Pension Danger List

GSP

Taken from today's BBC business page ticker. Is this usual, concerning?

"The Pensions Regulator has two danger lists of defined benefit schemes - those are the more sought-after ones where you get a percentage of final salary - its new chief executive said.

Charles Counsell told MPs in the Work and Pensions Select Committee that 50 schemes are being monitored for short-term and long-term trouble, according to FT Adviser.

They can collapse if assets under-perform or pensioners live longer than expected, or if sponsoring companies go bust".

DairyQueen

Yep, a known risk with many private sector DB pensions being that the liability is so onerous that they are at risk of going bust. The PPF will under underwrite a proporton of members' benefits.

Sign of the times.

Thrugelmir

Nothing new in sponsoring companies going bust. At least now schemes are monitored more closely.

Brynsam

GSP wrote: »

They can collapse if assets under-perform or pensioners live longer than expected, or if sponsoring companies go bust".

Assets underperforming/pensioners living longer than expected will simply mean the employer has to shovel more cash into the scheme. The sponsor going bust is the real worry.

GSP

Okay thanks for your replies.
So in a nutshell does this mean those with a db pension should be concerned, be making plans.
Will those already receiving a pension be in trouble if a company goes bust?

Brynsam

GSP wrote: »

Okay thanks for your replies.
So in a nutshell does this mean those with a db pension should be concerned, be making plans. What sort of plans did you have in mind?
Will those already receiving a pension be in trouble if a company goes bust?

Have a look at the PPF's website for more info if you're that bothered, but don't get too hung up on this.

What's the funding level of your scheme? How healthy is the employer? Do you read the annual Funding Statement you get from your scheme?

Malthusian

GSP wrote: »

Okay thanks for your replies.
So in a nutshell does this mean those with a db pension should be concerned, be making plans.

They should be aware of the possibility but the pension is covered by the PPF. For most people before retirement age and not subject to the cap, going into the PPF means a 10% haircut and a cap on inflation-linking. Beware of anyone who tells you that "you need to get out now before it's too late".

For most people, 90% of their DB entitlement is still likely to be better than what they could get on the open market with 100% of the transfer value.

If you have a very large DB pension - larger than £40,020 per annum at current rates - you need to be especially aware due to the cap on PPF payments and should take regulated advice.

Will those already receiving a pension be in trouble if a company goes bust?

No. If you are already receiving a pension (or are above the scheme's Normal Retirement Age but haven't drawn it yet) you are covered 100%. Pensions already in payment aren't subject to the 10% haircut or the cap. (Those with pensions in payment can't do anything to escape their scheme going bust so they get a higher level of protection.) *edit* As raised by Spenditnot, this does not apply to thsoe who drew their pension early before NRA, see below.

Spenditnot

Malthusian wrote: »

If you are already receiving a pension (or are above the scheme's Normal Retirement Age but haven't drawn it yet) you are covered 100%. Pensions already in payment aren't subject to the 10% haircut or the cap. (Those with pensions in payment can't do anything to escape their scheme going bust so they get a higher level of protection.)

Does this also apply to those who have taken a DB pension early but are still below the scheme normal retirement age when it enters the PPF?

Malthusian

Spenditnot wrote: »

Does this also apply to those who have taken a DB pension early but are still below the scheme normal retirement age when it enters the PPF?

Good point, I should have been more vague.

If you took your pension early and are below NRA, a cap does apply on a sliding scale depending on age.

Spenditnot

Malthusian wrote: »

Good point, I should have been more vague.

If you took your pension early and are below NRA, a cap does apply on a sliding scale depending on age.

I'll just have to hope mine survives trouble-free for a few more years then

System

My employer in 2012 failed to mewntion in their accts a £12 million blackhole in its DB pension funding agreed to put in £2.5 million a year extra Then 2 years ago it went from a £18 million blackhole to £34 million with a explantion that the company had not had any money from it....................Im seriously concerned as are the others that are in it we had it pulled from under our feet in 2006 now in a DC scheme whiuch isnt looking along the lines of been sat pretty at 55 more like work till you drop scenerio