what price final salary schemes now?

aloiseb

I always thought final salary pensions were risk free until I heard on Moneybox about all the people who aren't now going to be getting anything because their company folded, and decided to pull the plug on the schemes. It doens't look good for those poor people at the moment, as the Government won't help them out either.

I'm beginning to wonder if it is actually safer to keep money under the floor boards...the £50 p m - odd I am paying my university's final salary scheme at the moment would be extremely useful for paying off debts. Especially if at the end of my working time, they can just turn round and say sorry, we're keeping your savings because we've gone bust. (and I can't help thinking that universities are no more secure than companies, now that they too have paying customers)

Who would I go to to find out about the security of my money - the pensions adviser there? or is he/she bound to tell me the rosy side of the picture?


Please help! - I'm not sure if I need reassurance, or advice!

ReportInvestor

The government has set up the Pension Protection Fund (paid for by companies with final salary pension schemes, including your university) that will pay you 90% of any entitlement up to a maximum of £25K pension p.a. That entitlement rises to 100% of up to £25K once you have retired.

So current members of final salary schemes have far more protection than the 85,000 you see in the news who are at the mercy of the government's pathetic Financial Assistance Scheme that has only paid out to 32 people to date.

Interestingly the Trade Unions are to challenge the PPF at a European level as inadequate under European Law.

Unfortunately the costs of the PPF will be another factor in the equation that will persuade companies not to offer final salary schemes to future employees and to change the terms of final salary schemes to existing employees .

But the entitlements you have earned to date are now pretty secure .

exil

aloiseb wrote:

I always thought final salary pensions were risk free

they never have been 100% secure. but then neither has any other place you can put your money.

until I heard on Moneybox about all the people who aren't now going to be getting anything because their company folded, and decided to pull the plug on the schemes. It doens't look good for those poor people at the moment, as the Government won't help them out either.

only reason they might have to help them is the "misleading advice" argument. Nobody is arguing the govt is obliged to help out every FS scheme that falls apart.

I'm beginning to wonder if it is actually safer to keep money under the floor boards...

only if your floorboards pay interest. Inflation still exists.

the £50 p m - odd I am paying my university's final salary scheme at the moment would be extremely useful for paying off debts.

remember it's also buying life insurance, and can be used to get a pension if your retire early due to redundancy or ill health.

Especially if at the end of my working time, they can just turn round and say sorry, we're keeping your savings because we've gone bust. (and I can't help thinking that universities are no more secure than companies, now that they too have paying customers).

If you are in the USS (as I am), it would require ALL (or at least most) unis to go bust to threaten the scheme. Long before that point is reached, the scheme would probably be wound up and replaced by a DB scheme with benefits earned so far "frozen".

It is of course possible that the current AUT action could cause this very thing to happen. Hopefully someone will knock the unions' and employers' head together before we reach that position.

If you are in the uni's own scheme - then your point holds. Unis do have assets though (buildings, land, endowments) and even if that didn't
cover the shortfall, the PPF would now come into play and you should get
back nearly all you paid in.

Trouble with the PPF is that it is paid for by the FS schemes themselves, in much the same way as ABTA bonding is paid for by travel agenst. End result will probably be to continue the flight to DB schemes.

Who would I go to to find out about the security of my money - the pensions adviser there? or is he/she bound to tell me the rosy side of the picture?

The USS has a website with various reports. According to this the USS is healthier than nearly every other FS scheme and I see no reason to doubt that. If you want independent advice, see an IFA.

Please help! - I'm not sure if I need reassurance, or advice!

bit of both - but don't we all! At age 40 your chances of dying in the next year are only about 100 to 1 against..... losing your job maybe 10 to 1...
becoming disabled or too ill to work - all these things are rather more likely than your pension disappearing altogether IMO.

EdInvestor

These people will give you good free advice about your company pension:

https://www.opas.org.uk