What happens when BHS can no longer pay your pension?
The famous old company British Home Stores (BHS) is in trouble and could soon disappear from our high streets.
Part of the problem is the company’s pension scheme, which is £571m in deficit. Meaning it needs to pay out £571m more than it has available.
The recent troubles at BHS and now Tata Steel raise an important question. What happens to final salary pensions when the company you work/worked for goes bust?
When a company goes into administration the Pension Protection Fund (PPF) steps in and assesses the situation. If there are not enough assets in the company to pay all the pension liabilities then the PPF takes over.
The PPF is funded by the pension assets it takes over, levies applied on all pension schemes and has its own investment portfolio.
If you have already reached the pension scheme’s ‘normal retirement age’ and are receiving your benefits then you should continue to receive the same level of pension from the PPF. However if you were working for the company before 5/04/1997 then the part of your pension attributable to this period will not increase with inflation, as it would have done previously.
If you retired early or have yet to receive your pension then you will be limited to receiving 90% of your benefits subject to a cap of around £32,761 for a 65 year old. The cap gets lower the earlier you retire and take benefits.
The important point here is that final salary pensions may not be as safe as first thought and it’s a problem for all of our famous British employers. For example, Tata Steel’s deficit is £485m, Tesco’s is £3.9bn and BT’s is a whopping £5.9bn!
Is now the time to take back control of your pension? Why not call us for a chat to assess your options properly?