how secure is my pension?

cheerfulcat

Sorry, you're right DFC. Wrong opera. But the objection remains; the PPF is no sort of guarantee that people won't lose out in future, and I don't think that people should be encouraged to see it as such.

dunstonh

And there's Equitable Life, of course

Equitable life's problems were linked to over generous guarantees which they couldnt afford.

With profits does give the provider for a liablity but unit linked doesnt. Eq Life Unit Linked funds have done quite well.

So, lets rephrase a little. Money purchase, unit linked plans have no financial liability to the company or provider.

Debt_Free_Chick

cheerfulcat wrote:

Sorry, you're right DFC. Wrong opera. But the objection remains; the PPF is no sort of guarantee that people won't lose out in future, and I don't think that people should be encouraged to see it as such.

I'm not fond of the word "guarantee" in general - and the PPF is based on future Governments funding it - but it's currently a promise that the Government will top up some of the shortfall. It's certainly more security than any final salary scheme member has ever had before - and IMHO, it ought to mean that "a lack of security" is no longer an issue for the average member. It is, afterall, the kind of "compensation" that Roz Altman is demanding from the Government (for those not covered by the PPF).

I agree with your earlier point too - that we must all make provision for retirement and probably not rely on any single method of doing this - which I why I think that improved security ought to assist with retirement planning, but should not "blind" people into thinking that they will automatically be comfortably off.

Tricky balance ....

james3333

its all a big mess to me
so which kind of pensions are 'safe'?
iam 29 and have been paying into it since i was 20 years old.
i pay £150ish per month.
mine used to be a final salary, but it changed to a 'salary sacrifice'
and basically, my final pension is based on what i have earned over the years ( like a progressive scale) rather than my final salary.
i contribute to it and so do the company.
i 'sacrifice' some of my pay, basically i take home more, because the company pay it for me and i have reduced NI.
so, all ypou pension experts, how safe is this scheme, is there enough info here to judge?
(bare in mind we have a deficit of about 20million).

EdInvestor

so which kind of pensions are 'safe'?

None of them are really.

The risk with a final salary scheme lies with the future financial health of the company itself, backed up by the credibility of the promises of the Government.

The risk with a money purchase scheme lies with the movements of the capital markets and the way the money is invested, plus the charges you pay for the investment.

Both types of pension are heavily affected by how much is paid in.

You have almost no control over what happens with a final salary scheme- by contrast the employee has a lot of control over a money purchase scheme.

If you pay no attention to pensions throughout your working life, know nothing about finance and have no interest at all in money, you will be probably better off with a final salary pension *provided* you work for the Government or a large financially strong blue chip company.

If you are interested in money and investment, work for a generous company which will put a large solid payment into your pension, and pay higher rate tax, you could be better off with a money purchase scheme.

But the bottom line is that there is no such thing as a safe pension.There never was really. There's a basic lesson here:

No-one looks after your money like you do.

It's time everyone realised that and acted accordingly.

Daft_Monkey

I've heard somewhere that if that if the company that goes bust has a foreign parent company the PPF will not pay up as they expect the parent company to pick up the bill, which o'course is at the discretion of the parent company.

james3333

oooh, interesting, our company has a MASSIVE owner/parent... Otto.
Otto is the worlds leader in catalogue companies, it owns freemans, grattan, next, grattan etc.
but i dont know wether if my pension is 'covered' by them if my company goes bust.

Debt_Free_Chick

Daft_Monkey wrote:

I've heard somewhere that if that if the company that goes bust has a foreign parent company the PPF will not pay up as they expect the parent company to pick up the bill

Absolutely right too! Why should UK companies pick up the bill when there's another company which could pay?

which o'course is at the discretion of the parent company.

The Pensions Regulator will intervene if the parent company does not cough up. What is not clear is whether he really does have the clout to force a company in the US, for example, to pay. We can only wait and see what might happen, when there's a real case to follow.

james3333

so, are we saying , there is no answer to my question
no law protects me?
no compo must be given?

Debt_Free_Chick

james3333 wrote:

so, are we saying , there is no answer to my question
no law protects me?
no compo must be given?

Still not clear on what kind of scheme you are in, but let's assume it's final salary (it would promise you a proportion of your salary, for each year you work, as a pension on retirement).

You have a promise from your employer. That promise is only good for so long as the employer continues in business and continues to pay the required contributions into the scheme. Contribution rates are now, effectively, down to the Trustees to determine - not completely, but Trustees have considerable powers of negotiation with the company.

The Trustees also have a duty to consider the financial strength of the employer. If the employer is considered to be financially "weak" the trustees can obtain guarantees of payment; letters of credit from the company's bankers; a charge over the company's assets. Any of these would be called upon if the employer failed to pay the required contributions.

And the Pensions Regulator can be called on, by the Trustees, if the company fails to agree a reasonable compromise.

So, pension schemes ought now to be "more secure" - but they still do not guarantee that you will receive the whole promise. If the company continues, you have little to fear. It's only if the company folds that your pension is really under threat. Even then, if the pension scheme does not have enough money to pay all the promised pensions, the Pensions Regulator can attempt to get the parent company to pay. Otherwise, the scheme may be eligible for the Pension Protection Fund, which will pay up to 90% of the amount you are promised.

There's a raft of regulations for trustees to comply with all designed to give you greater protection - and the PPF is, effectively, a "compensation" scheme - but it won't pay out 100%.

Having said all of that - is there anything that guarantees you will get 100% of what you were promised? I can't think of anything, so a 90% guarantee seems like reasonable security to me.

HTH