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Wound up final salary pension less than expected?

Retirement | Occupational Pension Helpful? 1

Asked by acciesfan, submitted 19 October 2011.

Open Quote I am 65 and due payment from final salary scheme pension which was wound up 2006.Am I right to expect the 6x1/80th+17x1/60th due at that time as a portion of my £40k salary at that date. This is not what I am being offered presently.End Quote

Answered by Justin on 11 July 2012

In theory, yes, but it depends on the circumstances and specific rules of the pension scheme that was wound up.

In general, when an occupational final salary pension scheme is wound up the scheme's trustees will use the money in the pension fund to buy deferred annuities for scheme members (like yourself) to ensure they receive their due pension income at retirement.

However, If there's too little money in the fund to do so (i.e. a deficit) and the company is either insolvent or would go bust if forced to make up the deficit, then members might end up with a lower pension than expected. If this was the case the trustees were obliged to make you aware of this at the time and give you yearly updates. And, if the company was insolvent before the scheme was wound up then the Pension Protection Fund should step in, although this only covers 90% of up to £34,049.84 annual pension at age 65.

I'm sorry I can't be more specific, as I'd need a lot more information to do so. But hope this points you in the right direction to finding the reason for the shortfall. If you haven't already done so I'd ask the pension scheme trustees to explain the reason for the difference too.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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