Final Salary Pension - Is it legal to withdraw it?

Southend1

redbuzzard wrote: »

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 auto-enrollment is probably the last nail in the coffin for decent pension provision in this country. It will encourage all employers to provide only the bare minimum for the majority of employees.

Perhaps if minimum contribution levels were set at a decent level things would be better, but that's not going to happen.

redbuzzard

Southend1 wrote: »

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.

That's a given. But a sure way for the top bananas to lose out is for the company to fail.

There's still a credit crunch, despite the flood of support for lending. Banks are incredibly risk averse, and companies without the best covenants are having to be increasingly creative about financing their businesses. A massive pension deficit and a 15 or 20 year recovery plan with payments taking a big chunk out of profits doesn't make that any easier.

Believe me I know how the OP feels. My DB scheme was closed in 2010 and replaced by DC, one indirect result of which was that I became a trustee. Even though I was made redundant 2 years later, the effect on my future pension has been to reduce it by the better part of £2,000 a year.

moneyfoolish

pandora205 wrote: »

Public sector is doing this too, though the accrued pension is safe and the career average is from the start of the new scheme (in my case April 2014)

It's still a DB scheme isn't it, even though less generous than previously. I've been in it for 13 years and was previously in another DB scheme at IBM for 24 years which a few years ago was changed to DC for all employees resulting it a mass retirement of many long-serving people because, I believe, they were going to be hugely disadvantaged under the terms of the new scheme - even their previous rights under the old DB scheme!

I have to agree with Southend1 re the people at the top. Yes, what would be saved would be a pittance but would be hugely symbolic! There must be many like myself who understand the need for change but resent it very much when the people running companies are increasing their rewards whilst the rest are having decreases. IMO, it's immoral!

Tancred

Kaledmutant wrote: »

Having been with Sainsbury's for over 25 years and being a member of the Final Salary scheme for pension I was advised by the company that the scheme is going to cease shortly and there is nothing I can do. This is despite the notification a few years ago that to secure the scheme I had to increase my contributions to the scheme from 7% to 10% of my salary, which I did. Is this technically legal or have I got grounds to pursue the continuation of the Final Salary scheme as I have done what was required to secure it?

Unfortunately yes - it is legal to withdraw it. The government should never have allowed this to happen but it's all too late now, sadly.

Tancred

mania112 wrote: »

Oh, and the main reason for the increased cost of running a Final Salary is that the government withdrew it's obligation to fund the annual increases of the schemes defined benefit, leaving the company to make the payments.

And also that the companies were legally allowed to take 'payment holidays', thereby increasing the shortfalls.

Tancred

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.

Scaremongering nonsense. The schemes could have carried on perfectly well as career average schemes with perhaps slightly higher employee contributions. The real reason is that without government arm twisting companies will always do what costs them less and looks better on the balance sheet. The directors of course retain all the final salary benefits.

rpc

Tancred wrote: »

And also that the companies were legally allowed to take 'payment holidays', thereby increasing the shortfalls.

Not so much "legally allowed" as "legally required." The law limited the surplus a pension could have to prevent tax-dodging. In most cases, the companies were not permitted to make their contributions.

In the case of my pension scheme, they used the money to fund other benefits. When I started work, there was no actuarial reduction for early retirement. Then the enforced it, then they ramped it up.

I can't help but wonder if thenudeone and I have the same former employer.

I think auto-enrollment is probably the last nail in the coffin for decent pension provision in this country.

If the minimums were set higher, it would be great. As it is, it will pull employers downwards. It will also probably leave people thinking that they have a company pension, they don't need to save. Good intentions, but poor execution. I would rather see the employer contribution gradually increased to a matched 5% as the statutory minimum. Done over a long enough period, earnings increases can be slowed so that the total cost of employment does not jump, but part of that cost is ringfenced for retirement.

The schemes could have carried on perfectly well as career average schemes with perhaps slightly higher employee contributions.

You still have the employer guarantee problem and IME most employees don't see the value in higher contributions and most unions make it very hard to achieve a good pension settlement because they are so ambitious and hardline in their approach to the negotiations.

BobQ

rpc wrote: »

You still have the employer guarantee problem and IME most employees don't see the value in higher contributions and most unions make it very hard to achieve a good pension settlement because they are so ambitious and hardline in their approach to the negotiations.

Is it any wonder that people do not see value in higher contributions? They have witnessed their pension benefits reduced by employers who not only claim the benefits are unaffordable but who also wish to reduce their own contributions to save money. At the same time they see the financial services industry fail in so many ways.

While you can say unions are unrealistic, their role is to represent their membership. Are their members saying "yes of course I do not want a pension. I am already too rich to need it and in any case the state pension is more than enough for me."? If so then you are right!

atush

Southend1 wrote: »

@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.

Then you misread my post- that is not what I felt nor meant.

I feel that final salary pensions are open ended time bombs for companies unless and until LE drops significantly. Anyone with even a basic understanding of economics 101 can see they unsustainable in the long term.

No propaganda involved here, just economics.

Southend1

It depends where you stand and look from what you can see. From the 1940s through to the 1980s these schemes seemed perfectly sustainable. It's only recently that more people think they aren't. Some of that is a result of a short term view and some is because of the constant barrage of negative publicity from people who stand to gain personally by screwing others.