People who are paying into defined benefit (DB) pension schemes may want to engage a pension review service to make sure they’ll get what they’re expecting on retirement.
This is after research was released indicating that one in three DB schemes in the UK will fail to pay its members their benefits in full. Punter Southall Transaction Services made the prediction in its Risk of Ruin report, which has looked at pension scheme risk from an integrated risk management perspective.
Richard Jones, principal at the firm, explained that the company’s predictions are over the long term and are based on the fact that since the the Pension Protection Fund was introduced in 2005 over ten per cent of schemes have failed to deliver full benefits to their members.
Mr Jones added that trustees need to use integrated risk management to assess the risks within their schemes, particularly given that the Pensions Regulator is placing emphasis on this approach.
He explained that by assessing things like covenant, funding and investment decisions within this kind of framework it’s apparent that “some steps favoured by trustees in managing their schemes – such as acceleration of deficit payments and de-risking – may not be significant in reducing the chances of members not receiving their benefits in full”.
According to the latest Occupational Pension Schemes Survey produced by the Office for National Statistics, the number of active members of DB schemes has been steadily falling in the UK, but as of September 2015, around 1.6 million people remained active members of these kinds of pensions.