It's hard to imagine not having a pension after working for so many years, but that's the kind of situation many pilots face today. You could easily lose some of your hard earned pension benefits, especially if your company files for bankruptcy.
How Safe is Your Employer's Pension Benefit?
You may be surprised to learn that employer's pension plans are at risk all the time due to cash-strapped airlines dipping into these funds to ensure that their business continues without the threat of bankruptcy. Although insurance is available for these airlines if the company goes bust the amount that the pilots are likely to see can be far less than the amount promised, or the amount that was put in.
A very good example of this is the United Airlines fiasco. A federal bankruptcy judge allowed them to default on their pension obligations and terminate a $9.8 billion pension plan that affected 122,000 United Airlines pilots, retirees, flight attendants, mechanics, and ground service workers. The situation was then handled by the Pension Benefit Guaranty Corporation, which cut pilots benefits by 50 percent.
And lets not forget about the biggest airline of all times who suffered the same situation PanAm.
Who Guarantees Your Pension?
In the US, the US Government created the Pension Benefit Guaranty Corporation to monitor airline pension plans to ensure that retiring pilots received some sort of payout if the pension was terminated. There are enough examples of airlines that terminated their pensions in order to have PBGC handle them. Plans that terminated in 2003 paid the most to pilots at age 65, which ended up being less than $44,000 annually. This is much less than what a fully funded pension would have provided.
In Europe, Far East and in other countries, pensions work differently. Usually, the governments take charge of paying out pensions, but this depends on each government separately and may also hold political and economical risks.
Modern day governments are very volatile as well. Most are saddled with incredible debts that they might not ever be able to pay off, and far too much money is paid in foreign aid governments to other countries.
Putting faith in your airline and government to secure your pension could be a costly decision. Governments have the power to change laws in terms of the retirement age and the payment of pension benefits.
Having a Plan B
If history is any indication, it is vitally important for pilots to have a Plan B when it comes to their retirement. Just as you would have an alternate airport, you need an alternate plan should your pension plan not pay out the way it should. Putting money aside in having a secure Plan B only makes sense. Whether you're a newly minted First Officer in your first airline job, or whether you're 50 years old and looking forward to retirement, it's important to start putting money away so that you have it in case your pension does fall through, you are still looking at a comfortable secure future ahead.
At Crewinvest we provide tax-free secure savings and retirement solutions guaranteeing your capital to not reduce and earning 40% or more return at the end of your plan's term.
Contact me at email@example.com to find out more and discuss your financial situation.