Marconi Pension

reelcrazy

My Dad is 59 and was made redundant from Marconi 2 years ago. He is now worried that the company may change in the next 6 years, threatening his pension.

His pension is currently deferred. I don't know if there are any protections in place for this?

Can anyone advise? He is considering taking a lump sum which, to me, seems like a bad idea because of the amounts involved.

EdInvestor

The Marconi scheme should come under the new Pension Protection Fund, which guarantees 90% of the pension up to 25k,IIRC. But there are some concerns that the PPF is underfunded.

What kind of deal are they offering your father?

Debt_Free_Chick

The PPF will only apply if Marconi is insolvent.

The PPF, itself, is not "funded" in a sense that most of us would understand. If an employer becomes insolvent and the pension scheme enters the PPF, then the assets of the pension scheme would pass into the PPF. The PPF would then pay out the benefits to members as they fell due. The benefits would be those promised under the pension scheme rules, but reduced to 90% of their value. Future pension increases would be limited to 2½% p.a. There is an overall limit on the pension that the PPF would pay out of £25,000 per member.

In addition to being "funded" by the assets of the pension schemes that pass into the PPF, other continuing pension schemes will pay a levy. So the PPF will be made up of pension scheme assets and levies. The PPF may well not be "fully funded" but it doesn't need to be. It doesn't pay out all the benefits all at once - it simply pays out the pensions when members reach retirement age. This way, payments going out will be spread across future years - hence, the funding is not really an issue.

However, I think the question may have been slightly different - not sure what reelcraxy meant by

He is now worried that the company may change in the next 6 years

If Marconi is sold, in total i.e. another company buys the shares, then the new company would be responsible for the Marconi pension scheme too i.e. the new company would replace Marconi as the sponsoring employer.

If a new company buys part of Marconi, then the pension scheme does not automatically pass to the new company - it would stay with Marconi.

HTH

EdInvestor

Debt_Free_Chick wrote:

The PPF will only apply if Marconi is insolvent.

Yes indeed, getting a bit ahead of ourselves there; but the scheme does apparently have a substantial deficit which might mean the company can't be sold, and in the wake of this BT disapppointment, IMHO the OP's father is right to be concerned

dunstonh

Depends on what you mean by substantial. I read that it was around £140 million. The article I read indicated that £140mill wouldnt put off buyers.

reelcrazy

Editor wrote:

What kind of deal are they offering your father?

His pension is for approx £4000 a year when he hits 65 in 6 years time. They are offering him an early retirement pension of £2400 a year now or £1200 a year now and £12000 lump sum. It is my gut feeling that he should ignore the early retirement option for at least another 3 years and see how things pan out. The thought of going from a potential £4000 to £1200 a year just to get £12000 seems a bit rash.