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Is Your Final Salary Pension Scheme Secure?

As the number of firms taking new entrants to their final salary pension schemes continues to diminish there are concerns that even those with a place in existing final salary pension schemes may not be as secure as they first thought. While the pension fund operations of a company and the day to day finances of business are ring fenced to offer some degree of protection, there are a number of schemes currently underfunded.

If a company was to go under with a pension fund in deficit, i.e. not enough assets to cover pension liabilities, then there is a high chance that members would lose at least part of their entitlement. While the Pension Protection Fund is there to help those members who may lose out it only covers 90% of pension entitlements up to a maximum of £26,000 per annum. As wages continue to move higher there are many people who may well be entitled to pensions in excess of this amount.

All in all the pension industry is still very much in a state of turmoil with a number of factors starting to hit home. The government’s decision to start taxing pension income over 10 years ago, the miscalculation by government actuaries with regards to average life spans and reduced investment returns have all turned the screw on pension fund administrators and members.

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