Can an individual insure a final salary pension scheme

Question

My wife is part of her company's final salary pension scheme. It is a big consultancy and the fund is solvent. However, she is worried if the company collapses and the scheme goes with it she will lose most of her pension (the Government insures only a small part of it). Can you buy an insurance policy to cover such an eventuality?

Answer 1

It sounds like a complicated calculation to determine the exposure to risk.  I suspect it is possible to come up with odds on the likelihood, or probability of occurrence.  However, the problem would be determining the precise cost of the shortfall.

It would be very scheme specific, and sponsoring employer specific (given that these would be the the risk factors)

A better solution (if possible), might be to try and short the shares in the sponsoring employer.  This would protect you against the company going under over short periods of time.

It is certainly possible to buy covered warrants in some large companies, over a period of 6-12 months.  Which would be like a 6-12 month insurance policy.

The size of the deficit in the scheme at that time on a discontinuance basis might allow her to judge how many covered warrants to buy.

Unfortunately, for small companies, and small final salary schemes this route would be unlikely to be successful.  You would need to find a market maker to offer odds and make a book on this.

If you are serious, then send me an email and I will forward it on to a few contacts who might consider this.

Answer 2

Yes but it will cost so much that you can not afford it.  That is why it is not available.

All of us  in a company scheme have the same worry as they try to reduce their liabilities and find staff redundant if they do not agree to a new scheme.

Just remember to thank this Government who scrapped the tax advantages and introduced very heavy legislation affecting pension schemes. The rule of unintended consequences/ MP's pensions are OK you wil be pleased to hear

Answer 3

I am not aware of cover available in this area.

xxVP