What happens if pension company goes bust

If you are a part of the salary related scheme and if the pension fund cannot meet its current and future liabilities, the new pension protection fund helps and ensures pensions can still be paid.

In , this was made to cover compensation to eligible members of benefit pension schemes when insolvency events happen. It came about after eligible employees lost their pension, through no fault of their own, when their employers went bust. As the PPF is a non-government funded scheme, there are maximum levels of compensation members are entitled to. It should be noted that the value of pensions increases with inflation and is reviewed yearly.

Before you retire, an annual forecast of compensation payments will be given. Additional to this, the PPF will contact you six months before you are going to retire, to inform you how to get your compensation pension.

Once the assessment phase has begun, you must stay in your current pension scheme and not transfer any money over to a new one, unless you have requested, and it has been accepted beforehand. The contributions are put into a portfolio of investments, so the final amount of your pension is dependent on how well these perform. Therefore, you will only lose out on the pension contributions — those which were pre-agreed and are now unable to be paid.

If you have unpaid employer contributions, you can claim from the National insurance Fund. Alternatively, if the pension provider goes bust, you can claim compensation from the Financial Services Compensation Scheme. A Court of Appeal ruling in July declared the cap unlawful and the PPF has confirmed that it will begin disapplying the cap. Again, once you start receiving payments, payments from the pension you built up after 5 April will rise in line with inflation each year, subject to a maximum of 2.

The compensation cap applied to PPF payments will now disappear. Monthly compensation payments will also be increased. The corporation is yet to decide whether it will put a six-year time limit on these payments. The cap was lower if you retired earlier and rose above age 65 for those drawing their pension later.

The table below shows the compensation cap as it stood at the start of and what percentage of it you get technically called the 'factor' at different ages. We've rounded up the percentages for clarity. There has also been an 'enhanced' long-service cap for people who have 21 or more years' service in their pension scheme. The Pension Protection Fund only applies to companies and employers that went bust on or after 6 April Prior to that, the Financial Assistance Scheme FAS was introduced to cover the pensions in companies that went bust between 6 April and 5 April The FAS cap is unaffected by the July ruling.

For employers that went bust prior to that, there was no formal protection scheme in place. Trustees - a group that manages a pension scheme - were legally obliged to transfer the pension benefits to an insurance company through a 'buy-out'. There was no legal obligation to do so before April So if you have a pension in a company that went bust prior to that, you may have lost some or all of your pension.

You can track down old pensions using the government's pension tracing service , to find out which insurer took over your company's pension. If that doesn't yield any results, you could use Companies House to find the contact details of the administrator or the insolvency practitioner that dealt with the winding up of the company to see if they have any records on what happened to the pension.

This is because defined contribution and money purchase schemes - which see you pension savings invested on the stock market to grow in a big pot - aren't run by employers. Instead, they are run by pension companies, usually insurers, which means your money is separate from your employer's finances. Pension companies should 'ringfence' your pension savings from their own operations, which means that if they went bust, your pension is separated.

The FSCS pension protection checker can help you find out how much protection your scheme has. If your employer went bust and the value of the pension fund has lost money because of dishonesty or fraud, there is a separate fund to pay compensation. This is called the Fraud Compensation Fund. It covers most workplace defined benefit and defined contribution pension schemes but not personal pensions or the state pension.

You may look to transfer your company pension to cash in your final salary pension but this is prevented if it is in the fund. The only way this could happen is if you made a request to do so, which was accepted in writing by your pension scheme and you had selected a new pension to place your money before your scheme applied for the Fund. Will my compensation increase? Compensation increases annually in line with inflation between the time your former employer went bust, and the date your pension comes into payment.

Most defined benefit pension schemes are likely to be covered by the Fund. You might be able to increase the amount you get if you delay your pension. For advice about increasing your workplace or private pension, speak to a financial adviser. To help us improve GOV. It will take only 2 minutes to fill in.

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Protection for your pension How your pension is protected depends on the type of scheme. Defined contribution pension schemes If your employer goes bust Defined contribution pensions are usually run by pension providers, not employers.