UK - The Pension Protection Fund will give members less than a third of their benefits instead of the 90% promised by the government, O&M Systems claims.
The transfer specialist said the government had used a “certain amount of spin” to overstate the level of protection the PPF would provide.
It explained that the “90% guarantee” becomes active at the date the scheme announces the wind-up and is not subject to revaluation during the period up to retirement.
This means that the real value of the guarantee will fall during that period, and that, effectively, it will only apply to members that are already set to retire.
O&M says the total value of members’ pensions will also be eroded by inflation, as the guarantee only applies to the individual’s pension. No allowance is made for either the escalation of pensions in payment or spouses.
O&M’s research suggests this will leave deferred members with just 31% of their expected pension.
O&M director Jason Wykes said: “The majority of final salary scheme members are concerned about the security of their benefits and have little faith in the ‘pensions promise’ of their employer.
“In practice, the department for work and pensions’ announcement does little to dispel those concerns.
“Members of these schemes need to be aware that this announcement does not give them the safety they first thought and it will not take effect until 2005.”
The PPF was unveiled as part of the government’s action plan to boost member security.
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