Question of Finance: How secure is my defined benefit pension pot?
Q I AM currently a member of my employer's defined benefit pension scheme.
I have heard a lot about defined benefit schemes and have read in the newspaper about companies being unable to pay out benefits when their employees retire.
I am concerned about my scheme but am unsure what, if anything, I can do about it?
A EVENTS like the public failure of Waterford Crystal and other high-profile defined benefit pension schemes recently have been the source of concern to members of such schemes.
It should be said, however, that although no new defined benefit schemes are likely to be established, not all schemes face critical funding issues and most should be sufficiently funded to make the appropriate payment upon retirement.
However, we are seeing a migration away from defined benefit to the alternative defined contribution arrangements, or in some cases a hybrid.
In some cases, benefits under the defined benefit scheme will be capped in the future.
You need to speak with your employer or scheme trustee to ascertain if there are plans to make this move as this will have a direct impact on you. Without more information, it is difficult to offer specific advice.
Initially, I'd suggest you talk to your employer and find out your projected pension based on the current arrangement.
Find out if the scheme is in deficit and, if so, what impact this may have on your pension. Enquire about the employer's plan to deal with any deficit.
If there's no plan, you are right to be worried -- check if your employer intends to wind up, close or restrict the scheme.
You may then need to consider taking out an additional voluntary contribution pension to deal with any shortfall.
- Fionan O'Sullivan, director, IFG Corporate Pensions