Defined Benefit Pension - Deferred

I would be due a Defined Benefit Pension if I work until age 65.

On my annual document it states the pension amount I would be due on reaching age 65, if I were to leave service now.

I am given to understand that if a person has retired that their pension is set for life, even if the business in question goes bust.

Can someone explain what the position would be regarding a Deferred DB pension? Is it safeguarded in any way or would it also go if the business went?

I'm finding it difficult to get an answer to this question so I'd be really grateful if one of you experts out there can help.

This one is bothering me too, I heard a guy on the TV this evening who retired early from I think Independent Newspapers and now he says it looks like the deferred defined benefit pension he thought he would get at 65 is to be reduced.

I presume like myself you are thinking of redundancy/early retirement and what happens at 65 if they start moving the goalposts now. My last main employer spent their time telling us we had the 'Rolls Royce of pensions', it's beginning to look more like a Lada!

I think your DB pension is only guaranteed once you start drawing down on it. That's when your part of the pot is put aside for you.

I really haven't a clue about these things but I attended a union meeting a few years ago because we had to vote on changes to our DB pension in order for the company to deal with the deficit.

They told us that unless we did something now people my age might not get a pension. The reason being there is e.g. a third already on the pension, a third waiting to draw down (those that took early retirement and are still under retirement age) and a third are current employee's that are still paying into it. The DB pension scheme is closed to new employees so as the years go on there will be much more drawing down from it than funding it. They told us that unless we agreed to the changes that will help correct this the pension fund will run out in about 17 years so anyone not drawing down on it by then may not have a pension i.e. me!

Brought it all home. Up until then I never thought about it. I just figured I'd get half my last salary after 40 years service. It never dawned on me that this mightn't be the case.

I'm a long way off retirement age and there isn't much I can do about it so I have to hope I get to drawn down on it before the well runs dry.

Unfortunately your concerns are justified. If a Defined Benefit (DB) pension scheme remains solvent, everyone will get the pensions they were promised. However, if the pension scheme has to be wound up, the position changes. Priority is given to existing pensioners and funds accumulated through Additional Voluntary Contributions (AVCs). After sorting those out, the remainder of the fund is divided up between active members (those who are still employees) and deferred members (those who have left the employment but are still due a pension at retirement).

There is a provision that in the event of a scheme wind-up, existing pensioners can have some of the optional extras like indexation on their pensions reduced.

There's a couple of good answers about this on the Pensions Ombudsman's website [broken link removed].

Thank you so much for your replies and that link to the Ombudsman's site. That makes it perfectly clear.

It's what I had feared but I wasn't sure if my understanding was correct.

I was thinking of applying for a Voluntary Redundancy package but this would very much depend on my pension remaining intact, so looks like I'll have to soldier on!

Depending on your age and the funding situation of the scheme, the voluntary package may allow you to start drawing down your pension on exit. It would likely be a reduced amount as its being paid early but at least you then move into the priority category if the scheme winds up. But you need to balance that against having no job.

I took a voluntary severance a couple of years back, I did so based on my age and service accrued, my pension can be accessed at age 60 ( long way off yet ) this was however a very critical part of my accepting that voluntary severance, it was not compulsory redundancy.

Any matierial change to what I am expecting at age 60 will see me and I'm sure others in a similar situation resorting to the legal system, If I didn't think that pension was ring fenced at least substantially then I would have stayed working.

And as for the Govt dipping into personal pension pots like mine and yours to the tune of 1.8%, that's .6% a year over three years with one year down, well that is just theft, simple as, dressed up and on the statute books but still just simple larceny, legalised larceny.

I did the same, had hoped to get another job but nothing doing, so was trying to figure out how to get as far as 65 on limited income until pension kicks in, now my fear is that there will be a reduction in that pension or worse still no pension. I know in theory what is should be based on what was in the documentation when I left but if they start messing with that then who knows what we will get. As for legal route, if the employer doesn't have it then where would it come from, I doubt that would work. On top of that the state pension at that stage won't kick in until age 67 but I am convinced that will be means tested before then anyway, even the contributory because there will be just no money to pay it.