DB pension semi state company.

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tom1ie

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Hi all, I need some advice and would appreciate any help. I am automatically enrolled in a defined benefit scheme in a semi state company.
The dB scheme is closed since 2011.
I got my statement in the door this week and I gave it a good read where I seen:
“The scheme is funded by contributions paid by the employees plus the company. There is no guarantee that the scheme will have sufficient funds to pay projected benefits and it is possible that projected benefits under the scheme could be reduced”
Am I right in thinking that because my scheme is closed, there are no new employees paying into the fund only money going out to current pensioners, so how will the fund be able to provide for my pension at the benefit rate shown on my scheme?

should I be thinking of changing over to a dc scheme?
I’m not too well up on pensions so any help you can give would be great.
thanks.
 
Every DB scheme , whether open or closed, does not provide an absolute guarantee that the “promised benefit” will be paid on retirement. All such schemes are dependent on the scheme remaining ”solvent”. Its not clear from your post whether you are still accruing benefits on a DB basis (ie the scheme is closed to new entrants from 2011 but existing members remain in a DB struct ) or whether your DB benefits were frozen in 2011 and you are in a D.C. scheme since 2011.
In either event, any DB entitlement must be properly funded by the Employer, unless the DB scheme is wound up and you are offered a Transfer Value into a DC scheme.
Its not the case that you can simply transfer your DB over to a DC. From reading your post it suggests that you are still in a DB scheme. If so, then the Employer must satisfy the Pension Authority that it is properly funding the scheme. They must provide regular Actuarial Funding Certificates to show that they are properly funding the promised benefits (or have a financial plan to do so).
 
I was in a DB scheme prior to 2008 and that scheme was eventually closed. I retired in 2014 and my pension was 50% less than projected so I wouldn’t put much store on projected figures.
 
Feemar5 said:
I was in a DB scheme prior to 2008 and that scheme was eventually closed. I retired in 2014 and my pension was 50% less than projected so I wouldn’t put much store on projected figures.
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Oh. Wow that’s not encouraging. Looking back if you had the chance to have moved to a DC scheme would you have done that?
my understanding of a DC scheme is what you put in goes into your individual pot as opposed to a dc where it goes into the members scheme.
 
Conan said:
Every DB scheme , whether open or closed, does not provide an absolute guarantee that the “promised benefit” will be paid on retirement. All such schemes are dependent on the scheme remaining ”solvent”. Its not clear from your post whether you are still accruing benefits on a DB basis (ie the scheme is closed to new entrants from 2011 but existing members remain in a DB struct ) or whether your DB benefits were frozen in 2011 and you are in a D.C. scheme since 2011.
In either event, any DB entitlement must be properly funded by the Employer, unless the DB scheme is wound up and you are offered a Transfer Value into a DC scheme.
Its not the case that you can simply transfer your DB over to a DC. From reading your post it suggests that you are still in a DB scheme. If so, then the Employer must satisfy the Pension Authority that it is properly funding the scheme. They must provide regular Actuarial Funding Certificates to show that they are properly funding the promised benefits (or have a financial plan to do so).
Click to expand...
Yes the DB scheme has been closed since 2011 but the DB scheme is still accruing benefits.
I just can’t understand how I would expect to get anywhere near the rates stated on my statement as i went into the DB in 2009 so I was only in the DB 2 years before it was closed. therefore there are 38 years worth of people ahead of me drawing out of DB pot plus the existing pensioners and because it’s closed there are no extra payments from new members going in to offset the liability.
Am I completely wrong in how I’m understanding this?
 
Two separate possibilities:
- The DB is closed to new entrants, but existing members at 2011 remain accruing benefits on a DB basis. In that case both you and the Employer continue to invest contributions and the scheme must satisfy the Pensions Authority that the funding is sufficient.
- The DB is closed to all. No further benefits are being accrued and you have a deferred benefit based on service and salary as at 2011. All members are now in a D.C. scheme into which you and the employer contribute (a separate fund for each member). In that case, the Employer still has a liability To fund the deferred benefits DB benefits. So assuming the Employer does maintain the solvency of the DB element , your frozen DB should be ok.

I am unclear as to which applies to you.
 
Conan said:
Two separate possibilities:
- The DB is closed to new entrants, but existing members at 2011 remain accruing benefits on a DB basis. In that case both you and the Employer continue to invest contributions and the scheme must satisfy the Pensions Authority that the funding is sufficient.
- The DB is closed to all. No further benefits are being accrued and you have a deferred benefit based on service and salary as at 2011. All members are now in a D.C. scheme into which you and the employer contribute (a separate fund for each member). In that case, the Employer still has a liability To fund the deferred benefits DB benefits. So assuming the Employer does maintain the solvency of the DB element , your frozen DB should be ok.

I am unclear as to which applies to you.
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Yeah I am in the first example you have explained there.
there is a separate DC scheme in place for anyone that joined the company after 2011.
 
Ok, so you are in funded DB scheme. The Employer therefore has a responsibility to ensure the scheme remains properly funded even for someone who might be 38 years away from retirement.
Having said that, who knows how that might work out in the future. All DB schemes are dependant on the Employer continuing to fund the scheme adequately. One cannot guarantee that at some time in the future the Employer might not pull the plug on the DB promise in which case benefits accrued to that date are either frozen or a Transfer Value is offered into a D.C. scheme.
From an Employer point of view, a DB scheme involves the Employer effectively ”writing a blank cheque “ to fund the promised benefits. With greater longevity, DB promises have become more expensive over recent years. So who knows whether an individual Employer will continue to fund such liability.
 
tom1ie said:
Oh. Wow that’s not encouraging. Looking back if you had the chance to have moved to a DC scheme would you have done that?
my understanding of a DC scheme is what you put in goes into your individual pot as opposed to a dc where it goes into the members scheme.
Click to expand...
I can't remember all the details but the problem seemed to be that because of the recession and all the investments had collapsed the fund did not have sufficient time to recover before my retirement. My employer had increased their contributions and I also upped my percentage but the market was volatile. I would not put much store on their projections as if your employer does not pay in what they require then the scheme will be underfunded. I don't know if I would transfer at the moment as values are low - they seem to be increasing so maybe wait a while.
 
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