case of O'Rourke v Meadowvale Pension Scheme [2023] IEHC 148 (the Case) found that a deed purporting to wind-up a pension scheme over a decade ago was not legally effective.

The trustee had failed to properly transfer certain assets out of the scheme before attempting the wind-up, so the trust (and trustee obligations) continued.

The Case concerned a small, self-administered pension scheme. The main assets of the scheme were shares in a private company registered in South Africa. The trustees sought to transfer those shares to a PRSA before the purported wind-up. All parties accepted that the transfer of part of the shares was not valid and effective, as it did not follow the restrictions in a shareholders' agreement. The High Court had to decide if these assets remained in the hands of the trustees or if they would revert to the employer or the State.

The Court concluded that the trustees continued to hold those assets. Judge Eileen Roberts held that the deed of wind-up did not terminate the scheme as the deed was "fundamentally flawed" being incorrectly based on the premise that all trust assets had been distributed.

Only part of the scheme assets had been validly transferred out. This partial transfer fell foul of Revenue's prohibition on spilt transfers. Consequently, Revenue did not accept it as a valid wind-up. The Court acknowledged that Revenue's conclusion was not determinative of the legal position but that it sat comfortably with the legal conclusion and avoided any conflicts with the scheme's regulatory...