Legal & General defined benefit pension

DarkHorse

Hi,

Hopefully someone on here can help me out with a few queries that I have with my work place pension.

I was in a Legal & General defined benefit pension scheme for 20 years with my old employers (I took redundancy from them in December).

The scheme is underfunded, and my old employers have a plan to make up the 17% shortfall in the fund by 2021.

My old employers are in financial trouble (hence why I was quite happy to take redundancy, as I had another job to go to.)

My questions are;
1. Can my old employers dip into the scheme for funds?
2. If they were to go out of business, would the shortfall be something the members just have to live with.
3. I have had a transfer of benefits statement, which is about £309k if transferred out now, or £372k if left in and my old employers do make up the shortfall. Would it be best to leave it where it is (as they are trying to make up the shortfall), or transfer it out (if there is a risk of losing the current benefit if they were to go out of business).

I am happy with the benefits that I would be due on retirement, but was worried if the scheme is safe to leave it in.

I will be grateful for any advice.

JoeCrystal

1. Nope (Laws prevented that from happening now)
2. Nope (Pension Protection Fund will pick it up if that happens)
3. Leave it there is your best choice. It is extremely unlikely you will get better deals elsewhere.

DarkHorse

Perfect, thanks for the advice.

I will leave it alone where it is.

ischofie1

DarkHorse wrote: »

Hi,

Hopefully someone on here can help me out with a few queries that I have with my work place pension.

I was in a Legal & General defined benefit pension scheme for 20 years with my old employers (I took redundancy from them in December).

The scheme is underfunded, and my old employers have a plan to make up the 17% shortfall in the fund by 2021.

My old employers are in financial trouble (hence why I was quite happy to take redundancy, as I had another job to go to.)

My questions are;
1. Can my old employers dip into the scheme for funds?
2. If they were to go out of business, would the shortfall be something the members just have to live with.
3. I have had a transfer of benefits statement, which is about £309k if transferred out nowt, or £372k if left in and my old employers do make up the shortfall. Would it be best to leave it where it is (as they are trying to make up the shortfall), or transfer it out (if there is a risk of losing the current benefit if they were to go out of business).

I am happy with the benefits that I would be due on retirement, but was worried if the scheme is safe to leave it in.

I will be grateful for any advice.

Answer 1 - No they can't. Pension funds are "ring fenced" to specifically guard against this.
Answer 2 - No. If they went out of business you wouldn't have to live with a 17% shortfall. The scheme would be transferred to the protection fund and the most you would loose is 10%.
Answer 3 - Your transfer value of £309K represents a 17% reduction on the value it should have been had the scheme not had a shortfall.
Companies that have a shortfall, can offer transfer value reductions but a lot of companies in this situation still offer the full transfer value.
Considering the transfer value reduction & the fact that DB transfers are rarely a good idea, I would suggest you would be best leaving it where it is.


Note - Just because a pension scheme has a deficit doesn't mean it's in trouble, most private sector DB schemes are in deficit.
Also note - Your old Co may have a plan to make up the shortfall by 2021, however there is no guarantee this plan will be achieved by then.
There are many changing factors that will re-value the schemes assets over time and these factors could well have a bigger influence than the extra money that your old Co is "pumping" into the scheme.


Regards.

greenglide

Nope (Pension Protection Fund will pick it up if that happens)

Not quite as rosy as that, I am afraid.

If you are over the scheme pension age when the scheme folds then the PPF will continue to pay the pension. If it is before that then benefits are more restricted, see here http://www.pensionprotectionfund.org.uk/Pages/compensation.aspx

Just because the company is in "financial trouble" does not mean that the company will fail. It might restructure or be taken over - it cannot just "ditch" the pension scheme.

I assume that this scheme is administered by Legal & General? I wasnt aware that Legal & General were going bankrupt!

DarkHorse

Thanks. Yes you are quite right my old employers are not L&G......I hope they are financially sound! L&G are administering the scheme.

kidmugsy

I say again, people take an exaggeratedly rosey view of what the PPF offers. If my principal DB pension fell into the PPF I would lose virtually all my inflation-protection. My widow would lose nearly 50% of her pension, plus almost all her inflation protection.

I urge the OP to visit the PPF website to see how their terms would effect him and his widow.

xylophone

http://www.pensionprotectionfund.org.uk/Pages/Compensation.aspx
may be worth a look.

ischofie1

kidmugsy wrote: »

I say again, people take an exaggeratedly rosey view of what the PPF offers. If my principal DB pension fell into the PPF I would lose virtually all my inflation-protection. My widow would lose nearly 50% of her pension, plus almost all her inflation protection.

I urge the OP to visit the PPF website to see how their terms would effect him and his widow.

I take on board what you're saying with regards to other aspects of loss if it went to PPF.


The one certain loss is if the OP transferred out.
They'd lose 17% + all the benefits that a DB gives you.


The vast majority of schemes don't end up with PPF so by transferring out they'd be exchanging a very small possibility of loss for a guaranteed loss.


Regards

xylophone

He might anyway find it very difficult to find an IFA willing to do the business.....

https://forums.moneysavingexpert.com/discussion/5458420