Should I be concerned about the performance of a DB scheme

tel_

Dazed_and_C0nfused said: 

And according to the scheme website it seems your normal pension age is 60 so why wouldn't you take your pension then?  Have you checked what happens to the 5 years with of payments if you choose not to take it at 60?

The website does allow you to change your retirement year, which subsequently re-calculates your estimated annual pension & % of lifetime allowance. From what I can fathom so far, is that if I defer my retirement age, the annual pension and % of lifetime allowance goes up.

Thanks for informing me on the normal pension age being 60.

tel_

gm0 said:

If a DB scheme is under funded. (Funding ratio).  And the sponsoring employer fails and can no longer contribute.  If nobody buys the remains out of administration.  Then the scheme may not get more contributions from the employer or a successor company (because there isn't one).   In which case.  A scheme may then fall into the Pension Protection Fund (PPF).  Funded by a levy on all DB schemes. 

It pays the pensions for failed schemes that are now underfunded and have no sponsor anymore. And consumes the assets such as they are.

If I recall there is a floor of 90% of benefits for a 10% haircut that can (optionally) be imposed (for a radically underfunded one).  And the scheme specific indexation and other terms get junked and replaced with the PPF ones.  Anything more generous which failed.  Disappears.  This is still a 90% + CPI underpin. And some spouse terms. Which is a fine thing as a fallback.

It is not generally worth contriving to run away just because an employer is looking a bit sickly.  Especially now with CETV values down (Interest rates are up - cheaper to produce the income promise).
And the need for expensive advice to move anything at all within the close to defacto ban on it FCA have pursued.

But each case, funding level etc. is different.

Google British Steel pension scheme scandal for what happens when shiny suits and buckle shoed spivs bluff the naive and transfer them out of a DB scheme using fear - for pleasure and profit.

Amazing info - thanks.

I'll definitely read-up on the British Steel pension scheme for sure.

tel_

xylophone said:

I must admit, I had no clue I was enrolled onto this scheme from my old employer, 

I seem to remember that the M&S Final Salary DB Scheme was non contributory- if so,  the fact that you had been enrolled may have passed you by like the idle wind you regarded not!

That said, I feel pretty sure (from my own experience with another such scheme) that it would have been mentioned in glowing terms as an outstanding employee benefit  on your induction day....

While it was closed to new employees in 2002, existing members were permitted to accrue benefits for a number of  years after that - I 

 think this was mentioned by a scheme member in a post several years ago, around the time when all the staff were transferred to a DC 

Scheme.

Did you join the scheme on or before 31/12/95?

Yes, it was non contributory.  I still have all my paper statements of when I got paid at M&S - even the weekly ones of when I used to get paid in cash.

There was never any contributions stated on them.

The scheme would have been mentioned upon joining for sure - but I don't remember any of it.  

I joined the scheme in Oct 1993, and left the scheme (and the company) in Nov 2003. The DB scheme closed end of March 2002.

hyubh

tel_ said:

Thank you for all the valuable comments so far.

The company is solvent, it's Marks & Spencer PLC.

Apologies - I thought that I could start withdrawing the pension from 55, but can't find the detail on this yet. Maybe I  wrote down the default age off 55 for some reason. Will clarify that bit when I can.

I didn't pay-in any AVC's, so no concern there.

Yes, I should have included liabilities. Here's the statement of net assets.

Given no one else has said this outright... the answer to the question in your thread title is: no. The M&S scheme is in surplus, long closed to future accrual, and on a conservative investment strategy while doing 'buy-in' deals with with insurers. Although the value of its assets decreased over the year, so did its liabilities pretty much in step (higher interest rates are generally good for DB schemes). Also its sponsoring employer is financially healthy.

That said, when a private sector DB scheme is in deficit, the fact is not completely irrelevant - the sponsoring employer may come to fail, and if it does, as a member you'd want the scheme to be well funded at that point to open the possibility of a successor scheme with an offer better than PPF compensation levels. Part of the madness of the collapse of British Steel was that the pension fund proved indeed to have the assets to reform on better than PPF terms for many members. But by the time it did, many had already transferred out in a panic.

OldScientist

To follow on from @hyubh post, the current funding levels (and explanations) can be found at https://www.mandspensionscheme.com/news/news/2023/10/annual-funding-update

It was in surplus (106%) as of Match 2023. Judging by the timing of the news item linked above, the funding of the scheme in March 2024 will be known in October. For your peace of mind, it will probably be worth keeping an eye on this each year.

As for 'open' or 'closed' schemes, 'closed' schemes are different in the sense that, for a large enough scheme, the liabilities are well defined (absent any significant improvements in life expectancies), so provided the assets are duration matched to the liabilities (including the expected costs of running the scheme), then the scheme should remain fully funded.

Linton

I believe the reason for the drop in asset value is the fall in bond prices.  DB pension schemes know now what much of their future liabilities are so they can structure bond purchases to mature when the money is needed.


This means that the current value of the bonds is pretty meaningless, it can go up and down over time without affecting the actual state of the scheme since the bonds will not be sold at current values. The current value of the liabilities will also rise and fall with changes in interest rates.

tel_

hyubh said:

Given no one else has said this outright... the answer to the question in your thread title is: no. 

Thank-you for the one word answer, and your other comments - much appreciated!

tel_

OldScientist said:

To follow on from @hyubh post, the current funding levels (and explanations) can be found at https://www.mandspensionscheme.com/news/news/2023/10/annual-funding-update

It was in surplus (106%) as of Match 2023. Judging by the timing of the news item linked above, the funding of the scheme in March 2024 will be known in October. For your peace of mind, it will probably be worth keeping an eye on this each year.

Thanks for this link - this is great info. I will book-mark it for future reference.

I will definitely visit the funding update annually as you suggest, as I do with my DC pension.  I make a point for compiling a spreadsheet at the end of the year with all my pension, ISA and savings contributions.  This addition, which I didn't know I had, is a lovely income to add.