Pension question

Luckyjammygit

Just a quick question please:

I worked for MFI for 28 years and paid into pension for 26.

Now made redundant and new owners of pension fund are called Galiform.

Do I receive pension for life based on what I paid in,or is this dependant on how the new firm does in the future and how many still pay in?

Thanks for any replies

All the Best!

MikeJones_2

Hi Luckyjammygit,

Have you had confirmation from Galiform that it has taken over the responsibility of maintaining the MFI pension scheme (or have you assumed it)?

More about MFI/Galiform here (Wikipedia).

If the scheme was a defined benefit scheme (e.g. such as a final salary scheme which is one type of DB scheme) then it might interest you to visit the Pension Protection Fund website to learn about how these schemes are 'protected' (the link is to the Scheme Member FAQs which is quite good).

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Debt_Free_Chick

Only the retail chain was sold. The pension scheme was left with the parent company, which was renamed Galiform.

In a way, nothing has changed with the pension scheme. It was previously dependent on the fortunes of MFI (the group, not just the retail part) and it's still dependent on the fortunes of MFI, now named Galiform - assuming it's a defined benefit scheme.

Luckyjammygit

Thank you for replies.

I always thought if I paid in for 25 years pension was guaranteed for life?

Schnorbitz_2

Luckyjammygit wrote: »

Thank you for replies.

I always thought if I paid in for 25 years pension was guaranteed for life?

It must be pretty worrying for you about your pension, even if you no longer work for MFI.

If your pension is a "money purchase" type of pension, then you (and probably MFI as well) have been paying in contributions as you were working there, and letting it roll up with the ups and downs of the investment returns. When you retire, you go to an insurance company and buy an annuity, which will last for the rest of your life.


However, as you started at MFI many years ago, it may well be that you've got a "final salary" pension - you've been promised a certain fraction of your final salary as a pension for each year you've been in service. (There are many variations on this too).

Please could you have a close look at any documentation you've received from your pension administrators and see whether you can work out what kind of pension you have, and we can talk about it a bit more. If you've got a money purchase pension, you'll be receiving a statement of how much it's worth each year, together with three predictions of how much you might get when you retire. If you've got a final salary pension, you probably had one statement a year talking about what your salary is and how long you were working with the company, but you may not have had one since you left the company.

Good-ish news for both types of pensions when the pension scheme's employer goes bust: if you have a money purchase pension, then that pot of money set aside is still all yours (although, if it's in shares, it will have gone down in value recently). If you have a final salary pension, then under the Pension Protection Fund you can get 90% of the pension you were originally due at retirement age.

I'm not sure what you mean by the "guaranteed after 25 years" bit - it's not something I've heard of before. It sounds as though it might be some rule that's specific to the scheme.

Luckyjammygit

Thank you for reply

Cannot find any mention of what type of pension it is but have found a document called retirement notes and this states "pensions are payable for life"

Hopefully this is the case!

Schnorbitz_2

Luckyjammygit wrote: »

Cannot find any mention of what type of pension it is but have found a document called retirement notes and this states "pensions are payable for life"

Hopefully this is the case!

Yes, once you actually retire, either the annuity or payments from the final salary fund will continue for the rest of your life. There are various choices about a tax free cash sum, increases on your pension and a pension to your wife or husband should you die first which you may be able to make, depending on the flexibility of the scheme you're in. But the actual pension amount should be payable for life (with the normal provisos about the Pension Protection Fund acting as a sort of insurance for the scheme).

Luckyjammygit

Thank you

This really has took a weight of my mind!

Ian_W

The pension scheme has its own WEBSITE which may be of interest.
It is a defined benefit, though not final salary, scheme with 1/90 of actual annual salary accruing for each year of service, updated annually by RPI [up to a max of 3%pa] - HERE.

As regards Galiform itself a recent broker update from UBS [10/12/08]on their shares noted:

that despite its view that Galiform is well run and a good business, it sees three factors that prevent it from being more positive ... weak retail environment is unlikely to improve in the near term; Galiform's pension deficit is likely to get worse rather than better; and ... the extent of the group's ultimate liability on the leases it holds of stores occupied by collapsed retailer MFI.

In light of this I wonder whether MikeJones with all his expertise might care to comment further?

MikeJones_2

Schnorbitz wrote: »

If you have a final salary pension, then under the Pension Protection Fund you can get 90% of the pension you were originally due at retirement age.

Hi Ian,

I do wonder whether Luckyjammygit's pension differs from the details on the Galiform Pension website given that he was in the scheme for 26 years. The details on the website might refer to a newer scheme - I don't really know as I've only took a quick glance.

My other immediate observation is that Schnorbitz's comment is technically incorrect for a significant number of scheme members - although in fairness to Schnorbitz - it is a very common misconception.

So as not to re-invent the wheel, this text is sourced from the Pension Protection Fund website (the link is to 'Compensation' page):

1. For the majority of people below their scheme’s normal pension age the Pension Protection Fund will pay 90% level of compensation.
   
   In broad terms and in normal circumstances, this means 90% of the pension an individual had accrued immediately before the assessment date (subject to a review of the rules of the scheme by the Pension Protection Fund) plus revaluation in line with the increase in the Retail Prices Index between the assessment date and the commencement of compensation payments (subject to a maximum increase for the whole period calculated by assuming RPI rose by 5% each year). This compensation is subject to an overall cap, which, as at April 2008, equates to £27,770.72 at age 65 (the cap will be adjusted according to the age at which compensation comes into payment. Please refer to the current compensation cap factors).
   
   Once compensation is in payment, the part that derives from pensionable service on or after 6 April 1997 will be increased each year in line with the Retail Prices Index capped at 2.5%. Again, this could result in a lower rate of increase than the scheme would have provided.

In addition there will also be compensation for certain survivors.
____________

Comment
The PPF provides 'limited' compensation in as much as it doesn't exactly match the benefits a scheme member (or dependants of a scheme member) would have received had the defined benefit scheme not entered into it.

Anyone who earns above the PPF's compensation limits will have their benefits reduced - for much higher earners, then this is likely to be quite a significant reduction.

Likewise, a majority of people with pensionable service before 6th April 1997 will 'suffer' in other ways because of the way that the PPF treats that part of the pension benefit; the more pre April 1997 service, the greater the disparity between what would have been paid by the defined benefit scheme (had it survived) compared with what would be paid eventually with by the PPF.

Nevertheless, and whilst the PPF does have its critics, it is very much better than nothing.

Anyone with a private sector defined benefit pension benefit and who has not reached their scheme's Normal Retirement Date would do well to spend an hour going through the PPFs website.

I have to say though, even with the documents and examples available on its website, I personally think the PPF could do more to point out its weaknesses so that people are adequately informed.

Schnorbitz's well-meaning comment proves the point, don't you think?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

DocProc

Dear Employees,

Due to the current financial situation caused by the slowdown of economy, Management has decided to implement a scheme to put workers of 40 years of age and above on early retirement. This scheme will be known as RAPE (Retire Aged People Early).

Persons selected to be RAPED can apply to management to be eligible for the SHAFT scheme (Special Help After Forced Termination). Persons who have been RAPED and SHAFTED will be reviewed under the SCREW programme (Scheme Covering Retired Early Workers). A person may be RAPED once, SHAFTED twice and SCREWED as many times as Management deems appropriate.

Persons who have been RAPED can only get AIDS (Additional Income for Dependants & Spouse) or HERPES (Half Earnings for Retired Personnel Early Severance).

Obviously persons who have AIDS or HERPES will not be SHAFTED or SCREWED any further by Management.

Persons who are not RAPED and are staying on will receive as much !!!! (Special High Intensity Training) as possible. Management has always prided itself on the amount of !!!! it gives employees. Should you feel that you do not receive enough !!!!, please bring to the attention of your Supervisor. They have been trained to give you all the !!!! you can handle.

Sincerely,

The Management