Deferred pensions

Sapphire

I have a query about the safety of deferred pensions. If someone has a deferred pension that has been going up in value since it was deferred, and if a company that was responsible for this pension failed, would the pension be completely protected? Would the protection extend to the amount by which the pension has gone up in value?

Advice would be much appreciated.

hyubh

Sapphire wrote: »

if a company that was responsible for this pension failed, would the pension be completely protected?

To be clear, are we talking about a single employer, private sector scheme? If so, then typically the collapse of a sponsoring employer without another taking on its pension responsibilities would lead to the scheme entering the Pension Protection Fund (PPF). Were that to happen, your pension would not be 'completely' protected, but would still be protected to a degree. To quote the PPF:

If You Have Yet to Retire
When you reach your scheme's normal retirement age, we will pay you compensation based on the 90 per cent level subject to a cap.

Until you reach normal retirement age and your compensation is put in payment, your compensation entitlement will rise in line with inflation each year, subject to a cap.

[...]

Once compensation is being paid, then payments relating to pensionable service from 5 April 1997 will rise in line with inflation each year, subject to a maximum of 2.5 per cent. Payments relating to service before that date will not increase.

http://www.pensionprotectionfund.org.uk/Pages/Compensation.aspx (my emphasis)

The PPF, while set up (and ultimately controlled) by the government, is not taxpayer funded, which is why there are limits to its largess. On the other hand it's not the pensions industry that decides how much they contribute to it, which gives it stability.

Sapphire

hyubh wrote: »

To be clear, are we talking about a single employer, private sector scheme? If so, then typically the collapse of a sponsoring employer without another taking on its pension responsibilities would lead to the scheme entering the Pension Protection Fund (PPF). Were that to happen, your pension would not be 'completely' protected, but would still be protected to a degree. To quote the PPF:

http://www.pensionprotectionfund.org.uk/Pages/Compensation.aspx (my emphasis)

The PPF, while set up (and ultimately controlled) by the government, is not taxpayer funded, which is why there are limits to its largess. On the other hand it's not the pensions industry that decides how much they contribute to it, which gives it stability.

Many thanks for the info. That's very useful.

It is a single employer, private sector pension that I was referring to.

dunstonh

It is a single employer, private sector pension that I was referring to.

Defined benefit or defined contribution?

Sapphire

dunstonh wrote: »

Defined benefit or defined contribution?

I am not sure what the difference is between the two. It was a pension that was paid into by the employer and employee, and now that is has been deferred, goes up by 8.5 per cent per year. The original amount is not vast, so it is being deferred for as long as possible (another year or two). It now stands at around £12,000 per annum payable pension.

Linton

Sapphire wrote: »

I am not sure what the difference is between the two. It was a pension that was paid into by the employer and employee, and now that is has been deferred, goes up by 8.5 per cent per year. The original amount is not vast, so it is being deferred for as long as possible (another year or two). It now stands at around £12,000 per annum payable pension.

Sounds like a Scottish Mutual Pension I had - DC but with Guaranteed Annuity Rate (11% I think, without inflation linking) and Guaranteed Annual Return of around 8.5%. Must have been disastrously uneconomic!

Both Scot Mutual (I think) and my ex-employer are long gone but the pension ended up with Phoenix and is being paid with no problems.

hyubh

Sapphire wrote: »

I am not sure what the difference is between the two. It was a pension that was paid into by the employer and employee, and now that is has been deferred, goes up by 8.5 per cent per year.

Hmm, I had answered assuming DB given the subject-line ('deferred pension')... though perhaps not, given that. (Off the top of my head, the only practical scenario I can think of where a DB pension might go up by 8.5% a year in deferment would be where it's all pre-88 GMP, with the scheme using fixed rate GMP revaluation - otherwise you're more likely to have different elements going up by different rates, and tied to RPI or CPI.)

Sapphire

hyubh wrote: »

Hmm, I had answered assuming DB given the subject-line ('deferred pension')... though perhaps not, given that. (Off the top of my head, the only practical scenario I can think of where a DB pension might go up by 8.5% a year in deferment would be where it's all pre-88 GMP, with the scheme using fixed rate GMP revaluation - otherwise you're more likely to have different elements going up by different rates, and tied to RPI or CPI.)

It's not pre-88 GMP, and as far as I can assess, the different elements don't go up by different rates, and they are not tied to RPI or CPI. It is 8.5 per cent at the moment, but was 9 per cent until a couple of years ago. The exact percentage is apparently re-evaluated every three years or so by the trustees. It is in fact one of the Pearson pensions (Dorling Kindersley element).

xylophone

http://www.pearson-pensions.com/retired/dorling_kindersley_section

This?

Sapphire

xylophone wrote: »

http://www.pearson-pensions.com/retired/dorling_kindersley_section

This?

Yes, that is the one. However, the info. doesn't say anything about what would happen if the company (and presumably the pension scheme?) failed. Would the person with the deferred pension keep all the gains they have made since the pension was deferred?

xylophone

You have been given details above of the position for a deferred pensioner if the scheme went into the PPF.

https://www.ppfonline.org.uk/mycompensation/hopl.chi/wui/genpr2ui.html?hopsess=ctJAdcjmijQclMJjadncaYfzljiljQUn

As far as I can see from the link in my previous, you were in a defined benefits scheme?

When did you leave the scheme?

Do you have a statement of deferred benefits showing pre 88 GMP, post 88 GMP and any excess?