A question about : Directors raided the final salary pension. Help!
Hi,
In the golden years of the stock market - like 5-6 years or so ago, directors at our company told employees the scheme - final salary - was overfunded by a cool Ј1m.
what did they do?
They withdrew this amount from the scheme despite employee protests.
They closed the final salary scheme and introduced a money purchase one.
Now, of course, the damned final salary scheme is underfunded - and they are blaming the fall on the stock market.
In truth, of course, the idiots should be made to repay in the millions they took out!
What powers does a single employee have to get the pension plan topped up again by the company/directors?
In other words, I really want them to replace what they withdrew in their greed 5-6 years ago.
PLEASE RESPOND IF YOU CAN OFFER HELP AND ADVICE.
I am sure the situation is not isolated to our pension and will be relevant to many readers.
I FEEL SO BITTER ABOUT THE WAY WE HAVE BEEN TREATED. SOME EMPLOYEES WILL HAVE SEEN A LIFETIME OF CONTRIBUTIONS BEING SHAVED OFF THEIR PENSION.
DO WE HAVE LEGAL RIGHTS TO SEEK A REMEDY?
HOW DO WE PROCEED?
MANY thanks for any help
Best answers:
- This type of issue is always hard to comment on as it depends entirely on the specific facts.
In order to be able to take money out of an approved pension fund a Company has to be able to prove that the scheme was vastly overfunded using a Government defined valuation basis. This is very hard to achieve. As a result, it is entirely reasonable for a company in that position to take money out of the Plan, and in fact the Inland Revenue sometimes requires them to do so.
The funding of the scheme is not really a concern unless the scheme is wound up because the company becomes insolvent. Is your company in trouble?
If not, then members will get their benefits paid out, irrespective of whether the fund is currently underfunded, as the benefits are based on a final salary calculation rather than the underlying investments. A solvent employer HAS to pay the money in to meet the benefits eventually. It does not have to pay it all back in one go, but you will get your Ј1m back eventually, either through contributions or future investment returns.
If the company goes bust then there may be a problem, but the Government is bringing in the Pension Protection Fund to try and provide some compensation should that ever happen.
Is your company likely to go bust within the next 18 months? - Pal,
thanks for the feedback etc.
The company has tried to encourage us to leave the scheme with a cash now offer - and I now understand why, bearing in mind your comment that they HAVE to pa us the final salary calc and if there is not enough money in the pot they must contribute into it. right?
as for them going bust in 18months - that is something i have learnt can happen to the biggest and best - so i would say the risk of them going bust is much higher than average in 18 month as they work in a volatile sector of industry.
does this 18 month affect things? is that when you expect this new protection to be in place - Off the top of my head the new protection scheme is supposed to come into effect from April 2005, but I was hedging my bets and said 18 months as it could be 2006. (OK OK I can't count!)
Yes, the company has to pay the full cost of your benefits. The only exception is if they go bust in which case you fall back on the protection scheme, assuming it is in place.
I guarantee that the cash they are offering is worth far less than the pension. If it was worth more or the same they would simply pay it into the plan to fund the deficit instead.
Whether you accept the cash depends on what you would use the cash for. E.g. paying off huge credit card debts might be worthwhile. Blowing it on a holiday might not be so sensible.
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