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What happens to your workplace pension if your employer or pension provider goes bust?

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What happens to your workplace pension if your employer or pension provider goes bust?

The idea of losing your pension and the conditions being completely out of your control can be very frightening.

Nevertheless, the government has made sure to put many methods and policies in place to guarantee that if the worst does happen then your pension is protected.

Will you lose your pension?
Over the years we have seen a wide range of big-name companies going into administration leaving hundreds of thousands of employees left with nothing to show for their lifelong commitment to that specific company.

In reality, the result on what happens to your pensions will depend solely on whether you receive a ‘defined contribution pension’ or a ‘defined benefit pension’.

A defined contribution pension is known as the most common type of pension plan; they are managed by your pension provider not your employer which means your investment should be safe if the company goes bust. Sadly, you would lose out on any future contribution your employer might have made to your scheme.

A defined benefit pension is a type of workplace investment, it is your company’s obligation to make sure there is enough money in the plan to pay your pension when you retire. Read More:

Pension Protection
As expected when a tragedy like this strikes it is an extremely stressful time for people. ‘The Pension Protection Fund’ has created a safety net to provide some relief to those who fall victim to this type of substantial loss.

The PPF was set up in 2005 to ensure that people had some hope should something like this ever happened to them. It now protects millions of people in the UK.

Once an employer has gone into the administration stage then that is when the PPF step in and start to weigh up your choices. A report on Company Rescue states that if the scheme is deemed eligible it will take up to two years to go through the next stage of deciding exactly how much compensation you will be paid.

At the start of the assessment stage, those who are already in retirement will be given their full pensions. Anyone who is not at that age yet will receive 90% but this depends on the maximum fund that will be on offer at that time. Read more:

Another organisation that can help is the ‘Financial Services Compensation Scheme’. They can protect your pensions as long as they qualify as ‘contracts of long-term insurance’. The FSCS offers to pay compensations of 100% with no upper cap.

Also, you need to make sure that you take into consideration if your pensions were held within a SIPP or defined contribution scheme and the regulated provider of the investment failed, then the FSCS may be able to pay compensation up to the sum of £85,000. Read More:

Here at APJ we can explore the options that are available to you. Read more on the benefits of seeking a solicitor’s help here.

Our experts deal with the Financial Services Compensation Scheme on a daily basis.

If you think you have a claim, get in touch for a consultation today.