21 March 2016

Don't assume your salary-related pension will pay out in full

In today’s Press & Journal, Carbon financial planner, Richard Wadsworth issues a cautionary note to everyone with a salary-related pension scheme.

Richard points out that most pension schemes don’t have adequate funding to pay out to all members at the same time. To deal with this, employers put in place recovery plans under which they contribute additional cash to the pension scheme over a period of years. This highlights the need to consider the likelihood that any employer standing behind a salary-related scheme will be around for perhaps another 30 years in order to make good any shortfall in the pension fund.

Richard cites the very topical example of Sir Philip Green and the current troubles with the pension scheme at BHS. The Pension Regulator is looking to him to make good some of the shortfall in its pension scheme. Negotiations are ongoing, however what happens to the BHS pension scheme if ultimately he doesn’t pay up and BHS can’t make up the shortfall?

The BHS scheme could then fall into the Pension Protection Fund (PPF), and Richard goes on to explain how this works. Richard’s over-riding advice is to look at your pension statement which will provide a snapshot of its financial health, but also to look at the general health of the company that stands behind the scheme.

As Richard points out, salary-related pension benefits are very valuable, but don’t just assume they are guaranteed and will be paid in full. Now is the time to find out the position so that you can take the necessary action to avoid nasty surprises in the future.

It is an interesting article with lots of sound advice. You can read the whole piece here, or by clicking on the image below.

If you would like to discuss your financial planning options, please contact us with any questions you might have. You can do this by calling our head office on 0131 220 0000, or by emailing us at or you can also follow us on Facebook, Twitter or LinkedIn.

You can view Richard Wadsworth’s profile here.

P&J 21 March 16

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