Plans For Expatriate Retirement May Be Hit By Pension Black Holes

As many as two-thirds of the UK’s pension schemes may be at risk of failure.

According to a recent report by the Pensions Protection Fund, (PPF), by the end of last year some 3,710 schemes were in deficit, with shortfall totals hitting £210 billion. In percentage terms, 66.4 per cent of the 5.588 PPF-monitored pension pots are at risk should the companies involved find themselves under financial difficulties. The totals were highlighted by the collapse of BHS and Carillion, both of which had massive black holes in their company pension schemes.

PPS, the industry’s fail-safe mechanism for pension savers, steps in after company failures in order to ensure savers don’t lose their entire pension pots, typically paying out 90 per cent of the value of investors’ private sector pensions. However, considering the possibility of a sizeable post-Brexit increase in the number of major corporate insolvencies, questions are sure to be asked about the size of the PPF’s funds and their ability to cope with the resulting crisis.

Sir Stephen Webb, policy director at one of the UK’s leading pension providers, is certain Carillion won’t be the only major company to go into receivership. The question, he said, isn’t will it happen, it’s when, adding it’s inevitable pension savers will suffer as companies are prioritising dividend payouts over topping up their pension funds. For example, analysis shows FTSE100 firms paid out £71.2 billion in dividends in 2017 in spite of having a pensions deficit of £43 billion.

Other pension experts are predicting more Carillion-style bankruptcies, with those who’ve lost out wanting to know where the pensions trustees and the regulator while this was allowed to happen. Royal Dutch Shell, British Petroleum, BAE Systems, BT and Tesco are now carrying pension deficits ranging from £6.6 billion to a high of £9.1 billion, resulting in the belief that the UK’s private sector defined benefit pension schemes are on their last legs. It seems the popular employee benefit is now too expensive to maintain. For would-be expats nearing their planned retirement overseas, it’s a bitter pill to swallow.