According to the Pension Regulator, only 1,013 of the UK’s 6,400 final salary pension schemes remain fully open. That is 200 less than last year with the number decreasing month by month.
Companies are closing the schemes even to existing members (many closed to new entrants years ago) because they are expensive to run with too much red tape and tough economic and investment environments.
Once the decision has been made there is no going back. Trade Unions and other employee bodies have no alternative but to negotiate hard for the best possible replacement scheme.
To use BAA as an example the highest level of contribution is 12% from the employer and 8% from the employee.
It is essential that there is good communication and that all the figures are presented in an understandable way with minimum jargon.
Not only are all schemes different but all members are different. Most members will need some form of guidance which may or may not be provided by the employer.
This a good time to look at all your pension benefits including from previous employments and the State Pension. The extent of other savings and investments also needs to be considered.
One of the biggest issues is that how your pension fund is invested is now your responsibility and not your employers. Whatever you do take that responsibility seriously. If you don’t you will finish up in what is known as a “default” fund which could seriously affect your retirement income and lifestyle.
If you have been contributing to AVCs or a Top Up fund now is the time to divorce that fund from the employer’s scheme and transfer it to your personal control. There will be better investment choices, greater flexibility and it will truly feel like your money.
If you have been fortunate enough to have been in the final salary scheme for, say, 20 years this may seem like bad news, but it probably isn’t. If you get to retirement with a good level of guaranteed pension and a separate large fund with the greatest possible flexibility you probably have the best of both worlds with far more chance of designing the retirement lifestyle to which you have been looking forward.
Finally don’t just sit back and let this happen to you. Give it your full attention, spend some time understanding the options and take whatever guidance/advice you feel is appropriate.
Webinars dealing with all this in far more detail and providing practical guidance are offered regularly but there are no dates available just now. If you would like to receive details of the next one click this link to register your interest.
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