Final Salary Pension Closing

Lowt

I have been notified that my current final salary pension scheme is under proposal to close from next year.
I will then be moved to a DC scheme whee I will keep the DB (final scheme) payments in pro rata.

While I understand that this is becoming common place, it feels like have had a significant reduction in my benefits/earnings package.

The proposal has been given with no indication of increased contribution, payout or other.
Therefore this seems like a simple reduction in my payment.

Does anyone have advice for counter proposals or examples of companies who have dealt with a movement away from a DC scheme in a different way?

atush

When this has happened in the past, if the company is solvent, there have been some very nice employers contribs into the DC paqckage- some even up to 20% with employees putting in 5-7%. Which should soften the blow somewhat.

Let us know when the first sign of the level of employer's contribs comes up. I would protest anything under 10%.

marlot

Yes, you're right to feel it is a reduction in your package. But I guess the choice is likely to be to take it, or find another job.

When this happened to me, my then-employer was putting in 18% to my DC pension, which felt fair-ish. Not as good as the DB pension though!

Lowt

Thanks both. The DC additional contribution seems fair.
I've seen 21% reducing to 16% with one company and a single payout at 20 % with another company which seemed very small.
I'll add the outcome to this post.

If anyone else has examples then please post as this will help to form a counter proposal

Thanks so far

header

I'm in a similar situation. In my case the DB scheme has been closed to new joiners for a number of years and I will end up in the existing DC pension with the company paying 8% and employees paying 6%. There is a transition period when the employer puts in 4% additional for 4 years.

We are in the so called "consultation" period. Is there anything we should be doing either to prevent the change, or soften the blow?

mgdavid

company I used to work for closed the DB scheme and moved us onto DC with 8% contribs matched by employee. The sweetener was an additional contribution from employer starting at 10% and reducing on a sliding scale to zero over about 8 years.

Southend1

header wrote: »

I'm in a similar situation. In my case the DB scheme has been closed to new joiners for a number of years and I will end up in the existing DC pension with the company paying 8% and employees paying 6%. There is a transition period when the employer puts in 4% additional for 4 years.

We are in the so called "consultation" period. Is there anything we should be doing either to prevent the change, or soften the blow?

If the management won't listen or make a sensible offer and your colleagues are also unhappy with what is effectively a big pay cut then industrial action or the threat of may encourage them to be reasonable. Also, knowledge is power, so arm yourselves with information about the company's profitability, executive pay rises etc - this should help you put together your case.

BobQ

Lowt wrote: »

I have been notified that my current final salary pension scheme is under proposal to close from next year.
I will then be moved to a DC scheme whee I will keep the DB (final scheme) payments in pro rata.

While I understand that this is becoming common place, it feels like have had a significant reduction in my benefits/earnings package.

The proposal has been given with no indication of increased contribution, payout or other.
Therefore this seems like a simple reduction in my payment.

Does anyone have advice for counter proposals or examples of companies who have dealt with a movement away from a DC scheme in a different way?

Yes you have had a pay cut. So either accept that it is fair or move to an employer that offers a better deal or appreciates you better. What does your union suggest?

greenglide

BobQ wrote: »

Yes you have had a pay cut. So either accept that it is fair or move to an employer that offers a better deal or appreciates you better. What does your union suggest?

It is not a "pay cut" it is (generally) a reduction in the value (to you) of the overall remuneration package. If you have no use for spouse / partner benefits and the scheme is not very generous the change may be cost neutral to some people (although most will quite rightly see it as a real reduction in future benefits).

This will normally require a change in your contract of employment. You do not have to accept the change. Unfortunately the employer can then dismiss you.

If the employees act together you may persuade them to do something less drastic than closing the scheme? What about changing to a CARE career average scheme? The costs to the employer are more predictable.

Finding anyone outside the public sector who offers a DB pension scheme to new starters is extremely difficult these days but there are still some around.

atush

Southend1 wrote: »

If the management won't listen or make a sensible offer and your colleagues are also unhappy with what is effectively a big pay cut then industrial action or the threat of may encourage them to be reasonable. Also, knowledge is power, so arm yourselves with information about the company's profitability, executive pay rises etc - this should help you put together your case.

I agree, as I think that 8% contribution is questionable as a replacement for a DB pension. The above two outcomes were a more 'fair' proposal.

So basically If I were you, I would be getting together with my fellow employees and any union, and asking for a higher DC employer's contribution even an extra contribution that slides downward as above. But a permanently higher overall contribution would be preferred.

wannaberichbtch

My employer went through this process 2 years ago, resulting in the final salary being replaced with a dc scheme last year. At the time it felt like a huge kick in the teeth even though the transitional payments were comparably favourable. However the dc scheme is treated almost as an avc in that funds can be used from the dc scheme in lieu of any tax free lump sum from the fs scheme, i.e if total value of my dc fund was for example £50,000 and my lump sum from the fs is £50,000, I could take all of the funds from the dc scheme tax free and leave the fs scheme untouched thereby giving me a higher income. Hopefully your new scheme will allow this, it should certainly be raised during the consultation period.