Pension protection fund

Landslide_Victory

chiefie wrote: »

I've got this worry that if something big happens they just won't have the money to bail out schemes.
I have looked at the transfer value of one of my DB pensions and I would prefer it to be in my hands than at risk of the markets and a black swan event.

I think there is more chance of you losing money in a DC scheme than the PPF running out of money.

chiefie wrote: »

I don't believe any IFA would take this into account when recommending what to do.

You would eventually get an IFA who would take on the transfer but unless you have other provision I would advise against it.

chiefie wrote: »

It's just my gut - I'd prefer my money in my hands than in a scheme that is 74% funded.

Schemes that are a 100% funded or above are very hard to find nowadays. I wouldn't worry at 74% - lots of time for that to improve.

chiefie wrote: »

Any thoughts - am I being irrational

You're just concerned.

chiefie

Its nit an lgps pension but a private one. I would keep the lgps one in the hope that this is less risky. I suppose the issue is one if I control the funds its down to me if I fail or not. Perhaps I am overthinking things but the closer you get to retirement the more I am fretting (probably overly so )

woolly_wombat

chiefie wrote: »

Its nit an lgps pension but a private one.
I would keep the lgps one in the hope that this is less risky. I suppose the issue is one if I control the funds its down to me if I fail or not. Perhaps I am overthinking things but the closer you get to retirement the more I am fretting (probably overly so )

I have to admit to obsessing over the security of my pensions, largely because of what happened to my (thankfully small) Equitable Life pension fund.

I'm more concerned about my lgps (after reading hyubh's link) than my DB pension with a former private employer, but that's because the former private employer was a subsidiary of a large multinational that still appears to be doing OK.

You are the person best placed to weigh up the risks.

jamesd

chiefie wrote: »

Its nit an lgps pension but a private one. I would keep the lgps one in the hope that this is less risky. I suppose the issue is one if I control the funds its down to me if I fail or not. Perhaps I am overthinking things but the closer you get to retirement the more I am fretting (probably overly so )

Overly so. The money is more at risk in your hands than in the pension scheme.

It's particularly worrying that you write about stock market risk, as if you might not actually invest it, which would leave you facing a bigger than PPF loss to inflation over time.

Unless you plan to invest the money you are right that you should not expect any IFA to advise you to transfer it out. That might change if there was a clear sign that the supporting firm is about to become bankrupt and if your entitlement is well above the maximum payout that the PPF will make, which is unlikely to apply in your case. The maximum payout mattes because money above that is all gone, not just reduced to 90%.

Forget it, sleep easy and try to remember that people here have nothing to gain by giving you bad advice.

jamesd

chiefie wrote: »

Any thoughts - am I being irrational ?

It's not irrational to be worried. It's just that your worries appear to prompt you to consider a course that would make you substantially worse off because you're not putting the correct risk levels on the various choices that you have available.

The lowest overall risk choice is either leaving the money where it is or taking it out and using it to fund deferring the state pension, which is only available sensibly for limited amounts and to people who are close to state pension age.

It's possible that take it out and defer the state pension could pay more than the DB scheme but since we don't know the payment transfer value, or your age and when you reach our state pension age it's impossible to have a decent opinion on this possibility. It is possible to just dismiss it if you're more than ten years from state pension age and say it's unlikely to be correct at more than five years from it.

woolly_wombat

hyubh wrote: »

Trying to make Phillip Green out as some kind of hero for suddenly acknowledging the BHS pension deficit when put under pressure by the PPF makes Worstall a bit of a tit in my book.



The fact a scheme is in deficit doesn't mean it will go into the PPF at some point - it means the sponsoring employer has a duty to continue to put more money in it. Even if one thinks it prudent to believe sponsoring employers will go bust en masse, what's the solution? Scrap the PPF and go back to the situation in the so-called heyday of final salary pensions where there was no sort of guarantor at all? Fund it out of general taxation? Plant some magic money trees? Pretend final salary pensions never existed...?

I see that, according to yesterday's Sunday Times, the Pensions Regulator is pursuing Sir Philip Green and that he "could face a demand of £280m over BHS’s pension deficit — more than three times the sum he has so far offered to pay".

They also report that Frank Field MP, chair of the work and pensions committee, is calling for ministers to consider stripping Green of his knighthood.

Last weekend they reported that Green "paid more than £400m of dividends from BHS to his wife in the tax haven of Monaco during his 15-year ownership".

http://www.thesundaytimes.co.uk/sto/business/Retail_and_leisure/article1677692.ece

http://www.thesundaytimes.co.uk/sto/business/Companies/article1675398.ece

princeofpounds

To get really blunt about it - government backing of protected pensions will not fail, because government can spend general taxation and then print the money required to finance the pensions, if it comes down to it.


The actual way these kinds of pensions could fail is much more subtle. Take the fall of the Soviet Union, for example. Pensioners ended up getting the payments promised (more or less), but the value of the RUB fell massively and so the pension simply bought a lower standard of living than was expected.


Note that in such circumstances, other investments didn't work well either.


Except, perhaps, moving to a 'safe haven' asset abroad before anyone else realised there was a need to - for which you need a crystal ball. Or allotments where you could grow food were still useful too.


So if apocalypse is your worry, I think you would do much better to have a vegetable plot and a water purifier in your garage than fretting about your pension, which would likely be very damaged by pulling it out of a DB scheme.