Changing my contribution amount in my company Pension Scheme

onefurlongout

Hi everyone.

Our company recently dropped our non contributory scheme and advised us that we would now need to make contributions of which they would match.

I've just paid the first month and the amount going in from my salary (5%) is unafforable. I've asked to reduce this to 1% but I've been advised that I can only do this due to a change in circumstances.

Can they really do this? I simply cant afford this and I dont think that I should have to give another reason other than affordability

Thanks

MikeJones_2

Hi onefurlongout,

Is it an occupational pension scheme, such as a 'final salary' type scheme or is it a Group Personal Pension Plan type or Stakeholder type scheme?

Did the employer undertake a formal 'consultation process' with employees?

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

MrChips

It sounds like your pension scheme may be part of a salary sacrifice arrangement. I think HMRC rules dictate that such schemes are ok as long as members make their benefit elections once a year, or on a "lifestyle change".

Ask your HR department what constitutes a lifestyle change - often it is things like marriage, birth/adoption, significant change in salary (up or down). Maybe you will qualify for one of their circumstances.

onefurlongout

Hi guys,

Mrchips - it would be salary sacrafice, I'll get the list from HR

Mike - Its an OPS contribution based, they told us about the changes but I never recived any illustrations. They just told us that you would have to pay as much due to the salary sacrafice but the payment is still 5% of my salary

MikeJones_2

Hi again,

onefurlongout wrote: »

Its an OPS contribution based, they told us about the changes but I never recived any illustrations. They just told us that you would have to pay as much due to the salary sacrafice but the payment is still 5% of my salary

The legislation states that the sponsoring employer would have had to go through a consultation process (required where the number of employees is greater than 50). The 60-day consultation period would be in addition to any other HMRC contracting out requirements (i.e. another 30 days.)

The changes were included in the Pensions Act 2004 with further details confirmed in The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendments) Regulations 2006, and The Occupational Pension Schemes (Consultation by Employers) (Modification for Multi-employer Schemes) Regulations 2006.

The Statutory Instrument is 2006/349, and there is associated DWP Guidance available here (it's a pdf - 28 page DWP document).

Note that the requirement is to consult: once the process is over (minimum of 60 days must be allowed), the employer is free to make whatever decision he likes about the proposed changes - they do not require the members' consent. The requirements for the consultation process (set out in the Regulations) are pretty convoluted, so it would not be difficult to make a mistake and invalidate the exercise.

The only other route I could foresee as an acceptable argument for you to use would be whether your Contract of Employment or Terms of Engagement (or similar document) had a specific clause with the term non-contributory mentioned.

If the scheme is defined benefit, I think you have little or no chance of success in reducing your contribution rate.

If it's money purchase, then there may well be a chance in you achieving success, albeit slight.

As Mr Chips advises, a call to HR would be a good first step.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

MrChips

onefurlongout wrote: »

Our company recently dropped our non contributory scheme and advised us that we would now need to make contributions of which they would match.

The fact that the employer contributions are defined based on the employee contributions suggests it is a money purchase (DC) arrangement.

MikeJones_2

Hi MrChips,

MrChips wrote: »

The fact that the employer contributions are defined based on the employee contributions suggests it is a money purchase (DC) arrangement.

Good point. Well spotted!

Mike

onefurlongout

I've got HR on the case, thanks for the heads up

MrChips

You may find this useful

http://www.hmrc.gov.uk/specialist/sal-sac-question-and-answers.htm