Pension fund in deficit

Jane_Bee

Hello

I understand from the press that my company pension is in deficit (by a HUGE amount) I'm struggling to figure out what this mean for me.

My in my mid 30s and have worked for the company for 10 years. I've been paying into my pension since then (as has my employer).

I've searched the money saving expert website but the only info I can find about pension deficits relates to final salary pensions, which is not what I have.

I simply don't understand what this mean for me and my pension, is it at risk in terms future? I don't have any other investments or a mortgage, so I can't work out my position.

If anyone can point me in the right direction of online info or something that would help me understand I'd be grateful.

Thanks

Jane

capital0ne

Don't worry, the Financial Assistance Scheme and the Pension Protection Fund were both set up to rescue employees whose company pensions schemes have collapsed.

http://www.thisismoney.co.uk/money/pensions/article-1608115/Pension-rescue-schemes-explained.html

molerat

Does your co have a now closed DB scheme as these are the ones that are often in deficit as there are not enough funds to meet the future promises. A DC scheme is usually invested on an individual basis and is worth what it is worth with no promises so cannot be in deficit.

Linton

Pension deficits only apply to DB pension schemes (eg final salary) which you say you dont have. Did your company have a DB scheme in the past which closed before you joined? A pension deficit occurs when the scheme's current holdings are estimated, on pessimistic assumptions, not to be sufficient to pay all the Defined Benefits the scheme is obliged to provide when they become due. A deficit may or may not turn out to be a problem.

DC pensions hold a lump sum in your name and cant be in deficit since the lump sum is what you get when you retire. The scheme hasnt made any commitments as to what that lump sum will be.

capital0ne

Jane_Bee wrote: »

Hello
I understand from the press that my company pension is in deficit (by a HUGE amount) I'm struggling to figure out what this mean for me.

I'm guessing you work for Carillion!

dunstonh

(by a HUGE amount

Is that a huge amount in your opinion or a real huge amount relative to the scenario?

Some pensions are so big that a minor deficit could be hundreds of millions or even a billion. So, the figure may be huge to an individual but it may be small to a profitable company.

I've searched the money saving expert website but the only info I can find about pension deficits relates to final salary pensions, which is not what I have.

Deficits only apply to final salary schemes. Money purchase schemes cant be in deficit as they have a daily value and that is what you get.

Jane_Bee

Hi All thanks for your replies and helping me understand that in my case this deficit is not related to my particular pension.

Over £400m seems huge in my eyes but maybe not financially. Not Carillion, but news today reminded me of something I'd seen about my own company. A consultancy recently taken over by a Canadian firm. You can work out who that is!

Thanks again

Jane

Joey_Soap

Ah, A****s. if you have a defined benefit plan, the deficit will be expressed as a % of the funding level required to pay outstanding commitments. For example, the fund maybe 90% funded, meaning there is a 10% deficit at current funding levels. If you do not have this information and you have a defined contribution plan, there is a lot less for you to worry about in that respect.

Those who do have DB plans with that company, it is very likely indeed that as part of the takeover, the pension trustees will have obtained binding commitments from the new business owners with regards to funding the scheme going forward. I was a deferred member in a DB plan when the company was taken over. That is exactly what happened at that company. I expect yours will be the same.

greenglide

My ex-employer merged with another company as part of an ongoing split / merge / whatever exercise.

As part of the corporate movings about they have contributed over a billion $ into the pension funds which are now fully funded! As a retired member I am obviously pleased at this.

So corporate merges and acquisitions are all bad even though a lot all.

Unfortunately the merged company has decided to equalise the multiple pension schemes as part of their race to the bottom and closed the scheme to all further accruals.

It used to be quite a good employer once.

atush

Joey_Soap wrote: »

Ah, A****s. if you have a defined benefit plan, the deficit will be expressed as a % of the funding level required to pay outstanding commitments. For example, the fund maybe 90% funded, meaning there is a 10% deficit at current funding levels. If you do not have this information and you have a defined contribution plan, there is a lot less for you to worry about in that respect.

Those who do have DB plans with that company, it is very likely indeed that as part of the takeover, the pension trustees will have obtained binding commitments from the new business owners with regards to funding the scheme going forward. I was a deferred member in a DB plan when the company was taken over. That is exactly what happened at that company. I expect yours will be the same.

And this is why it is hard to sell companies who are struggling AND have a pension deficit (think TATA) as the buyer has to make commitments.