Bad news on workplace pensions for would-be expats

Published:  29 Aug at 6 PM
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Would-be British expat retirees expecting agreed workplace pension amounts may have to trim their budgets.

British pensioners who’re either planning to retire overseas or have already done so may find their workplace pension pays out far less than promised. According to a report by the British government’s Pension Protection Fund, two out of the three pension plans managed by the fund are heavily in the red. The PPF’s main focus is rescuing funds at risk when companies operating pension schemes go to the wall, thus ensuring former employees are covered. Following the report, new retirees planning to draw down on their pension pots will be hit with reduced benefits.

Media-based pension pundits have been warning about the present situation for several years as well as advising older company employees approaching retirement to sell on their pensions if possible. Some 3,500 workplace pension schemes are now in the red, with the total amount estimated at £186 billion, some 63 per cent of the total value of schemes under the PPF’s supervision. Pension regulators are claiming a major contributor to the present problem is the company practice of putting payment of dividends to shareholders ahead of fully funding their pension schemes. According to a spokesperson for the Pensions Regulator, pensions trustees should be robustly negotiating with the sponsoring employer in order to get a fair deal for the scheme, and employers should take into account pensions savers’ interests before paying out returns to investors and shareholders.

A number of FTSE100 companies have massive pension liabilities, including British Telecom, BP, Shell, with Carillon and British Home Stores already failed, although none of these company schemes are at risk at present. Once a scheme has been taken over by the PPF, payments for workers already retired continue as normal, but only 90 per cent of the expected benefits is paid to new pensioners. In addition, the amount is subject to an annual cap dependent on expectations and years of service.
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