Pensions panic – ACCA reassures employees reeling over collapsed retailers

Check the facts before entering pensions panic – ACCA reassures employees reeling over collapsed retailers

Chas Roy-Chowdhury, head of taxation at the ACCA said, “With BHS now joining the notorious list of British businesses going in to administration with a massive pension’s burden, the Government’s Pension Protection Fund (PPF) can give pensioners and employees clarity on what they can expect from their pension scheme despite the retailer’s turmoil.

“For those who are retired and at their scheme’s normal pension age when the employer goes bust, they will generally receive 100 per cent compensation, which will rise year-on-year in line with inflation, subject to maximum of 2.5%. However, only pension contributions made after 5 April 1997 will increase. This also generally goes for those who have retired on legitimate ill-health grounds, regardless of age, and widows receiving a pension.

“For those that took early retirement, PPF will pay 90 per cent of their benefits capped at a certain level, according to their age when the PPF compensation is put in place. This will also rise year-on-year in line with inflation, subject to a maximum of 2.5%. However, pension contributions made before 5 April 1997 will be exempt from the increases.

“Many people who are past and present employees of such companies will have been desperately worried by these businesses going in to administration and the impact it will have on their pension outcomes. The PPF at least provides a safety net and ensures that they will receive, for many, most of their pension.”