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Safety net to pay just 21%

Transfer analysis shows that investors face massive losses in calls on Pension Protection Fund

Pensions which fall on the Pension Protection Fund will give most investors far less than the 90 per cent that many expect, says O&M Systems.

The IFA and software supplier says the findings come from testing its new trans- fer analysis report on clients. The tool offers advisers a predicted PPF figure to help advise clients whether they should move out of occupational schemes that are considered risky.

O&M Systems director Jason Wykes says analysis of figures from clients who are members of the troubled T&N scheme shows that some high-earners will get only 21 per cent of the value of their pensions from the PPF while even low-earners will receive only 74 per cent.

Wykes says if it is assumed by scheme members that they will only lose 10 per cent of the fund if a scheme enters the PPF, most would accept it, but if this loss is much grea- ter, then clients worried about the future of their scheme need to have it brought to their attention.

Out of the most recent 1,200 clients reviewed by the new tool, Wykes says the average that would be paid by the PPF was around 55 per cent of the fund.

The O&M Final Salary TVAS report is available as a free add-on service to adv- isers who are already using the software supplier.

Wykes says clients at both ends of the spectrum will be affected, with high-net-worth clients heavily caught up in the PPF cap on compensation, while poorer members could lose out as GMP benefits are revalued by the PPF, often at lower values.

Wykes says: “What matters is advice. You cannot offer a crystal ball to predict which schemes will get into trouble but you can point out to a client what he stands to lose.”

Scottish Equitable pensions development director Stewart Ritchie says: “As a general rule of thumb, the Pension Protection Fund cover is around 70 per cent and not 90 per cent for low earners. This O&M tool is invaluable for clients who think their scheme is vulnerable.”

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