change to final salary pension scheme

Grimbal

I've just received a letter from my company outlining how unsustainable final salary schemes are. The indications are that they will propose to discontinue the FS scheme and bring in another scheme to take its place.

Really naive question, but can they do this? In the letter it says that if we do not consent to a change in our employment contracts, then they may need to replace the existing contract and offer a new one. We don't seem to have much choice but to accept the new pension scheme - whatever that will be !

ETA: we don't have a union at work

LillythePink

Well yes they can.

we have just been through the process at my work at the end of last year.

Have they said that they will shut it completely, or just stop the funding and swap new contributions to the new scheme?

If they shut it completely, then they will need to give you a transfer value calculated by actuaries. If they are just stopping the funding, then they may offer for you to transfer out your pot to a new scheme - again, calculated by actuaries or you may be offered the chance to be a deferred member.

With my work, they stopped funding it and offered us the choice of a transfer out (with incentive) or becoming a deferred member of the FS scheme. we had no choice about the new scheme - from 1.1.11 we were in the new scheme.

We got offered an incentive of an extra 30% uplift of the pot and an increased % into the new scheme for 5 years.

I transferred out of our scheme, as although they only stopped funding, I believe that they will close the scheme so I decided to take the money and run.

If they do give you a choice, then think about it carefully.

Mrs_Stick

yes they can. And its happening lots

Loughton_Monkey

Grimbal wrote: »

.....Really naive question, but can they do this?......

So where have you been for the last 5 years in which the 'slashing' of Private Sector Final Salary schemes has dominated financial news?

You really need to be relieved they have taken so long to do it!

Grimbal

LillythePink wrote: »

Well yes they can.


Have they said that they will shut it completely, or just stop the funding and swap new contributions to the new scheme?

Not known as yet - the consultation period will be starting soon apparently

If they shut it completely, then they will need to give you a transfer value calculated by actuaries. If they are just stopping the funding, then they may offer for you to transfer out your pot to a new scheme - again, calculated by actuaries or you may be offered the chance to be a deferred member.

With my work, they stopped funding it and offered us the choice of a transfer out (with incentive) or becoming a deferred member of the FS scheme. we had no choice about the new scheme - from 1.1.11 we were in the new scheme.

Ah, ok, that's interesting. I had no idea of how they would go about aligning the new scheme - thankyou

We got offered an incentive of an extra 30% uplift of the pot and an increased % into the new scheme for 5 years.

I transferred out of our scheme, as although they only stopped funding, I believe that they will close the scheme so I decided to take the money and run.

If they do give you a choice, then think about it carefully.

thank you so much for your post, very helpful. I've obviously been aware that FS schemes aren't being offered as widely, and hoping that they would just keep the status quo where our FS scheme had been closed to new members for a few years, and any new employees were taken on the money purchase scheme. I was also a little taken a back at the statement that if we don't agree to the changes on our existing contract, then they'll just change our contracts anyway !

DavidHayton

Grimbal wrote: »

ETA: we don't have a union at work

This should be a great incentive for you and your colleagues to join one. Then, when your employers make changes to your terms and conditions of employment you will be able to find out whether your boss is (a) acting within the law, or (b) trying to pull a fast one.

Best wishes
David

withabix

DavidHayton wrote: »

This should be a great incentive for you and your colleagues to join one.

No it shouldn't.

The end of final salary schemes is SENSIBLE because they are unsustainable.

regprentice

There are a number of ways your employer could change the plan.

As noted above - close final salary , move to defined contribution. Most common option, you still have a final salary prorated over the period it applied.

It could be worse

My employer actually capped the qualifying final salary as at a set date but continued to run a final salary pension. Now everyones final salary will be calculated on the wage they earnt on 31-10-10. I'm not in it, but my colleague is- 30 yo earns £30k annually - in 35 years his final salary pension will be calculated on £30k no matter what he earns when he's 65! There is no provision for this £30k figure to be adjusted for inflation/wage rates over that 35 year period.

Grimbal

DavidHayton wrote: »

This should be a great incentive for you and your colleagues to join one. Then, when your employers make changes to your terms and conditions of employment you will be able to find out whether your boss is (a) acting within the law, or (b) trying to pull a fast one.

Best wishes
David

I think that part of the T&C of our employment is that we don't join a union? vaguely remember seeing a clause about that, but not 100% sure - it's been a long time !

Grimbal

Loughton_Monkey wrote: »

So where have you been for the last 5 years in which the 'slashing' of Private Sector Final Salary schemes has dominated financial news?

You really need to be relieved they have taken so long to do it!

apologies, my post was unclear - what I was most surprised at was that they can take T&C in an existing contract and, if they don't "like" it, effectively rip it up & re-write another one - rather than than the closure of the scheme itself

Grimbal

regprentice wrote: »

My employer actually capped the qualifying final salary as at a set date but continued to run a final salary pension. There is no provision for this £30k figure to be adjusted for inflation/wage rates over that 35 year period.

thankyou very much - that's an excellent point - I'll make a note to remember to look out for this