Is It Possible for a Pension Scheme to Run Dry?

Unfortunately the answer is yes a pension scheme can run out of money.

The final salary schemes take the money contributed by you and your employer and place it in one pension pot that provides benefits for all its retired members. If the amount that the pension pot has to pay out now or in the future is more than the total value of its investments, then the scheme will run out of money. The trustees of a final salary pension scheme are responsible for ensuring that it does not happen. However, in case they need to limit future costs, the employer or the trustees can either close the company pension scheme to new members, or freeze the scheme so that it is closed to all members. Alternatively, they may wind it up completely so that it is fully closed down.

Money purchase pension schemes invest the contributions made by you and your employer, providing you with a personal pension pot that will supply your benefits. These pension schemes can experience a shortfall only if where has been a fraud or theft, and in these cases, some of the money may possibly be recovered through the Pension Protection Fund.