Final Salary Pension - Is it legal to withdraw it?

GhIFA

Southend1 wrote: »

It depends where you stand and look from what you can see. From the 1940s through to the 1980s these schemes seemed perfectly sustainable. It's only recently that more people think they aren't. Some of that is a result of a short term view and some is because of the constant barrage of negative publicity from people who stand to gain personally by screwing others.

It's not that people "think" they aren't, it's because they actually aren't.

Increasing longevity is not a "short term view"!

If you want to see "propaganda" then you'll ignore the reality of the situation. I know of one company where the cost to the employer of providing the final salary scheme at the point where they had to close the scheme was approaching 40% of the salary on average.

hyubh

Southend1 wrote: »

From the 1940s through to the 1980s these schemes seemed perfectly sustainable. It's only recently that more people think they aren't.

Changes in the accounting standards used to calculate pension fund liabilities was a big reason for that (in simple terms, the traditional standards for the task were rubbish by the end).

rpc

BobQ wrote: »

Is it any wonder that people do not see value in higher contributions? They have witnessed their pension benefits reduced by employers

If people don't see the value in increasing contributions to keep a scheme afloat, then there is an education issue. There is a legitimate discusison to be had about how those increases are partitioned, but to expect an employer to foot the whole increase is often not reasonable. Please give examples of cases when accrued benefits have been reduced by employers.

If you look at some of the numbers, there are pension liabilities in excess of the assets and market cap of companies. In some cases the liabilites are double. Those sound fairly unaffordable to me.

hyubh wrote: »

Changes in the accounting standards used to calculate pension fund liabilities was a big reason for that (in simple terms, the traditional standards for the task were rubbish by the end).

And the current method is rather pessimistic. We've gone from one end of the scale to the other and the pension schemes are suffering. If the govt relaxed the accounting rules a bit, schemes would be a lot more viable.

Southend1

rpc wrote: »

And the current method is rather pessimistic. We've gone from one end of the scale to the other and the pension schemes are suffering. If the govt relaxed the accounting rules a bit, schemes would be a lot more viable.

Thanks rpc, that's a much more articulate way of saying what I was thinking. What you see depends on the glasses you look through.

Obviously longevity is currently an issue for pension schemes. The answer is higher contributions or a different mix of investments within the fund. Or a combination of both. Increased contributions may be shared between employer and employee or entirely met by the employer.

The longevity issue may change in future - a pandemic or a war for example. Or on the other end maybe even the discovery of the elixir of life!

Whatever happens, I believe all employees deserve a decent employer provided pension scheme.

Kaledmutant

Thank you, everyone who has replied. Most of what you said made sense but some went over my head a bit. The FS pension will cease (but my accruement has been retained) and the newer scheme will be called a "Retirement Savings Plan" which means I lose the link between my pension build up and future pay increases (as I haven't had a proper pay increase in well over a decade this probably won't mean much of a loss - and a guy at Head Office reckons I might not see a pay increase for another eight years, which, judging from Justin King's (CEO) comment at the 25 years award ceremony "you've got another twenty years in you" doesn't mean a lot of chance of a pay increase before I retire anyway!)

They will pay an extra 6% into my new fund for the first 16 pay periods and then will pay a max of 6% into the fund against my own contributions. I currently pay 10% and hope to maintain that so they will match my 10% with 6%.

Life cover of 6 times my basic is also part of the plan.

Despite the fact that my pension at retirement will drop against the old FS scheme I can still have a reasonably healthy retirement income from the two different Sainsbury schemes and whatever state pension I will be entitled to.

Once again, my heartfelt thanks for all of those who took time to reply since the original post. Now I have to wait for the consultation to happen and then the sign up forms to be despatched.

martinsurrey

rpc wrote: »

And the current method is rather pessimistic. We've gone from one end of the scale to the other and the pension schemes are suffering. If the govt relaxed the accounting rules a bit, schemes would be a lot more viable.

Accounting rules do not make a scheme viable or not, they just make them APPEAR more viable or not.

The viability of a scheme will only be found out if it fails (runs out of funds), or finishes (so last member dies and the scheme had enough funds to pay all benefits).

Accounting standards are just ways of predicting which one of the above will happens.

As the government is on the hook to pick up failed schemes (to an extent) I for one am glad that companies have to ensure they are prudently funded.

I am of the generation that has never and will never have a final salary pension scheme, yet my employer is diverting huge amounts to fund liability’s it built up long ago (so in effect I’m funding my parents generations pensions).