| Fears mounted this week when former employees of Curtis Fine Papers at Guardbridge, which went into administration last week with the loss of scores of jobs, learned of a shortfall in the company’s final salary fund.
Similarly, staff at Dundee engineering firm Texol Technical Solutions were left with concerns over pension fund payments when the company slid into administration and slashed its workforce in February.
The problems have come to light during an increasingly difficult economic climate that has seen company profits slashed and families suffer a reduction in disposable income due to the credit crunch.
However, Susan Pringle, of Henderson Loggie Financial Services Ltd of Dundee, said there were a number of safeguards in place to prevent individuals losing their pensions when a work-based scheme faltered.
“If you have been paying into a final salary company scheme you should receive an annual statement explaining the financial strength or otherwise of the scheme,” she said.
“If a pension scheme is under-funded the trustees must put in place a plan to make good this deficiency, and this will be set out on this statement of pension funding.
“However, this statement only provides you with a snapshot of the scheme’s strength at a particular time and how the company is tackling any problem is important to note. Contact your company’s pensions department for further information.”
She continued, “In the event of a company becoming insolvent, there are safeguards in place to help protect your pension provision.
“Under current legislation there is provision for the payment of certain contributions owed should pension deductions be made from salary but not be passed on to an occupational or personal pension.
“This is done by the trustees or administrators of the scheme applying for payment from government funds, subject to limits.
“If you are a member of a personal pension or stakeholder pension scheme, you contributions will likely be invested with an insurance company. Insurance companies are subject to governance by the Financial Services Authority and are required to maintain a level of solvency from which their liabilities can be met.”
Peter Morrison, a lecturer in finance at Dundee Business School, said workers should not panic, as it was unlikely their pensions were in jeopardy because problems tended to arise only when a combination of economic factors conspired.
“A company puts in money from the profit it makes but if that company goes down — and at the time it goes down the pension fund is underfunded — then that is a problem,” he said.
“The question then is how do you know if your pension scheme is underfunded. Usually, you get letters from your pension trustees every year telling you how much your projected pension is and that is one way you can check it is on track. The other thing you can do is get in touch with the Pensions Advisory Service helpline to discuss any concerns you may have.”
Mr Morrison said a government-backed scheme — introduced in the wake of major pensions scandals at Mirror Group and others — all but guaranteed any worker whose pension disappeared would receive most of their entitlement.
He said, “The government set up the Pension Protection Fund which gives you a high degree of your pension (back) — basically 90% of whatever shortfall is discovered.
“The government isn’t going to start paying out tomorrow — it depends on the complexity of the firm’s collapse and the complexity of the pension fund itself — but generally you are talking about a year or thereabouts to decide whether a scheme is eligible and another year or two to sort it out.
“There have been situations in the past where people have found themselves in a situation when they are just about to retire. When this happens they find themselves on a reduced income for a period of time.
“It is not a panic situation — I don’t think it is something the average member of the public should be worrying about.” |
