There are many businesses that are struggling with increased costs of materials, goods, services, wage demands and inflation in general. During the coming recession, many businesses will fail.
We are tackling the question that sadly some of our clients will ask over the coming years:
“What happens to my company pension or workplace pension if my employer goes ‘bust’ i.e., insolvent and is being liquidated?”
Your employer is usually required to offer a workplace pension unless there are no qualifying employees. There are two types of pensions and we have produced three videos this week to help you understand what happens to your pension if your employer fails:
Video 1 – this video – Defined Contribution Pension Schemes
2. ER Folds DB Scheme Video 2 – Defined Benefit Schemes
3. Er Folds DB Deficit Video 3 – Defined Benefit Schemes when the scheme is in deficit and there is not enough money in the business to cover the liabilities.
Defined Contribution Schemes
These are investment linked, money purchase, workplace pensions such as:
Each month you and your employer pay a % of your earnings into a pension fund. This is invested in pension investment funds that can do down as well as up in value. The objective is that you grow the pension fund over the years and then at retirement, you have the choice of:
Compensation and Protection
A defined contribution pension scheme is not held by your employer, it is usually with a regulated insurer pension provider such as Legal and General, Standard Life, Aviva, Aegon, Nest, One Pension etc.
If you employer becomes insolvent, your defined contribution scheme is not part of your employer, it is with an insurer, so it will not fold if your employer does.
If your regulated pension provider closes and go into liquidation, then you are protected by the Financial Services Compensation Scheme (FSCS) as follows: