FAQs

Why are my benefits reduced (FAS schemes)?

 

For schemes that have qualified for FAS (Financial Assistance Scheme), scheme members are guaranteed to receive 90% of their accrued pension entitlement at the date their scheme began to wind up. This is subject to a compensation cap. Pension increases are made by reference to the Consumer Prices Index (CPI) capped at 2.5% and apply to post-1997 pensionable service only. For these reasons, a scheme member may see a reduction in their scheme benefits.

 

Why are my benefits reduced (PPF schemes)?

 

For schemes that are eligible for the PPF (Pension Protection Fund), scheme members receive PPF compensation based on their age at the 'assessment date'. The PPF pays compensation equal to - 1) the full amount of pension in payment to members above normal pension age at the start of the assessment period. 2) 90% of a member's pension if the member is under normal pension age at the start of the assessment period. 3) 90% of a member's entitlement if is an active or deferred member (and under normal pension age) at the assessment date and subject to a compensation cap. Annual pension increases are also restricted to CPI capped at 2.5% and apply for post-1997 pensionable service only. For the above reasons, a member may see a reduction to their scheme benefit/entitlement.

 

Why has there been a delay in paying my DC benefits?

 

There may be a number of reasons why there is a delay in paying your DC benefits. This could include the timing of the disinvestments, the nature of the investments, whether the benefits need to be secured outside the scheme as a result of qualifying for FAS or PPF compensation. Back payments of any missed annuity instalments will normally be made to ensure that the member receives the pension due to him/her.

 

I was employed by another company in the group, so my benefits should be paid in full; the former directors of the company deliberately put it into insolvency and the members have lost out, are you investigating this?

 

The question of which company employed which scheme members can be difficult to unravel at ties, particularly where an employer or group of companies has gone into insolvency. However, this is a factual question and should be answered by making reference to the employment contract or service agreement. Claims of financial impropriety by scheme members against the former directors of an insolvent company are serious. For FAS/PPF schemes, it is the Pensions Regulator that investigates the background to the insolvency. Members should raise their concerns with the trustees and help provide as much information to back up their claims so that the Regulator can investigate further.

 

Why is it taking so long to wind the Scheme up?

 

The winding up of a pension scheme can be a long process , with a large number of tasks which need to be completed and signed off before the Scheme can be wound up. This includes ensuring the Trustee is satisfied with the Scheme data and providing members with an opportunity to change their personal data if they believe it to be wrong. If the Scheme was contracted-out of the State Second Pension (S2P formerly SERPS), the Trustee must ensure that Guaranteed Minimum Pensions (GMPs) are reconciled with the amounts held by Her Majesty's Revenue and Customs (HMRC). Other delays can affect a scheme wind up, including the tracing of missing members.

 

Why won't I get my full entitlement?

 

If your Scheme is fully funded, upon being wound up, you will receive your full entitlement, usually purchased for you with an Insurance Company. If your employer has become insolvent, it is less likely that your Scheme will be fully funded. When the Scheme's assets are insufficient to cover the Scheme's liabilities i.e. the Scheme can not afford to pay members their full pension entitlement, members' pensions will be reduced in line with the Scheme's funding level (what the Scheme can afford to pay members). However, depending on when your Scheme commenced wind up there may be Government assistance available to you. If you are a member of an under-funded defined benefit scheme that began to wind up between 1 January 1997 and 5 April 2005, you may be eligible to help from the Financial Assistance Scheme (FAS). If you are a member of an under-funded defined benefit scheme that began to wind up after 6 April 2005, you may be eligible to help from the Pension Protection Fund (PPF).

 

How much will I get when the Scheme winds up?

 

If your Scheme is fully funded, upon being wound up, you will receive 100% of your pension entitlement. This will normally be secured with an Insurance Company and paid by them once you retire. If you are a member of an under-funded defined benefit Scheme which has entered the FAS or PPF, you will broadly receive between 90% and 100% of your expected benefit depending on a number of factors including your age at date of wind up. There are some important exceptions to this however, as larger pension benefits can be subject to a cap and you therefore may receive less than 90% of your overall pension benefit. If you are concerned that you may be affected by a cap, you should contact your Scheme administrator for details of what the current FAS and PPF caps are.

 

Why is my friend getting more of their entitlement under the Scheme than me?

 

The entitlement to Scheme members who were already in receipt of their pension before wind up and Scheme members who retired after the wind up date are different. There are many other complexities that relate to why a friend may be in receipt of more or less pension than you and direct comparisons with friends are often not possible.

 

When will I find out how much compensation I will get from PPF?

 

During the PPF assessment period (the time from the wind up date until the Scheme transfers to the PPF at the end of the wind up), your current Scheme administrator will confirm to you the impact, if any, on your pension entitlement.

 

When will I find out how much compensation I will get from FAS?

 

FAS does not inform Scheme administrators how much you will be entitled to. FAS will inform you of how much compensation you are entitled ahead of your retirement date from the Scheme. Should you have any queries regarding how much you can expect to receive from FAS, you should contact them directly. Your Scheme administrator should be able to provide you with contact details. Alternatively, further information can be found on their website.

 

What do I need to do during the winding up of my pension Scheme?

 

You should keep the trustees advised of any changes to your address. It is important that you are kept up to date with any developments and the trustees should send you an update at least once a year, providing you a summary of the current situation. It may be that you are required to complete and return a data verification statement or similar document. It is important that you act upon such a request, as a data verification exercise provides you with an opportunity to correct any personal data which may be wrong.

 

What affect will the recent stock market crash have on my pension?

 

If you are a member of a defined benefit (DB) arrangement and your employer remains solvent, the recent stock market crash will have no impact on your pension benefits. By being in a DB scheme, you have a pre-determined benefit which is not impacted by fluctuations in the stock market.

 

As described in the above Q&As, if you are a member of a DB scheme with an insolvent employer, you will most likely be entitled to assistance from FAS or PPF.

 

If you are a member of a defined contribution (DC) arrangement, the recent stock market crash may affect your pension fund investments. However, it is worth noting that pension fund savings are long term investments and this DC fund should be being managed appropriately to reduce the risk of stock market fluctuations affecting your final benefit at your retirement date. Members who are not close to retirement often have a large proportion of their fund held in stocks and shares. They have time to allow their pension pot to recover from any stock market drops and are able to capitalise on buying lower-priced shares when markets are down that should hopefully rise in value in the future.

 

For members nearing their retirement date prudent investment management means that the recent stock market crash should not have impacted too greatly on their pension fund. As an individual approaches retirement, it is common for funds to be moved from stocks and shares to less 'risky' investments such as government bonds. This process is referred to as ‘Lifestyling’ and helps protect individuals from stock market fluctuations adversely affecting their investments when they are needed to purchase a pension annuity.

 

 

 

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