Final Salary Scheme Closing

piccybabes

The company that I work for is currently going through a process of consultation on the closure of its Final Salary Scheme. The Scheme was closed to new members some 5 years ago.

The Scheme has around 200 currently active members.

The company offers a Stakeholder pension scheme where it matches up to 6% contributions made by employees.

I've been given an illustration that says that with the Governments recognised growith rate of 6.5%, that I will be £3,750 per year worse off. ( As an aside I think the 6.5% rate is wildly optimistic).


Although the company has staff pension representatives who are helping with the consultation process, I am trying to galvanise a more joined up forceful response.

There is no Union - I work for a Consulting Engineering Company.

Anybody here had any experience of getting a company to improve its contribution rate to compensate for the loss of benefit.

My thoughts were;

1. Everybody sign a "statement of discontent" or words to that effect
2. Set up a survey monkey survey to get some facts to present to the company on the level of discontent with the offer.
3. Tip off the trade press

Anybody got any other thoughts?

Thanks

Loughton_Monkey

The words 'flogging a dead horse' come to mind, sadly. There seems to be universal closure of these generous Final Salary schemes - at least in the private sector. It must be galling, as a taxpayer, to continuing paying through the nose for the public sector.

It is not only the prohibitive cost (around 25% typically) of such a scheme, it is the indeterminate future liability that your company would have to bear to guarantee the FS benefits.

I can't see tipping off the trade press will do anything. They probably don't get FS salary schemes themselves, and this sort of thing is not 'news' any more.

Best, I think, to try and convince them to change the scheme to Salary Sacrifice and pass on their own NI savings. Together with your own NI savings, this should go quite a long way to making up the gap.

kidmugsy

If the firm hangs on to part of the employers' NICs but gives the bulk to the employee, it's likely to find employees contributing more and thus the firm saving more. Enlightened self-interest, you might say. I suspect that everyone who can should use salary sacrifice while it's available - surely such a profitable dodge can't last for ever?

Old_Slaphead

kidmugsy wrote: »

If the firm hangs on to part of the employers' NICs but gives the bulk to the employee, it's likely to find employees contributing more and thus the firm saving more. Enlightened self-interest, you might say. I suspect that everyone who can should use salary sacrifice while it's available - surely such a profitable dodge can't last for ever?

Salary sacrific arrangements have proliferated in last year or 2, at a cost to the Treasury, and not just for pension contributions. I've read somewhere recently that the Chancellor will clamp down on them pretty soon.

C_Mababejive

Why is there some kind of received wisdom that FSPS was never going to work,its a bad idea and therefore we must bin them all and conveniently forget about the original agreements which were made and all the monies which have been paid into them over decades?

What has changed?

When times were good,we never heard of such a thing but now companies and government are using the excuse of recession to effectively rob the ordinary working people of what they have earned.

And yet for large companies,they will happily rob the workers of their FSPS with some lame excuse, and line the pockets of directors with gold plated arrangements.

Take that great champion of the energy consuming Proletariat OFGEM for example.

This cadre of gravy training sloths has been campaigning for years to rob the pensions of those who work in the energy industry. Those people are not fabulously wealthy. they are just ordinary workers...and yet OFGEM has been secretly plotting for a number of years for a way to rob them of their pensions. Yet pension arrangements are a matter for employer and employee and nothing to do with OFGEM which should really concentrate hard on their own job rather than dabbling in areas which dont concern them.

But OFGEMs Directors, including Lord Mogg..a peer of the realm...are quite happy to line their own pockets with expenses,salaries and for many..nice secret Gold plated civil service pension schemes.

Not for them any hullabaloo and fighting over pensions. It is taken as read that they will get nice fat pensions and indeed they are bold enough to boast about the generosity of their pension arrangements in their Sits Vac section of the website.


But you have to dig very deep to find out how much they actually get. It is cloaked in secrecy and doesnt even appear in their annual reports and accounts. they have a separate report to hide it in.


Many directors and such like hide behind remuneration committees so that when they get outed for troughing it excessively,they can throw their hands up,disown the process and blame that damnable remuneration committee for paying them so much.

But workers have only themselves to blame as for a number of years ,they have been browbeaten and cowed..left in fear for their livelihoods and jobs by the masked and sometimes overt threats of their Draconian overlords.

The pendulum has swung too far to the right and the time is long past due for workers to rise up ,rally and protest in the strongest terms...

Err..if you can be bothered...

Or will you continue to sweat and be trampled?

C_Mababejive

Old_Slaphead wrote: »

Salary sacrific arrangements have proliferated in last year or 2, at a cost to the Treasury, and not just for pension contributions. I've read somewhere recently that the Chancellor will clamp down on them pretty soon.

Yes,they are to end soon..

piccybabes

Thanks for the replies.

Company already operates SMART pension system.

I have prepped a 10 question "Survey monkey" survey to send out to all active members.

I think we are all resigned to the fact that the scheme will close, what we are focussed on now is what recognition for loss of benefit/redressing the loss of benefit we can get the company to agree to. i.e upping the 6% matched contributions.

Maybe 200 individually signed letters may help sway the decision, backed up with some stats on the active members feelings.

We have 26 days to make a change that willl effect the rest of our lives in retirement. I have to do something.

C_Mababejive

piccybabes wrote: »

Thanks for the replies.

Company already operates SMART pension system.

I have prepped a 10 question "Survey monkey" survey to send out to all active members.

I think we are all resigned to the fact that the scheme will close, what we are focussed on now is what recognition for loss of benefit/redressing the loss of benefit we can get the company to agree to. i.e upping the 6% matched contributions.

Maybe 200 individually signed letters may help sway the decision, backed up with some stats on the active members feelings.

We have 26 days to make a change that willl effect the rest of our lives in retirement. I have to do something.

What do the scheme rules say? Who can close it and under what circumstances?

Perhaps if you point out to your colleagues how much they will lose $$$$ they might not be so apathetic.

Is this a large business and if so,what are the pension arrangements of the more higher ranking staff/managers/directors?

Do you think you should accept less so that they can continue to trough it?

kidmugsy

"Why is there some kind of received wisdom that FSPS was never going to work,its a bad idea and therefore we must bin them all and conveniently forget about the original agreements which were made..." "What has changed?"

The original FSPS typically paid you a pension if you'd stuck with the firm until retirement. Then Goverment insisted that they also pay a widow's pension: so the cost went up. Goverment insisted that they also pay deferred pensions: so the cost went up. Goverment insisted on a degree of index-linking on pensions: so the cost went up. If firms had "stuck with the original agreements" people would find the deal a lousy one. Then the coup de grace: Brown looted them of their tax break on dividends. Add to that the "What has changed?" of our increasing life expectancy, and they are doomed. Of course, if employees really behaved as if they were vital, employers would keep them as an essential way to attract and retain staff. But whatever employees may say, their actions say otherwise. Heavens, just look at the number of staff who simply fail to take advantage of the schemes when they are offered (including, to my considerable frustration, one member of my own family).

piccybabes

Thanks for resonses;


What do the scheme rules say? Who can close it and under what circumstances?

The scheme allows for the company to wind it up


Perhaps if you point out to your colleagues how much they will lose $$$$ they might not be so apathetic.

We have had personal illustrations which show this
.
Is this a large business and if so,what are the pension arrangements of the more higher ranking staff/managers/directors?

Listed company. Pension arrangements hmm interesting one - I suspsct that most are on Stakeholder scheme and most of top management are relatively new ( 4 years or less).

Do you think you should accept less so that they can continue to trough it?

Absolutely not. We already had a pensionable salary freeze to try to assist the scheme in 2006.

What I find incredible is the rest of the staff's apathy towards doing anything. What happens now means a major difference to the quality of their lives for the 20 or so years of their retirement.:eek:

Shimrod

You can try and fight the closure of the scheme, but at the end of the day it is a consultation period not a negotiation and once the consultation period is over the company can close the pension scheme anyway. There have been a couple of cases where the company has kept the pension scheme open, or delayed the closure by a couple of years (IBM I think was an example of this), but that has tended to be large companies with a large number of active members.

I'm not saying don't fight it but your energies may be better spent trying to improve the benefits of the new scheme going forward. You mention that the company contribution is 6% - the overall average company contribution is 6.5% (varies from 2-3% in some retail organisations to 15% in banks!). Do a bit of research to see whether 6% is above or below average for your sector - you could suggest to the company that 6% is less than competitors in the same sector and look for a increase - the staff in final salary schemes these days tend to be the longer serving and the company may wish to reward their loyalty (this tactic may not work if the company is also looking to reduce headcount).

If the pension scheme is contracted out, then you are going to incur an extra 1.6% NI once the scheme closes - will the company offer a pay increase to offset that?

Is the pension scheme closure purely about saving money, or is it to limit the unknown liabilities going forward? How much does the company pay as a % of salary into the final salary scheme at the moment? If the closure is purely to reduce unknown liabilities you could ask for the same percentage (a bit less might actually be a better starting point) as the contribution to the new DC scheme.

Consider what benefits you get with the final salary scheme at the moment - these normally include enhanced death benefits, spouse's/dependents pension and ill health pension. Will the company pay for increased life cover (if you get 3x at the moment, ask for 5x cover) - this is quite a cheap option for the company. If you die before pensionable age while is service, partner and/or dependents would (probably) get a pension, and if you die after while receiving the pension, there would be a 50% spouse's pension. These options cost money when you buy an annuity (in the form of a lower pension) - what will the company offer to offset this loss - again you could ask for an enhanced contribution. For ill health pension, will the company provide permanent health insurance (PHI) for instead for those currently active in the pension scheme?

Who is attending the consultation meetings? It would be normal for the company to meet with representatives of the workforce - they are representing you so make sure they get your point of view across - it doesn't matter whether they agree with what you say or not.