Employer changing from DB to DC

buba2006

Last week my employer told everyone (over 500 employees) that we are in the consultation stage of moving from a DB pension to DC.

We have to have a meeting with HR etc and air any issues/questions that we have. I don't know enough about pensions to know what i should be asking. I would like to know if legally the work can change over everyone. Is there anything we can do to stop the change.

My other question is i have worked for the company for 15 years, 8 years part time. The switch over date for moving to DC is 2016. Would i be better off going full time for the next 2 years as final salary is based on last 3 years salary.

What questions do i need to ask?

Southend1

If you are a union member you should speak with your rep ASAP and see what can be done collectively about this.

Going full time would normally increase your pensionable service more quickly but not the pensionable salary

buba2006

Southend1 wrote: »

If you are a union member you should speak with your rep ASAP and see what can be done collectively about this.

We don't have a union

what do we do?

Southend1

Ok so no use for this issue, but join a union first thing tomorrow for next time there is a problem at work. Find the most appropriate one here: http://www.worksmart.org.uk/unionfinder/

Realistically as an individual there probably isn't anything you can do to change or stop the proposal. Others may have some ideas but I think it's unlikely.

So you need to gather as much information as you can about the changes to enable you to make decisions e.g. Get another job? Pay additional pension contributions? Plan to work longer? Increase your hours? Try to negotiate a pay rise? Etc.

Things to ask would be along the lines of what will be the new employee and employer contribution rates for the DC scheme. Can you pay extra and if so will the employer match it. Where will it be invested. What management charges apply. Do you get a choice of investment funds. Etc

I expect others will be along soon with more ideas.

mania112

You can't stop the switch, except if enough staff get disheartened about it and morale would drop too low (that sort of thing).

The catch-22 though is that they might need to do this to save money - the alternative might be redundancy, so tread carefully.

Your main question is why?, and will I have to contribute more?

If they'd allow you to go Full Time it's worth asking that question to them and asking them to calculate what the difference in pension would be. You can then decide if it's something you want to do.

BobQ

buba2006 wrote: »

Last week my employer told everyone (over 500 employees) that we are in the consultation stage of moving from a DB pension to DC.

We have to have a meeting with HR etc and air any issues/questions that we have. I don't know enough about pensions to know what i should be asking. I would like to know if legally the work can change over everyone. Is there anything we can do to stop the change.

My other question is i have worked for the company for 15 years, 8 years part time. The switch over date for moving to DC is 2016. Would i be better off going full time for the next 2 years as final salary is based on last 3 years salary.

What questions do i need to ask?

The consultation is a legal requirement and you can express your concerns but it is unlikely that the firm will change their mind about this following consultation.

The employer can change your terms and conditions whenever they like, legally by negotiation. If you refuse and they impose the change your only option is to resign and take them to an Employment Tribunal. In practice most people will not gain much by doing so.

You should read the consultation paper. A DB scheme pays a pension that is guaranteed. A DC builds up a cash value and is investing in stocks and shares, and bonds, which you use to buy a pension or draw out to pay a pension.

When you retire will you receive the pension in two parts (ie DB and DC?) Or are they proposing to move the benefits accrued to date in the DB bit into money in a DC fund. This is probably not a good idea from your point of view.

For the DB pension things to look for are confirmation that the DB terms you have already accrued will be retained. Is it a DB scheme based on final salary? This appears to be what you are saying. If so, you need to find out how the value of what you have earned to date is maintained. It should either be index linked for inflation until it is paid or it may be capped in some way or based on your salary when you retire.

New laws give you some options to move the DB pension to a DC scheme but is generally not a good idea.

A union would have helped you understand your options but they would not have replaced the need for an independent financial adviser (IFA) to advise on what you should do.

It may be that in this case you do not have to make any choices about what to do, but if you do ask if the employer will be providing access to an IFA. The DC bit will probably have choices to make on which funds to use.

kidmugsy

Southend1 wrote: »

join a union first thing tomorrow
.

And I hope your union is better than the useless one I was a member of - useless on the subject of pensions, anyway.

PeacefulWaters

I think a key question to ask is "what's in it for us?" - the reality is that you're seeing a valuable benefit removed.

Where's the sweetener? A friend of mine got a 25% of salary lump sum in similar circumstances. Not much in terms of what's lost, but at least something.

Another friend got 3% from a different firm. Insulting. Another got an extra day holiday added to entitlement each year. Another got nothing at all.

Good luck.

Southend1

kidmugsy wrote: »

And I hope your union is better than the useless one I was a member of - useless on the subject of pensions, anyway.

Out of interest, did you sit back and moan about how useless the union was on pensions or did you get involved and use your own great knowledge of pensions to the benefit of your colleagues?

kidmugsy

Southend1 wrote: »

Out of interest, did you sit back and moan about how useless the union was on pensions or did you get involved and use your own great knowledge of pensions to the benefit of your colleagues?

I served on the branch committee, if that's what you mean. The main lesson I learned was that the other committee members also despised the union officers and their uselessness.

232607

My company did this about 9 months ago and I sat as part of a staff committee to oversea the transfer from DB to DC so I'll share my experience with you.

Last week my employer told everyone (over 500 employees) that we are in the consultation stage of moving from a DB pension to DC.

We have to have a meeting with HR etc and air any issues/questions that we have. I don't know enough about pensions to know what i should be asking. I would like to know if legally the work can change over everyone. Is there anything we can do to stop the change.
Almost certainlynothing you can do to stop the change. For a size of 500 people, your company will have employed consultant/legal experts to guide them and they will ensure everying is in order to trans act the change.

My other question is i have worked for the company for 15 years, 8 years part time. The switch over date for moving to DC is 2016. Would i be better off going full time for the next 2 years as final salary is based on last 3 years salary.
Not sure on this so I'll leave others to reply.
What questions do i need to ask?
Regarding the move from DB to DC.
Tell your company you wish to form a staff/works committee to act on all your behalf during the consultation. I would expect them to agree to this & they may even want this themselves. Ask your company if people on the committee can have time set aside from their normal working day to study/become knowledgable about pensions in order that they can best represent all staff.
Form your committee from staff who are knowledgable/willing to become knowledgable about pensions. Ensure thay are not afraid of confrontation and capable of presenting details in a professional structured mannor.
Argue for the retaining of the DB scheme ONLY to further your case for later arguements about improvements on the proposed DC scheme.
Be in no doubt that the DB is going.
We made the mistake of spending 1/2 the consultation process argueing for the retension of the DB and the remaining 1/2 argueing for improvements in the DC. We had much success in getting improvement to the DC & wished we'd spect more time in this area.
Your company will want the process to be a "consultation" process, IE they tell you what is going to happen, The job of the committee is to turn it to a "negotiating" process, IE you end up in a middle ground that is fair to all.
Ultimately the committee should end up with a long list (probably not less than 15) of proposals to improve the DC. These should be presented to the company for consideration. Back these proposals up with evidence, IE a lot of others companies have done this Etc or statistical evidence.

Good luck.