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The Actuary The magazine of the Institute & Faculty of Actuaries

Good news for those whose DB pension schemes failed them

Things might be looking up if you’re turning 50 and you’re a member of a DB pension scheme that is going into the PPF, according to pension services and employee benefits group, Xafinity.

Between now and 6 April 2010, pension scheme members can start their pension early and get exceptional value if their scheme has adopted the PPF early retirement terms, because the reduction factors appear incredibly generous, the firm says, and better than most pension schemes in the market.

Kevan Royle, scheme actuary at Xafinity, says that, after April, members have to be over 55 to start their pension, but the terms are still very attractive As a result, he expects to see a run on the PPF as members make the most of it and let the PPF give them a much needed boost.

The bad news is that the sponsors of other pension schemes will almost inevitably have to pay for it through higher PPF levies, Royle warns.

"We have written to the PPF to encourage a review of their Early Retirement Factors as we feel current arrangements are overly generous and may lead to increased liabilities and scheme deficits for the lifeboat fund... with the real fallout being on those sponsors of other pension schemes that will have to support the PPF through increased levy payments in future.

"Questions need to be asked as to whether the terms they are currently offering are soundly based. At the end of the day, it is the Regulator who is trying to minimise PPF liabilities and he will be interested if the PPF is using factors that effectively reduce its solvency level."

From 6 April 2010, pension scheme members wishing to opt for early retirement will have to wait until they’re 55 years of age instead of taking benefits from age 50 to 55 as it currently stands, causing a rush in early retirements in coming months.