Final Salary Pension - Is it legal to withdraw it?

No, the offer for a FS scheme can be withdrawn at any time, although your contributions to date should be unaffected. They are very expensive for employers to maintain, and therefore private sectors ones are pretty much all closing (most already have).

Ask what they will offer to replace it, and join it (as it is bound to have a good employers contribution).

At least be happy you had one for 25 years.

Southend1 wrote: »

What if the scheme name/type was specifically mentioned in OP's contract? E.g. if it said something like "You are eligible to join the Sainsbury's DB Pension Scheme which is a final salary type scheme". Would OP then be able to argue it is breach of contract to withdraw the scheme and appropriate compensation should be made (e.g. same level of employer contributions to a DC scheme as in the DB scheme)?

No, it possible is in his contract, but it will also come with its own 'small print'.

The way I look at it:

We know it's rubbish to have a FS pension taken away, but they've become too expensive (for everyone), they could never have foreseen it.

You should a) be grateful you have some years service in a FS (very few people starting their career now will ever get the chance) and b) Would you rather take a pay cut and maintain the pension?

mania112 wrote: »

b) Would you rather take a pay cut and maintain the pension?

The OP indicated they would (did) take a pay cut to keep the pension. The company should ballot members with options to see what they feel, rather than just withdraw the scheme.

What they are doing, presumably, is to close the scheme to future accruals. What you have accrued, you will keep, along with annual revaluations.

Check to see if any changes have been made to the revaluation index used, or limits - I don't suggest it is likely, but check.

On no account should you take your bat and ball home and transfer out before understanding the consequences (which are likely to be very bad for you).

Given that it is a final salary scheme that is being withdrawn, and a FTSE100 company, I expect the replacement scheme will be relatively generous so despite your understandable disappointment, it will almost certainly be a good idea to join it and get the maximum employer contribution.

The ultimate benefits earned in a DC (money purchase) scheme for somebody with long service like you will be significantly worse than under the DB scheme, because you have fewer years to grow the pot - that's bad luck, but make the best of it and consider whether you need to, or can, make additional provision for yourself.

My guess is that they will probably put a similar employer contribution in going forward.

They may well actually reduce the employee contribution required, from 10% to something lower. When the DB scheme I was in closed, 7% contribution reduced to 5% with an employer contribution (the maximum) of 10%. Remember it will be your money in future - it makes no difference to the employer if you put more in, only to you.

In fact, it may be a good option to use the Sainsbury's scheme for any extra pension saving - costs are often very low in occupational DC schemes, though fund choices can be limited.

@Southend1 - I agree it would be nice to ballot staff, and perhaps give them a choice. In practice it's unlikely ever to happen - the employer takes the risk on DB schemes so they actually can't know with certainty what the costs will be. Improvements in life expectancy , and low gilt yields, have created huge deficits in DB schemes which employers are on the hook for.

hyubh wrote: »

I hope the general reaction wasn't 'great, our take-home pay has gone up!'...

I think some people thought it was a sweetener...

Like Sainsburys, there were stages to the removal. First closure to new employees, then an employee contribution increase ("to preserve the scheme"), then a switch from FS to career average, and finally closure to further accrual.