The Covid crisis has led to an increase the number pension savers concerned about the security of DB workplace pension schemes.
Wealth manager Killik & Co has reported a significant jump in enquiries from clients concerned that their final salary pensions could be at risk if the sponsoring company goes out of business as a result of the ongoing economic problems caused by Covid-19.
Killik’s head of wealth and planing Svenja Keller says: “A higher than usual amount of people have come to us asking about their DB pension, because they are worried about the financial security of the employer that their workplace pension is wrapped up with.
“Some industries, such as travel, are quite hard hit and there may be long-lasting consequences for some big companies.
“Those with larger pension entitlements are understandably concerned about this – if their employer went bankrupt, the scheme may end up in the Pension Protection Fund (PPF), but in most cases benefits are capped and inflationary increases tend to be less generous.”
She says the question is whether people should transfer out of the scheme and take a lump sum over the guaranteed income for life.
Keller points out that as interest rates remain at record lows the lump cash equivalent transfer values (CETVs) may seem attractive at present, however she points out it is vital – and in most cases mandatory — to get advice before switching.
Recent moves though by the FCA have clamped down on a number of advisers offering “unsuitable” advice and have moved to ban contingent charging, which means there can be hefty advice fees to pay even if the advice is to stay put.
Keller adds: “Advice on transfers can be a complicated process that is highly dependent on the individual and their pension. Sometimes, the advice will be to not transfer at all, and stay in the scheme. Either way, transferring out of a DB scheme is also irreversible, meaning that you need to be fully informed and go into it with open eyes.”
The post Covid crisis sparks new concerns about security of DB schemes appeared first on Corporate Adviser.