Company forcing pension change on Employees

MikeJones_2

Hi payless,

payless wrote: »

...those members of the old scheme still in employment currently benefit from the calculation ( of the years earned in old scshme) being based on actual final salary rather than RPI . Employer looking at breaking this link - guess not a massive difference to those who's earnings are likely to grow inline with rpi, but for those will big promotions likely ( or already if they can backdate break ? ) I guess it could be a BIG difference...

It's an interesting situation. Under the circumstances that you describe the employees affected don't yet have preserved pensions as such.

Two of the three elements of their formula is known and 'crystallised' (accrual rate and pensionable service) but what remains unknown is the final pensionable salary.

Hence, a 'risk' that the sponsoring employer would clearly like to manage more 'certainly'.

Having made changes to the scheme once, I can imagine it is a delicate communications exercise for the employer.

I've heard that some employers are offering the scheme members cash incentives in circumstances not dissimilar to this (i.e. a cash in hand lump sum now as a trade-off for the proposed change).

Personally, I don't have an opinion as I can see both sides of the story: that of the sponsoring employer trying to manage risk and costs associated with the final pensionable salary promise and that of the employees who've had to experience closure to future accrual in the past and now face a further change which I can see might be seen as one broken promise too far.

As I said before, it's an interesting situation.

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.