There is limited help in the companies’ pension schemes which analysts have reported are likely to face cuts, given the funding crisis they both face.
Company pension schemes in the UK are subject to protection when an employer goes bust. The funds are placed in a rescue scheme known as the Pension Protection Fund (PPF).
Payments are restricted to 90 per cent of what you received, up to a cap based on your age when your employer went bust. The cap for a 60 year old is currently £38,505 a year, then 90 per cent is applied to give an annual payment of £34,655. Payments will be increased each year, as above.
That scheme continues to pay any former employees already receiving their pension and protects the fund of those who have yet to reach pension age. A levy on other pension funds partially funds the PPF. However, as the company is no longer in business contributions cease, which may affect the amount that employees were expecting the fund to pay out on retirement.
Many UK companies are currently under severe financial pressure as a result of the Covid lockdowns and the resulting economic difficulties. It is almost certain that other companies will follow Arcadia and Debenhams into receivership in the months and years ahead.
If you currently have a UK pension tied to a former employer, you are advised to fully consider your options. This is particularly the case if you have any outstanding final salary pension schemes. The Michele Carby Practice offer a free pension MOT, including a full analysis of what you can expect in terms of retirement income from existing pension plans. We will also present all the options for managing those funds in the future.
If you would like to understand your pension options, get in touch today.
Do you want to know more about saving for a pension? Listen to our webinar on pension planning here