The news today that Tesco has revealed record annual losses of £6.4 billion has been met with shock amongst the UK’s business community.
However, it will have been related announcements about the company’s pension scheme that will be worrying Tesco’s current and former employees.
In common with many similar corporate schemes currently in existence, Tesco has said that it will immediately begin consultations with staff about abandoning its expensive final salary scheme in favour of a cheaper, contribution based pension scheme.
This comes on the back of warnings earlier this year from the head of the government’s pensions watchdog that as many as 5 out of every 6 final salary pension schemes could be underfunded. This would put scheme members at serious risk of not getting all the pension income in retirement that they may be expecting.
These revelations add to the growing realisation amongst UK defined benefit pension scheme holders that their pensions, which they’ve always been told are “gold plated”, may be far less secure than they have always believed.
However, there is a solution that increasing numbers of expats are turning to. It is possible to obtain what is called a Cash Equivalent Transfer Value or CETV, for a final salary pension scheme. This will allow UK non-residents to transfer their UK pensions overseas into a QROPS. Due to the unfunded or underfunded nature of a lot of these defined contribution schemes, transferring overseas can often represent excellent value as well as the ability to achieve significantly increased retirement income.
To find out if this might be the case it is always imperative that the advice of an expat focussed, pension transfer specialist is sought.
Now it isn’t certain in Tesco’s case what the final outcome will be. The company today is only saying that a funding plan has been agreed with the pension scheme trustees to “close the actuarial deficit”. However, scheme members will be minded to take action early to avoid having these decisions made for them.
