What happens to my pension if my company goes bust?

If you’ve been, or are about to be, automatically enrolled in your companies pension scheme, you may be worried about where that money goes, and what happens if your company goes bust.

What if my company goes bust?

Your company needs to have its pension scheme with a registered provider, it can’t keep the money itself, so you should be protected if your company goes bust. The worst that could happen is that they could have failed to transfer a month or two of contributions to the scheme (by law they have to transfer the contributions by the 22nd day of the month after the contribution is taken). Once money has been transferred to a pension scheme, your workplace has no control over it.

You may have heard stories in the news about companies closing down their pension schemes, and pensioners losing out. But these are old style defined benefit schemes – where the company has promised to pay a certain pension in the future, but the contributions into the pension scheme aren’t covering the payments that have been agreed to. This is unlikely to be the sort of pension you are paying into unless you are very lucky. Defined contribution schemes are really just savings accounts underneath, so once a company has put money in there is no further liability on them.

 

What if my pension company goes bust?

So we’ve established that if your company goes bust you won’t lose out, but what if your pension company goes bust. Pension companies have to keep any money you give them separate to their money, so if they go bust they can’t use your money to pay their debts. Any money held in a personal pension or stakeholder pension (the most likely for an auto enrolment pension), that is held with an insurer is protected by the FSCS up to 100%. There is more information on the FSCS website here.