Defined Benefit Pensions Schemes

A defined benefit scheme (often referred to as Final Salary Schemes) is a retirement planning arrangement sponsored by employers. The amount of benefits payable to the members of these arrangements is determined by the individual scheme rules. These schemes are also referred to by the level of accrual for each year of service i.e. 1/60th scheme this type of scheme promises a member 1/60th of a defined salary base for each year that they are a member of the scheme. The salary base is often assessed on final salary, average of the three best consecutive years within ten years of retirement or sometimes on average career earnings.

Over recent years there have been a number of factors which have had a negative impacted on this type of scheme, such as:

• Increased costs to the employer
• Reduced investment returns
• Greater life expectancy
• Lower gilt rates (the investments used to provide benefits for retired members)
• Changes in accounting standards (FRS17)

All leading to what is commonly referred to as the “pension’s black hole”; in fact this is a shortfall between the value of the assets and liabilities promised to each member under the scheme rules.

Many employers have or are looking at how they can manage these shortfalls, the options open to them are:

• Make greater contributions
• Close the scheme to new members
• Amend the scheme rules to offer reduced benefits
• Transfer benefits to an alternative arrangement
• Offer enhancements for current members to transfer out

If you are a member of such a scheme and are aware that amendments are being made to your pension, you may have a number of questions that you need to answer to assess the impact that these changes will have on your future.

We can help you answer these questions, we provide a full advisory service for planning your retirement which will take account of your existing scheme and how any proposed amendments will affect your income in retirement, along with your own personal circumstances and attitudes, providing you with our written recommendation’s to help you assess your current retirement planning.

If you find yourself in this situation and would like to discuss further, please complete the enquiry form and one of our trained advisors will contact you to discuss further. There are no fees for any initial consultation which may be by email, phone or meeting if required. You may incur costs should you decide to buy a particular product and these will be fully explained to you by the advisor before you finally decided to proceed.

If you are a member of your employers scheme which is not under funded or about to close and require information regarding the scheme or your benefits, please contact your pension scheme administrators as we cannot provide such information.