Defined Benefits Scheme - felling a little nervous...

Finst

Others have already answered your questions but I'll pitch in too.


The fundamental question you should be asking yourself is, is your company strong enough to plug the gap? The company can't walk away from the pension scheme without going insolvent, so is the company making enough profits to support the pension scheme. If the company is also in difficulties, that's when it becomes more concerning.


Having said that, the vast majority of pension schemes will have suffered a similar deterioration in funding level, so unless I knew my company was in financial difficulties, this would not be particularly concerning to me.


The second thing (already mentioned) to bear in mind is the Pension Protection Fund which guarantee you'll get something - broadly 90% of your pension but you do lose most of the inflationary pension increases (typically worth another 10% at least), although there is a cap on large pensions (over 25-30k pa).

jamesd

As others have written, you can relax a lot. Most of what you're seeing is just an artefact of low gilt yields and the ways that pension schemes model their assets and liabilities. As interest rates rise, deficits will fall.

What you could also do is wonder what the CETV is for you. The same low interest rates that make scheme deficits look bad can also produce remarkably large transfer values. Though schemes can use the possible deficits to reduce those. Since you are still in the scheme I suspect that this would not be a good move today but if they closed it for existing members of could be very interesting. Or not, it depends on the scheme.

If you're worried about the PPF failing, don't. It now has a surplus, not a deficit, in spite of taking on the schemes of failed employers that would normally have deficits as one of the effective requirements for getting in.

Malthusian

Finst wrote: »

The second thing (already mentioned) to bear in mind is the Pension Protection Fund which guarantee you'll get something - broadly 90% of your pension but you do lose most of the inflationary pension increases

Inflationary pension increases are capped at 2.5% (5% for pre-2009 service for those who haven't taken their pension yet). You would only lose "most" of the increase if inflation was 5% or more, double the Bank of England's inflation target (although that is CPI rather than RPI).