Regarding my personal feeling of greater security - - it's based on my particular circumstances as described below:This is just for my curiosity, may be slightly off-topic, but why are pensions known to fail when companies fail while annuities aren’t even tied to an employer at all. The pension, in theory, is kept separate from the company’s other resources so why isn’t the pension operated as an annuity and should function the same?I hope this reply will "re-activate" your issue and some experts will reply.
One option for a company undergoing some change (or just wanting to end their pension obligations) is to provide employees with an equivalent insurance product. My employer, after I retired, made a deal with insurance providers to take over the pension by turning the pension into an "equivalent" annuity product - - so, same monthly payment and same spousal percentage continuance. There was no merger or bankruptcy. The company simply wanted out of the pension responsibility and replaced the pension with an annuity to terminate their pension obligations. The government watches these types of handovers to make sure there's no hanky panky.
I actually feel more secure under the new arrangement that the old and I hope that if there are changes to your plan they work out well for you.
I'd suggest periodically printing out or saving any pension-related estimates and guarantees/processes/procedures you can.
And I hope other with additional knowledge or experience will chime in. Best wishes.
In other words, pensions seem like Ponzi schemes that crater when there isn’t more money going into them while annuities don’t seem to have that issue. Or do they and I’m not aware of it?
In my case I retired from my company eligible for pension but with under thirty years of service and below age 65. As I understood the "guarantee" PBGC provides in the event of a company's failure to be able to pay its pension obligations, I would have suffered a pretty intense cut in monthly benefit payment if PBGC had taken over. When the company ended its pension obligations by transferring funds to insurance companies and buying annuities to replace the pensions that paid identically as the pension (the monthly amount, the spousal benefit if primary predeceded, any step-up if secondary predeceded), my company split the pension offload to two major annuity providers in such a way that each pension was divided into two annuities, each with monthly payout of one half of the pension monthly payout. To keep things simple for the annuitant, each retiree was assigned one of the two companies as administrator which makes the single, full payout.
If I understand this, it means much higher security. First, no PBGC haircut. Second, the state pension guarantee should one of the insurance companies go under, would only have to cover the "half-sized" annuity that company was providing and therefore be much better covered (I think actually 100% covered). So having two "half annuities" from two companies spreads the risk and avoids PBGC haircuts.
All of the above is (a) my understanding and some details may be wrong and (b) even to the extent accurate probably very unusual.
Statistics: Posted by Beehave — Sun Jun 02, 2024 2:52 am — Replies 7 — Views 1107