What are pension fund 'surpluses' and 'contributions holidays'?

Salary-related pension schemes need to have enough funds to meet their obligations to existing members, and their funding is monitored by the Pension Protection Fund (PPF). When schemes have assets well in excess of the legal minimum, they are said to have a 'surplus'. This was common during the 1980s and 1990s.

As a result, many employers took the option of reducing or cutting their own contributions – a so-called 'contributions holiday'. The problem is that too many employers got used to not paying for their pension funds and, now that surpluses have disappeared in many funds, employers are shutting schemes (to new entrants and in some cases to future accrual by existing members).

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.