How Safe are Final Salary Pensions?

amc1

If my Final Salary scheme (two-thirds salary scheme) winds up, I will have 20 years service (or one-third salary benefits). Assuming I stay with the same company, will my FS pension in another 20 years be one-third of my salary now (+ inflation rises) or one-third of my salary then ?

Debt_Free_Chick

amc1 wrote:

If my Final Salary scheme (two-thirds salary scheme) winds up, I will have 20 years service (or one-third salary benefits). Assuming I stay with the same company, will my FS pension in another 20 years be one-third of my salary now (+ inflation rises) or one-third of my salary then ?

Depends on what the company decide to do. If they close the scheme completely, then you are likely to be treated like a leaver so you will get 1/3 of your salary at the date it closes, plus inflation (max 5% p.a.) to retirement age.

Some companies just stop future pension building up, but continue to link existing rights (1/3 in your example) to final salary at the date of retirement - but you have to remain employed with them, otherwise you get 1/3 of your final salary when you leave.

I have to say that continuing the link with final salary at retirement is not the norm - but I do know a number of companies who have done just that.

HTH

george_2

thirdparty wrote:

The Pension Protection Fund will pay 100% level of compensation for pensioners and 90% level of compensation for the remaining members subject to a cap of £25,000.

yes but it only allows for Pension increases for Pension accrued after April 1997, so anyone with a lot of service prior to this could lose out depending on the benefits their pension provides

Pal

I don't think anyone is claiming that the Pension Protection Fund is perfect, but it is still a damn site better than the guarantees applicable to any other investment you could get.