Boots And Coop Offload Workplace Pensions To Insurers

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I mean ultimately if Boots fails and your pension goes to the PPF you'll be even worse off, so there is a level of protecting its members in going to buy in. 

https://www.mercer.com/en-gb/insights/investments/portfolio-strategies/why-buy-ins-might-not-be-the-only-answer/

If a UK insurer were to fail, then pension fund members would be able to take some comfort in the knowledge that the Financial Services Compensation Scheme (FSCS) would cover their benefits to an unlimited value. However, the FSCS is unfunded and has not been tested. So, some unknowns exists, and the Prudential Regulation Authority itself speculates that tax payers would likely end up having to foot the bill. If paid in full, this would be a higher level of security than would be offered by the Pension Protection Fund (which is funded) should a corporate pension scheme fall into it.

Rather than simply settling for the comfort of entering into buyouts/buy-ins, we believe that trustees, sponsoring employers, stakeholders and advisers should consider the advantages and disadvantages of all of the options open to them.

At the end of this evaluation process, many may still conclude that buy-ins and buyouts are the best way to de-risk pension schemes — but it is likely that a number will discover alternatives that suit them better. Their decisions may be influenced by the appreciation that such buy-in/buyout policies are probably closer to being silver- than gold-plated, and that it may not be possible to identify all of the future risks associated with buying out a scheme.

bjorn_toby_wilde

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

EDIT..

The first 10 years under the company there were 3 years with no annual rise. After 10 years the total amount paid had increased by 10% at most. So half the inflation rate. Since then it has been subject to the Barber and GMP rules and increased accordingly.

Hi coastline

My Boots pension increases by RPI capped at 5% and the L&G announcement letter I received this morning says "Importantly, your scheme benefit entitlements remain unchanged"

Where did you get the 2% PA increase from?

coastline

bjorn_toby_wilde said:

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

EDIT..

The first 10 years under the company there were 3 years with no annual rise. After 10 years the total amount paid had increased by 10% at most. So half the inflation rate. Since then it has been subject to the Barber and GMP rules and increased accordingly.

Hi coastline

My Boots pension increases by RPI capped at 5% and the L&G announcement letter I received this morning says "Importantly, your scheme benefit entitlements remain unchanged"

Where did you get the 2% PA increase from?

From 50 yo the first 4 years there was no annual increase from the company. As posted earlier some parts must be discretionary payments. At some point I started to receive small increases and a one off lump sum ( hundreds not much ) to compensate for poor showing. After 10 years the pension was just 10% more and half CPI inflation. Then came the Barber Equalisation ruling and a taxable lump sum . In 2020 the company handed over to the Insurer and I've received 2% a year. This year 65 yo it was reviewed for GMP and increased accordingly. Now a bit more respectable regarding CPI in recent years. From GMP date the benefits are shown as a 2% annual increase. Pre 88 element will not increase and Post 88 CPI 0% or 3% maximum. I'll know within a few months what the actual figures are but it doesn't appear to be holding up with inflation even at 5% maximum. Rules are rules I suppose and every company pension will be different. Best way to look at it I've had a lump sum and 15 years of payments without being subject to basic rate tax. Considering the state pension at 10K is nearly all of the personal tax allowance then it makes it a bit more comfortable to live with. Now some will say taking it early isn't worth it but who knows .I'd imagine the break even point will be well into your 70's . I'd rather be healthy than extra cash . The difference wouldn't have made life any better. There's also cases where a DB pension can't be inherited but personal cash can so why spend your cash ?

Pat38493

bjorn_toby_wilde said:

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

EDIT..

The first 10 years under the company there were 3 years with no annual rise. After 10 years the total amount paid had increased by 10% at most. So half the inflation rate. Since then it has been subject to the Barber and GMP rules and increased accordingly.

Hi coastline

My Boots pension increases by RPI capped at 5% and the L&G announcement letter I received this morning says "Importantly, your scheme benefit entitlements remain unchanged"

Where did you get the 2% PA increase from?

With some of these DB pensions, you are just given a headline number and a few sweeping statements, but under the hood your pension may contain different sections from different periods of time with different augmentation rules.  For example my deferred DB pension has 3 separate tranches in it with 2 different NRA dates and one of them has different rules for increases in payment.  I was not given this information until last year (30 years after I originally signed up to the scheme!).  To be fair I think that some of this stuff is driven by legal rulings over the years just as much as scheme rules.

bjorn_toby_wilde

The other DB scheme I’m drawing is like that. Half of the pension is pre 4/1997 and any increases are discretionary. The company haven’t agreed any increases for years. The other half is post 1997 so increases by CPI capped at 5%. The GMP tranches are also dealt with separately.

I often see statements about “inflation proof final salary schemes” - if you worked in the public sector maybe. Many private sector DB schemes are quite a long way from that.

One of the reasons I took the maximum lump sum from this scheme was the poor level of increase in payment. It made more sense, with a good commutation rate to invest it elsewhere.