13 November 2020

A photo of a closed sign in a shop window

What happens to my pension if my employer goes bust?

In the unfortunate even that your employer closes, there are safeguards for your pension in place and it depends on what type of pension scheme you’re a member of. When things like this are out of your control, it’s understandable that things can be confusing and scary.

The Government has a rules and regulations to ensure that in the worst case, your pension is protected.

If you have a defined contribution (DC) pension…

…this is managed by a pension provider (not your employer) so your pension will be fine as your retirement income is dependent on how much YOU pay into it, as well as the investment performance. However, you will lose out on employer contributions. If you’re worried, it’s best to check directly with the pension provider you’re with.

If you have a defined benefit (DB) pension…

…it’s the employers responsibility to ensure there is enough money to pay your pension when you retire. The money will usually remain untouched as the pension money is kept separate to the rest of the business.

If you employer doesn’t have enough money, you should have protection from the Pension Protection Fund (PPF) which was set up by the Government. You will be compensated 100% of your pension if you’ve already reached the scheme’s retirement age at the time your employer goes bust. If you haven’t, you’ll only be entitled to 90% compensation.

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