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BeeHive  >  BeeLines  >  2008  >  Sep  >  Shelter from the Storm

Shelter from the Storm

Final salary company pension schemes are safer these days than they ever were years ago.  That’s an odd thing to say, I know, as all the time these days all we ever seem to be reading about or hearing about private sector final salary schemes is that companies are closing them down like there’s no tomorrow. 

It’s not that long ago really, but before June 2003 it was possible for employers running final salary schemes to simply walk away from their obligations to provide pensions; you’ll have read plenty of the horror stories about all that I’m sure.  My view is that members of final salary schemes had little idea before then about the thin ice they were skating on pension-wise, which I suppose was just as well in the circumstances.  The vast majority of employers kept the pension promises they made to their employees, but it’s worth remembering now that there was nothing in the legislation that forced them to do so.

That was all changed in 2003 and the legislation supporting that important change came about in the form of the Pensions Act 2004.  That Act made it impossible for solvent employers to renege on the pension promises made to employees and also established the Pension Protection Fund to provide compensation where pensions could not be met due to employer insolvency.  The company pension scheme world has thus been a much safer place to be since 2003/2004.

The PPF is funded through annual levies on other eligible schemes and is responsible also for managing the assets of failed schemes that it takes under its wing.  You may remember that Lawrence Churchill, the Chairman of the PPF, was a guest on our Pensions Radio podcast last year (Lawrence Churchill on Pensions Radio) where we chatted about the PPF and how it works. 

I’ve just been reading some interesting facts that the people at the PPF have published this week that I thought I’d share with you.  Apparently 57 schemes have transferred to the PPF so far and a total of 15,935 people are receiving compensation from the scheme.  This month’s payouts alone amounted to almost £2.3 million with the average annual compensation payment being £4,700 a person.  All in all a staggering £23,634,229 has been paid out by the fund since it first opened its doors in January 2005.  Also, those of you who are keen quiz night participants might like to note that the oldest person currently receiving compensation is aged 101 whereas the youngest recipient is just six years old.  The scheme is doing a lot of good.

3 September 2008

Source: www.pensionprotectionfund.org.uk

Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.

                                                                                                         

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