Safety of workplace pension schemes

There are rules which regulate workplace pensions. Your workplace pension is protected whether the provider is your employer or a financial company. There are controls in place to minimise the risks to pensions. How your pension is protected depends on the type of scheme.

Workplace pension schemes

There are two main workplace pension schemes: defined contribution and defined benefit pension schemes.

Defined contribution pension schemes

In a defined contribution workplace pension scheme, your employer chooses a pension provider to invest your pension contributions.

If your employer goes bust

If you have a defined contribution workplace pension, a pension provider usually looks after your pension fund. If your employer goes bust, you won’t lose your pension fund.

If your pension provider goes bust

If your pension provider was authorised by the Financial Conduct Authority and cannot pay your pension, you can get compensation from the Financial Services Compensation Scheme (FSCS).

Trust-based schemes

Some defined contribution schemes are run by a trust an employer appoints. These are 'trust-based' schemes. If your employer goes out of business, you'll get your pension but your pension pot might be reduced. This is because the scheme's administration costs will be paid by members' pension pots, not your employer.

Defined benefit pension schemes

A defined benefit workplace pension scheme promises to give you a certain amount each year when you retire.

Your employer goes bust

Your employer must make sure their scheme has enough money to pay employees’ pensions. Your employer can't spend the pension fund if they have financial problems. You're usually protected by the Pension Protection Fund (PFF) if your employer goes out of business and can't pay your promised pension.

Pension Protection Fund (PFF)

The Pension Protection Fund usually pays:

  • 100 per cent compensation if you've reached the scheme's pension age
  • 90 per cent compensation if you're below the scheme's pension age

For more details on compensation go to the Pension Protection Fund website.

If your employer's business merges or is taken over

If your employer's business is merged with another or bought over by a company and you stay in employment, your new employer must:

  • provide access to a replacement pension that meets or exceeds the government's standards for workplace pensions
  • give you information about the new pension scheme
  • enrol you automatically in the workplace pension if you're eligible

Pension fraud, theft or bad management

If there is a shortfall in your workplace pension fund caused by fraud or theft, the Pension Protection Fund may be able to recover some money.

You can complain to The Pensions Advisory Service (TPAS) or the Pensions Ombudsman (PO) about how your workplace pension is managed.

Advice about pensions

Pension scheme provider

Your pension scheme provider can answer specific questions about your pension.

The Pensions Advisory Service (TPAS)

They give general, independent advice on pension rules and regulations.

The Pensions Regulator

The Pensions Regulator regulates the way workplace pension schemes are run.

Pension performance 

There are different types of investments and their values go up and down over time, such as shares. Over the long term these investments will usually give a better return than a savings account. Although investment values may fall, it is likely they will recover over the longer term.

As you get near to the retirement age for your pension, you can ask your pension provider to gradually move your money. They will move it to investments that have less chance of reducing in value in the short term. This is sometimes called ‘lifestyling’. Some pension schemes do this automatically. Ask your pension provider if this will apply to your scheme.

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