Final Salary - Summary Funding Statement - Gulp - Looks perilous!!

ReportInvestor

Would that be a group or individual decision to hire a firm of consulting actuaries, Ed? We know these ivory tower number crunchers don't come cheap .

Do the trustees have any role in this? [I suspect the answer is "no".]

EdInvestor

I suppose a company could always pay for the trustees to commission a firm of actuaries to help scheme members You are right, the actuary firms are not cheap.

I suspect many people will end up trapped in f/s schemes whether they like it or not, because private providers won't accept transfers in without advice, and advisors won't give approval to move the scheme.

Mortgage_&_debt_free

Just a thought that led to a question...

If a f/s company goes insolvent, what would happen to any AVC/FSAVCs that have been bought over the years?

Would they be treated separately as they are additional and not part of the f/f pension until retirement??

Reason I ask is that I am paying 18% AVCs into a "safe" f/s pension (LGPS), but would want to know what the doomsday scenario might be.

Thanks

ReportInvestor

These would normally be into a separate fund. FSAVCs are with a provider chosen by yourself. In house AVCs might be managed by a provider like the Pru, chosen by the company or employer or trade union.

It sounds like you're making additional contributions into your employer's pension scheme, however. From what you say, these will be treated the same as your ordinary pension contributions if Stafforshire County Council were to go bankrupt (unlikely - they'd just put up Council tax and cut services ).

Mortgage_&_debt_free

Thanks for the reply.
I am paying into the LGPS but into AVC funds I have chosen (SL/CM).

I am able (with the SL) to access the details and value of the AVC online, so am I correct in thinking it wouldn't be touched if the main scheme turned turtle as it certainly seems separate in terms of what I put in/daily value, etc?

ReportInvestor

That would be my understanding in those circumstances. You have described an in house AVC with the funds managed by an external provider. It will eventually produce a lump sum. You will probably take some tax free and have to invest the rest in an annuity.

The local government people, although they have a set contribution rate negotiated between employers and unions nationally, place their pension fund money with different providers authority by authority.

Many local authorities went with Tony Dye, the arch stock market bear, and then ditched him just before the 2001/3 crash so that they could be fully invested in equities .

EdInvestor

Post A-day, Avcs have become obsolete and you can move them to a personal pension or Sipp.They won;t any longer be tied into the rules of the company scheme.

However if you are close to retirement there might be a deal whereby looking at the f/s scheme plus the AVCs overall,you might be able to take your tax free cash from the AVC fund,and then leave your main scheme intact to pay out the pension itself.Depends on whether your scheme has changed its rules.

best to take advice.

ReportInvestor

New scare story in the Scotsman about company pensions - Scotland's Top Actuary to deliver stark warning

".............Stewart Ritchie, president of the Faculty of Actuaries, will predict that many more pension schemes will collapse, and pensions be lost, because companies rely on "wholly inadequate" yardsticks to measure solvency.

He will argue that this allows finance directors to continue operating in denial, using "interest-free loans from widows and orphans", when they should be shoring up pension black holes.

He wants companies to come clean to employees that the security of their pension is much worse than it looks, because of reliance on inadequate funding standards such as FRS17. Even where companies achieve this holy grail, employees can still lose nearly half their pension if their employer goes down.

He will tell a gathering of the actuarial profession at Edinburgh's National Gallery: "We are kidding ourselves over the security of pensions. People expect companies they deal with, such as banks, insurers and Marks & Spencer to be solvent. Yet when it comes to pension funds, we have lost sight of solvency. Suddenly it is all right not to be solvent. It is not all right. When companies aren't solvent, like Farepak, they go down."

His main concern is that the current funding measures do not reflect a scheme's ability to pay the pensions it has promised. He described FRS17 and its stable-mate IAS19 as "assumptions made by well-meaning people, which currently fall a long way short of the cost of securing the pensions which have been earned....................."

"......................Finally, he will warn employees not to take false comfort from the Pension Protection Fund, which has been set up to provide a safety net if schemes collapse. "The PPF does not replicate the full pension promise and its own solvency is not guaranteed by the state," he will say."