What happens to a Pension when old employer goes into administration?

Traebon

I was wondering what happens to your Pension if a previous employer goes out of business... I left my old employer almost 4 years ago and have not transferred my pension to my new employer.

My old employer (a well known travel company) have announced redundancies and store closures for the second time in as many years. I worked for them for 12 years and at the start of my employment l transferred in my pension from my previous employer.

I am worried what happens to my pension if they go out of business. I have the transfer forms from my new employer to move my pension to my current company, but the booklet that came with it says you can be worse off if you transfer the pension over. Is it worth moving it anyway for peace of mind? Any advice would be much appreciated. Thanks.

xylophone

http://thomascookpensions.mercer.com/ThomasCook/pdfs/A_Rough_Guide_DB_booklet.pdf

Is the above your scheme?

Below is an information leaflet about what happens if a firm goes out of business.

http://www.pensionsadvisoryservice.org.uk/media/82799/windingupapensionschememay20072.pdf

Traebon

Hi there, yes it is. Thanks for the links. I've had a read through and it's made things more clearer for me. Time to transfer out I think. Thanks again )

xylophone

Time to transfer out I think.

If you are proposing a transfer out of a Defined Benefit Scheme you'll almost certainly need an IFA to sign off the transfer and unless it is to another DB Scheme with benefits equal to or better than your deferred pension, you'll be hard put to find one who'll agree?

MoneySaverLog

Just out of interest why do you have to get an IFA to agree a db scheme transfer, is this compulsory?

xylophone

See post 15 http://forums.overclockers.co.uk/showthread.php?p=24321852

dunstonh

MoneySaverLog wrote: »

Just out of interest why do you have to get an IFA to agree a db scheme transfer, is this compulsory?

The regulator's default position on defined benefit transfers is that they are mis-sold unless shown otherwise. This not only includes advised cases but also DIY cases.

As a DIY provider is not giving advice and cannot justify whether it is right or not without an adviser looking at it, they will not allow a transfer to take place as it would be classed as a mis-sale.

Debt_Free_Chick

Traebon wrote: »

Hi there, yes it is. Thanks for the links. I've had a read through and it's made things more clearer for me. Time to transfer out I think. Thanks again )

I'm not sure you should transfer out.

You need to take account of the Pension Protection Fund, which pays compensation when an employer goes out of business, in the form of guaranteeing a lot of your pension entitlement.

Have a look at this booklet which explains how the PPF works.

redbuzzard

Traebon wrote: »

Hi there, yes it is. Thanks for the links. I've had a read through and it's made things more clearer for me. Time to transfer out I think. Thanks again )

Be careful. Assuming you are in the DB scheme -

IF the employer goes bust, whether there is a financial consequence depends on whether there is a funding deficit in the scheme.

IF there is, then the PPF will substantially protect deferred members' rights, to the extent that you may well be worse off transferring out unless your pension is very large.

I had a deferred pension with a company that did in fact fail before I reached scheme retirement age. As it happened the previous owners still had responsibility for the scheme, but even if they hadn't I would have been substantially worse off by transferring. The TV was about £120k, but my pension at commencement is £8000, and the £120k would not have bought anywhere near 90% of that.