Kodak - Pension

Ambre_Solaire

If Kodak do declare bankruptcy how would that affect an ex employee who is retired currently receiving a Kodak pension ?

I have tried to search, but the word "may" is used alot

Many thanks

jamesd

Is it a pension from the UK or US company? The UK one if it's final salary related would have an independent pension pot that would continue to pay pension benefits. If there was insufficient money to pay those benefits, the pension scheme comes high in the priority list of creditors of the company.

If that still wasn't enough the Pension Protection Fund would pay out 100% of their current pension with CPI increases to all current retirees. For those not yet retired it would be 90%. Check the PPF leaflets on their site.

The PPF payouts are subject to a cap that is checked after the 90% reduction has been done. The cap was £29,897 at age 65 in April 2011 but will have varied since then and varies with age (I don't know why the caps in that table differ from those in the page that links to it). This means that someone not yet retired who is 65 years old and on a projected pension of £50,000 could lose £20,000 of their income if the PPF was required and if the underfunding was so great that the maximum cut was applied. Yet someone already retired on £15,000 would see no reduction at all. Both would suffer from a change to CPI instead of RPI inflation adjustments and a lower than 5% annual cap.

Looking at past scheme funding levels I see that the funding levels were:

31 December 2007: 79% assets £1,140 million target £1,441 million
31 December 2008: 65% assets £833 million target £1,283 million
31 December 2009: 55% assets £874 million target £1,586 million
estimated end of 2010: about £990 million of assets.

There seems to be a substantial temporary decrease there due to stock market movements that given time would be recovered from. 31 December 2008 was very close to the market low point after the 2008 financial crisis. The funding target was increased for the December 2009 valuation because of a change in the assumed rate of inflation, so salary increases were expected to cause a bigger increase in liabilities.

The subsequent change to CPI inflation for deferred pensions should have reduced that liability because CPI is likely to be lower than RPI. That should improve the position for those who are already retired.

My guess is that the end of 2011 assets were close to the end of 2010 estimate.

Given that I expect that currently retired people up to the income cap would continue to get all of their pension but those who have not retired yet or who are getting more than the cap level would see something close to the maximum reduction allowed under the PPF.

No warranty of any sort for this guesswork. It's moderately well informed but part of the result will depend perhaps on how successful the pension fund is in legal action to obtain assets from Kodak in the event of bankruptcy. It's even conceivable that the pension fund would end up owning the whole company. May is an appropriate word for much of this.

As someone who is already retired, provided your pension is under the cap level, you shouldn't be too hugely affected in the short term, but would be affected gradually by the change to CPI inflation adjustments.

Now would be a good time for any UK employee close to or above normal retirement age to consider whether it is in their best interests to retire. For someone who has an anticipated pension income well above the PPF cap it may instead be in their best interests to transfer the pension elsewhere if and only if they are both quite young and an experienced investor. For someone close to retirement age or not an experienced investor staying with the Kodak plan even during a transfer to the PPF is likely to still be best, unless say the cap level is well - maybe £10,000+ - below their anticipated pension payout. Caution: this paragraph contains massive simplifications and approximations. Individual advice from an IFA should be sought, particularly by anyone who would be seriously badly affected by the cap! The difficulty with transferring out is that payouts from an annuity after transfer will be terrible compared to staying in and that means that it's only likely to be suitable for the younger and experienced investors who would use income drawdown instead of buying an annuity or those suffering a massive potential loss.

roddydogs

Im wondering myself, im in the same boat. I believe that there are strict controls over Pension Funding. I cant believe thaey are nearly bankrupt as they sell all the digital stuff as well. PS the above post has just appeared after I posted.

xylophone

http://www.bphltd.co.uk/kodak3/pensioners.php

Ambre_Solaire

JamesD Many thanks for your detailed response,I will forward this on to my brother. The pension is through Kodak UK He was made redundant 8 years ago and is 61 years of age, he could access his pension when he was made redundant.

jamesd

He'll need to know the "normal retirement age" for the scheme. If he's above that he'd count as a normal retiree. If he's below it, I don't know how pensions due to redundancy are treated, it might be the reduction to 90%. When or if it matters he'll find out and he can't affect it either way any more.

Dopey_Doris

James, I wonder if you can help me. My husband worked at Kodak in Harrow (UK) for 20 years and left there 11 years ago. He is 46 now so quite a way from retirement age. We are worried about not having a pension now from Kodak when he eventually retires and he paid so much into it. Any advice you can offer on our options. Many thanks

RichandJ

Dopey_Doris wrote: »

James, I wonder if you can help me. My husband worked at Kodak in Harrow (UK) for 20 years and left there 11 years ago. He is 46 now so quite a way from retirement age. We are worried about not having a pension now from Kodak when he eventually retires and he paid so much into it. Any advice you can offer on our options. Many thanks

He left school at 15 in 1981 ? Didn't realise that was still possible at that time.

Best place to start is below, but be aware they probably won't have updated the site or even know themselves what is happening yet as the US parent has only just filed for Chapter 11.

http://www.bphltd.co.uk/kodak3/

Barnaby

As a Kodak pension retired person who is in receipt of a pension I decided to follow James link off the Kodak Pension page to the PPF.
I then used the 'phone number showing to ask about the situation.
A very helpful lady said.
* She had not heard of this
* Kodak did make cotributions to them so it's probable that the PPF would pick up the fund but only if Kodak went insolvent.
* Assessment would have to take place - this can take 2 years, they are only just sorting out WOOLWORTHS this month.
* while assessment is going on pension payments must be made in full by the company [Kodak].
She also mentioned the new CPI as apposed to RPI figures for calculating any increases and amount caps and max % payable once in the PPF scheme.

Kodak Pension Dept read out a statement to me which basically said Kodak [uk] was not directly connected to Kodak [usa] and they were solvent at this time, the pension would be paid in full but they were in discussions.
All pensioners etc will receive a letter explaining the outcome of these talks in the next 2 weeks.

Kodak ended by saying all options were open at this early time from total collapse, reduced payment to continuing the pension payments at full rate.

To me this sounds like there will be some impact to the Kodak scheme otherwise why the need for talks.

Ah well I'm 68 and now looking for a job again.....................

As the tune in Life of Brian goes ---- alway look on the bright side of life de du de dudedude duuu

roddydogs

One report says pension ok till 2024, but its all conjecture really. Paid into the scheme for 25 years. Good job they made us redundant in 1991, (Deer Park Road) otherwise it would be a lot worse, at least the 2 jobs I had till retirement are still paying out, so fingers crossed.

jamesd

Dopey Doris, hard to tell until we know whether the Pension Protection Fund will be needed but the worst case assuming he wasn't a high earner would be something like keeping 90% of the pension with no further increases due to inflation because his service was before the requirement to have increases became law. So he'd lose the moderately generous Kodak increases if the PPF became involved.

It's worth noting that this is not a UK style total bankruptcy but rather protection from creditors to allow for reorganisation - that's what a Chapter 11 bankruptcy means in the US for those not familiar with it. Those can sometimes lead to full bankruptcy but usually there's some other solution.

Barnaby, thanks for reporting what you found.