Will Your Final Salary Pension Pay You What You Are Expecting in Retirement?

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Are UK Final Salary Pensions doomed?

Final Salary (DB) pension plans were the cornerstone of employer provided retirement benefits for many years. Recently, however, issues of financial solvency have put the availability of these benefits in question.

According to the Financial Times, about 1,000 private-sector DB pension schemes, including 25 of the largest in the UK, are “highly unlikely” to pay their members’ pensions in full.

This frightening prediction comes as a result of a paper published in December 2015 by the Pensions Institute, a UK research body, which suggests that the number of troubled pension schemes is far higher than officially acknowledged.

So what is happening now?

In the few short months since December we have seen the very public failure of the BHS pension scheme and further troubles at Tata Steel. Now the UK Pension Regulator has published a report on DB pension funding which worryingly states that:

  • The average UK DB pension scheme has just over 82% of the money it needs to pay benefits in full to its members
  • Whilst average annual Deficit Reduction Contributions have increased by 14%, the median increase in liabilities is 33%

With the spectre of a possible Brexit and the uncertainty surrounding the forthcoming US Elections, it is hard to see how this is going to improve any time soon.

Should you panic?

Absolutely not, however you should take steps to review your pension to ensure you understand exactly how you are affected by all of this, and what you can do to secure your retirement.

What are your options?
  1. Do nothing and hope for the best
  2. Review your UK pensions to consider if you should:
    • Keep the pension(s) you have
    • Transfer your pension(s) to an alternative UK pension
    • Transfer your pension(s) to an offshore pension (QROPS)

The best course of action for you depends on many factors and requires a professional analysis of your existing pensions and your retirement intentions.

What should you do?

Contact your AAM Financial Planner now, or email [email protected] to arrange a confidential review of your UK pensions and find out where you stand.

You will receive a detailed report outlining your options and explaining what you can do to protect your retirement and the steps you need to take to do so.

Ian Black
Head of Wealth Solutions
AAM Advisory Pte Ltd

Sources:
This article is an op-ed piece by Ian Black
Facts and data sourced from:
http://www.ft.com/intl/cms/s/0/80a113e6-9fdf-11e5-beba-5e33e2b79e46.html#axzz48neMZlwn
http://www.thepensionsregulator.gov.uk/docs/scheme-funding-2015.pdf
http://www.pensions-institute.org/reports/GreatestGood.pdf

Disclaimer:
The views expressed in this article are those of the author and do not necessarily reflect the views of AAM Advisory Pte Ltd. This document/article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any securities/products mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment product before making a commitment to purchase the investment product. Past performance is not necessarily indicative of future performance. Any prediction, projection, or forecast on the economy, securities markets or the economic trends of the markets is not necessarily indicative of future performance. Whilst we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this document is subject to change without notice. The above report may contain data obtained from third parties and as such we cannot guarantee the accuracy of this data.