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Advice to pension clients whose DB pension is being bought out

Journalist: Samantha Downes, Freelance and Pumpkin Pensions

ended 08. November 2023

For FTAdviser:

Although the SPP has warned about systemic risks - largely insurance buyouts are considered the gold standard for DB pension schemes wanting to guarantee their member's benefits.

What advice do you give to clients whose scheme has been bought out?

2 responses from the Newspage community

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David Robinson
Co-Founder at Wildcat Law
Don't panic, and carry on as normal! This is a very mature market place now with well-established players. That means they know what they are doing from a pricing perspective which in the long run is good for members of the scheme. The risk of systematic failure whilst present is a relatively small one and certainly not one to cause members to give up what many describe as "gold plated" schemes. If you are fortunate enough to be a DB scheme member you have nothing to fear from a buyout, in fact, the opposite, it should provide long-term certainty.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
If your pension fund is being bought out, it is likely because the current trustees feel that they will not be able to afford to meet their obligations to you. Hopefully the purchaser is in a stronger financial position and will be able to fully pay your pension benefits upon retirement. If you are already retired you should see no change as if the pension is insolvent and the Pension Protection Fund takeover, you will still receive 100% of your benefits. If you have not yet reached retirement age you are likely to only receive 90% of your benefits in this situation.