Pensions Shortfall

hobo28

Hi all

I work for a major IT company and have a contributary pension through them. I recently read a little bit in all the bumph they send me every so often that there is a big shortfall. I don't really understand what this means.

Does this mean that the company hasn't been paying into the funds what it should have? Does this mean that my fund won't be doing as well as it should since the contributions haven't been there?

And what happens IF the company went bust? Highly unlikely but what if?

Thanks

EdInvestor

Hi hobo

Various reasons for most pensions shortfalls, including the fall of the stockmarket, contribution holidays (not paying in) by the company, and a recent major upgrade in longevity estimates by the actuaries, which means companies will have to pay out pensions for much longer and thus the liability estimates have gone up.

The shortfall is not a problem here and now (the liabilities stretch far into the future) but have become publicly known because firms are implementing new accounting rules which force them to make the state of the pension fund clear in the accounts.

Because a number of (fairly small) pension schemes have actually failed, winding up unable to pay out the promised pensions, the Government has now set up a Pension Protection Fund which is responsible for checking on the state of company pensions, making sure that action is being taken to fix shortfalls, and stepping in to pay pensions when necessary if a company goes bust.

Most of this probably won't affect your pension, and protection is now in place if it did.But scheme members should keep a close eye on what their company is doing to fix deficits, and contribution holiday plans, so as to avoid this problem emerging again.If scheme mebers were informed and took an interest ,much of the current problem would not have happened in the first place IMHO, so well done for trying to get to grips with it.

dunstonh

Various reasons for most pensions shortfalls, including the fall of the stockmarket, contribution holidays (not paying in) by the company, and a recent major upgrade in longevity estimates by the actuaries, which means companies will have to pay out pensions for much longer and thus the liability estimates have gone up.

Dont forget the amount that Labour have taken out due to new taxation. An amount that also happens to almost the same as the pensions gap. A gap that didnt exist before Labour got into power.