Final salary scheme lump sum?

redbuzzard

It was announced today that the British Steel final salary scheme is to close to further accruals; it closed to new entrants last year.

The funding position doesn't look too bad, although the numbers are big and there is a deficit. In fact the last triennial valuation as at March 2011 was the first time there was a deficit.

https://www.bspensions.com/media/userfiles/files/Newsbrief2014.pdf

Regardless of whether that is your scheme, the closure to further accruals shouldn't affect your benefits. In fact it should reduce the risks to the sponsor and therefore the scheme. A deficit is not a problem unless there is a default.

Don't let thoughts of scheme failure rush you into the wrong decision.

redbuzzard

atush wrote: »

And your pension once in payment does have protections via the PPF. Look into it?

The PPF provides compensation for members, deferreds, and pensioners.

If the scheme fails before NRA, then compo should pay 90% of the full pension at NRA with index linking up to 2.5%.

If it fails when the pension is in payment, compo should be 100% of the pension again with linking limited to 2.5%.

What I have never seen a clear answer to (though I haven't devoted my life to finding out) is whether and how it could affect early retirement options.

There's also the small point that the PPF is funded by a levy on pension schemes - the worse the position of the scheme (covenant and deficit are AFAIK both taken into account) the higher the levy. It's not clear what would happen if the PPF ran out of money, thought everybody would like to think the gubbermint would bail it out.

E&OE.