Final Salary Pension - Is it legal to withdraw it?

Southend1

mgdavid wrote: »

you are so right, the CEO is keeping the company going; if the company fails no-one has a job which is a far bigger issue than a change of pension scheme rules.

If sainsbury failed it would be bought as a going concern by someone else. AFAIK it is a profitable business.

BobQ

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)?

Terms and conditions of an employment contract can be changed provided the employer does what is legally required to consult its employees. In practice, all you can expect is that your accrued benefits to date are preserved in accordance with the rules of the closed scheme.

OP Things to look out for are whether the existing contributions are preserved in the old scheme (much as if you had resigned ) or whether they try to transfer it into benefits in the new scheme. Either way you have the right to choose.

FatherAbraham

Southend1 wrote: »

And as an aside would anyone really care if sainsbury went bust and was bought out by someone else? It doesn't matter to the employees or the customers whose name is above the door.

If it went bust because of the huge pension-fund liability, then the business would end up being controlled by the pension fund (no-one else is going to buy the business, it's worthless because of the pension-fund liability). The pension fund would consume the business until exhausted. The pension fund is doomed, because the business it depended upon is bankrupt, or at least not large enough to support it.

The shareholders would care a lot, because their investment would be gone, because of overcommitment to fund the workers' retirement.

The workers and pensioners would care, because their pension fund would now be rapidly heading towards insolvency.

Taxpayers would care because they'd end up bailing the fund out, up to a certain level of bennies (not 100% for everyone).

Warmest regards,
FA

Southend1

FatherAbraham wrote: »

If it went bust because of the huge pension-fund liability, then the business would end up being controlled by the pension fund (no-one else is going to buy the business, it's worthless because of the pension-fund liability). The pension fund would consume the business until exhausted. The pension fund is doomed, because the business it depended upon is bankrupt, or at least not large enough to support it.

The shareholders would care a lot, because their investment would be gone, because of overcommitment to fund the workers' retirement.

The workers and pensioners would care, because their pension fund would now be rapidly heading towards insolvency.

Taxpayers would care because they'd end up bailing the fund out, up to a certain level of bennies (not 100% for everyone).

Warmest regards,
FA

That's one way to look at it. Another would be that the business would end up being owned on behalf of its employees and former employees who would all then have a better incentive to make the business a success. Works for John Lewis.

rpc

Southend1 wrote: »

Well obviously it's much more important for the chief exec to keep his 6 figure package than for the oiks to have a dignified retirement. How dare they expect anything to be otherwise?!

Well lets see:

I am a deferred member of a pension scheme with a deficit of over £5.5bn. Total obligations are well over £20bn.

CEO base salary is just under £1m.

Please explain how trimming the CEO's pay packet is going to make even a scratch in the pension deficit.


Total FTSE100 pension deficit is estimated at £55bn. Pay/perks for execs are a drop in the ocean for most of these companies.

atush

Southend1 wrote: »

Just because everyone is doing it doesn't make it right. 30 years down the line we are all going to be wishing we had fought a bit harder for a fair deal.

I can see how you feel that way, but the current scheme isn't a 'fair deal' to the company or shareholder's as they cannot afford it going forwards. Period.

Personally, I'd rather have the company doing well and me having a job. Along with a deferred FS pension, and a new good MP pension going forwards.

It isn't the end of the world.

thenudeone

Southend1 wrote: »

Just because everyone is doing it doesn't make it right. 30 years down the line we are all going to be wishing we had fought a bit harder for a fair deal.

Define: "Fair". The reality is that we are all living much longer than anyone expected, and a certain pot of money simply can't buy the same monthly pension being paid out for twice as long as expected.

I worked for a FTSE-100 manufacturing plc which had a FS pension scheme several times its own size. It's really a huge pension scheme with a small FTSE-100 plc bolted on the side of it.

Like most such schemes is funding position has deteriorated because of poor gilt yields and (mostly) increased life expectancy. The trustees have accepted a plan for the employer to re-fund the scheme over 15-20 years, because there is no realistic alternative.

Bringing the scheme to a 100% funding position immediately (if the trustees were able to insist on it) would literally bankrupt the company and put tens of thousands of employees (i.e. scheme members) out of work, and stop any possibility of improving the scheme's financial position. Would it be fair to make current employees pay that price?

redbuzzard

It's not just the cost, it's the risk and uncertainty around it that companies can't live with any more. The volatility of deficits over the last few years has been unbelievable, and following each triennial valuation the company has to agree a new funding plan of special payments to plug the gap. It is possible to fully fund pension schemes and remove the risk but you need twice as much in the pot up front to do that.

If more employees took pension provision seriously, there would be more incentive for companies to find a way to keep high quality pension provision.

It was never the case that all employers, even big ones, had decent pensions for all employees.

What we can reasonably hope for in the future is that most employers will offer decent DC scheme and that most people will join it. The members may still have to think about what additional provision they need, but even if they don't do that them at least the foundation might help keep the benefits bill down for the rest of us.

I think a basic scheme should be compulsory, and auto-enrolment is a step towards that.

In fact I did wonder if auto-enrolment is factor in Sainsburys latest move. It will tend to increase pension costs further, I imagine the majority of Sainsbury's employees are not even in the prior-existing schemes.

Many employers will water down or limit existing schemes as auto-enrolment comes in. I know of one that has limited its decent DC scheme to existing members and new joiners of higher grades only - auto-enrolment will be into NEST only, at the minimum initial contribution level of 1% each for employee and employer.

I heard that Tesco was planning to stick with DB, but part of the deal was to increase normal pension age which didn't go down very well either.

As auto-enrolment phases in, I can see a continuing process of retrenchment on pension costs.

Southend1

rpc wrote: »

Well lets see:

I am a deferred member of a pension scheme with a deficit of over £5.5bn. Total obligations are well over £20bn.

CEO base salary is just under £1m.

Please explain how trimming the CEO's pay packet is going to make even a scratch in the pension deficit.


Total FTSE100 pension deficit is estimated at £55bn. Pay/perks for execs are a drop in the ocean for most of these companies.

That's not what I meant. See my earlier posts. Sorry, probably didn't make the point very well but I meant that the "people in high places" will do what it takes to protect their position at the expense of those lower down the hierarchy.

Southend1

@atush and @thenudeone

I think your posts sum up what I'm trying to say.... you don't believe that you have a right to expect your employer to make provision for you to have a decent and dignified retirement. Many others feel the same and this is fuelled by "propaganda" from employers about how much of a burden retirement provision is and how we'd all be better off if there wasn't any.