Blind leading the blind!

Balestra

After 18 years working as a carer for our children and then laterly for her dissabled mother, my wife recently went back to work at a university. At the start she opted for the clerical staff pension scheme but has the ability to opt out of it again and get her money back at any time in the first two years.

Just recently she learned that the scheme was £6 million in deficit in 2002 but that the deficit has now grown to £32 million.

This is just a local scheme for this university - she can't join the USS scheme which is nationwide because that only accepts academic and administrative staff and my wife is 'clerical' (not sure what the difference is between administrative and clerical but that's for a different thread).

It seems to me that for such a small scheme to be so much in deficit any money she pays in will just be dissapearing down a big black hole!

Should she get her money out now while she still can?

If so, any suggestions as to where she should go to get a pension that she can rely on?

roger56

What type of scheme is it and do you know if it falls into the new government pension guarantee scheme.
If it doesn't and you appear to have such a short time in the scheme it does seem risky to stay in. Have you had a first year summary of entitlement yet? Does that look healthy?

Also has your wife kept up her state pension (class 2) payments. If not get a state pension statement and if necessary you can back pay to gain years. These links are useful:
http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp
and
http://www.citizensadvice.org.uk/index/campaigns/social_policy/consultation_responses/cr_benefitsandtaxcredits/firm-foundation-for-retirement

Debt_Free_Chick

Balestra wrote:

If so, any suggestions as to where she should go to get a pension that she can rely on?

This scheme is backed by her employer. Perhaps she should first get a copy of the Annual Report & Accounts for the scheme, to see what the Trustees say about the deficit. They have more than likely come to an arrangement with the employer to fund the deficit, over a period of time.

The question is really whether the employer has the ability to fund the deficit. They don't need to do this in one go. The benefits that the scheme has to pay only emerge over a period of time, as each person retires. So there is time for the employer to make up the shortfall.

The calculation of the shortfall is complex, but it really is just an "accounting figure". It only comes into play if the employer wants to close the scheme down. And then, the employer would have to fund the deficit in one go.

If the employer is insolvent and can't fund the deficit, then the scheme would more than likely go into the new Pensions Protection Fund.

There are no guaranteed pensions around, as such. Her alternative is to fund her own private pension - and she would then lose the benefit of the employer's contribution. So it would cost her more to provide herself with the same pension.

And then she would be subject to the vagaries of investment returns and the cost of buying an annuity.

So ... stick with the employer scheme, if you/she have faith in their "promise" and ability to fund it.

Or go it alone and take responsibility for funding your own pension and suffer the headaches that the employer is currently taking on, on behalf of members.

HTH

dunstonh

Where there is an occupational scheme available you will not find an advisor out there that will fund into a personal/stakeholder pension when you havent joined. If you go direct to an insurer, they may refuse it as well.

There was a case recently where an IFA took someone out of the occupational scheme which went on to collapse. The client was really pleased as they were out of it and their money was safe. However, the FSA disagreed and fined the IFA.

So, you find that where an occ scheme exists, it should always be joined before commencing a private arrangement.

EdInvestor

dunstonh wrote:

There was a case recently where an IFA took someone out of the occupational scheme which went on to collapse. The client was really pleased as they were out of it and their money was safe. However, the FSA disagreed and fined the IFA.

Really? Do you any details of that case DH?That's regulation gone mad.

ManAtHome

dunstonh wrote:

There was a case recently where an IFA took someone out of the occupational scheme which went on to collapse. The client was really pleased as they were out of it and their money was safe. However, the FSA disagreed and fined the IFA.

Crazy... Are the FSA still presuming that the majority of occupational schemes will pay out as stated? Are you now in the position where you can be fined by the FSA for moving people out of shaky schemes or sued for mis-selling if you leave them in?

dunstonh

I read the article in financial advisor magazine some months back so dont have any of the specifics. I think the point that the client was financially better off from the advice was not considered. I seem to recall it was the principle behind the recommendations that led to the fine.

Debt_Free_Chick

ManAtHome wrote:

Crazy... Are the FSA still presuming that the majority of occupational schemes will pay out as stated? Are you now in the position where you can be fined by the FSA for moving people out of shaky schemes or sued for mis-selling if you leave them in?

Now, the FSA should be presuming that the occupational scheme will pay at least 90% of the benefits promised, as that is what the Pensions Protection Fund is intended to do.

What is a "shaky scheme"? Who decides?

ManAtHome

Debt_Free_Chick wrote:

Now, the FSA should be presuming that the occupational scheme will pay at least 90% of the benefits promised, as that is what the Pensions Protection Fund is intended to do.

What is a "shaky scheme"? Who decides?

Good point, although aren't there some limits on the PPF? I suspect shaky schemes will be those which fail some time between advice and pension age once the 'pensioncompo' industry gets going......