Company want to end local government pension scheme

Dionysusjones

Hello
I work for a company who want to end our local government pension scheme, I work in the office and I am 56 and have been there 20 yrs
We are ex council and got took over about 12 yrs ago, about one month ago they informed the unions that they want to end this type of pension because it is costing them too much money
There are about 200 of us left in this pension out of a workforce of about 600 and anyone who has joined in the past 10 yrs has joined another type of pension and they are saying our pension will be frozen and we will also join this pension
In about 10-15 yrs this pension will die off anyway with those left retiring, there is also a story that when we left the council there was a 15yr protection which might give us a further three years.
The company is doing well and taking on new employees all the time but on different contracts and the ex council workers are now out numbered by the new starts with some on as low as 14,000 a year .
Our Union and all those concerned are fighting it and we will do anything to protect our pension but what I would like to know is, how easy is it for a company to pull out of a pension scheme just because they want to cut costs.


Thanks..

PeacefulWaters

They will consult.

They will ignore feedback.

They will then do what they propose anyway with tiny concessions.

The fifteen year protection may be helpful to you. I have seen companies pay a lump sum of salary in compensation, ranging from 3% to 30% - the latter may prove beneficial to somebody closer to retirement, but unlikely.

What is your scheme retirement age?
What age do you actually expect to retire?
Do you pay 40% tax?
How much does your employer contribute to the other staff pension scheme?

Building up a lump sum (probably in a defined contribution scheme that replaces your final salary scheme) is likely to be the best way to fund any early retirement.

molerat

Yes they can close it as long as they comply with the contract you were transferred on. You need to find out about the 15 year protection.

Dionysusjones

Retirement age is 65, has this happened to other councils. They also got their own experts in who has it has turned out gave worst-case scenario from 2008 figures.
The Union have responded with their own expert who has said the companies report is false and inaccurate in every way.
They looked into doing it a few years ago but by all accounts it would of cost them too much to pull out, maybe with just 200 remaining they now feel they can afford it.
By the way, the company didn't know there was maybe three years left on the protection until the union informed them. They were not just trying it on , they hadn't checked it properly.
Incompetence is really at the highest level at this company and I believe they have to prove they can't afford the pension to end it.
Even though they are non profit making , they announced record profits last year which gets ploughed back into other projects.
Thanks for your replies

molerat

They do not have to prove the pension is costing too much. They can change the rules providing they do it within the contractual arrangements they had when they took on the employees.

smjxm09

You can be sure that those running the company will have golden pensions.

kidmugsy

Dionysusjones wrote: »

they are saying our pension will be frozen

I'll bet they aren't.

hyubh

Dionysusjones wrote: »

I work for a company who want to end our local government pension scheme, I work in the office and I am 56 and have been there 20 yrs
We are ex council and got took over about 12 yrs ago, about one month ago they informed the unions that they want to end this type of pension because it is costing them too much money

No doubt it is, however pulling out will potentially be extremely expensive in the short term as the company's share in the pension fund's deficit will then have to be paid off immediately (the situation here is quite different to if the company - as a going concern - was closing future accrual to its own DB scheme). That's probably your main 'hope'.

However, it may have been the case that when the outsourcing first happened, the old employer agreed to keep the historical liabilities pertaining to you and your colleagues at that point, and combined with the high employer rates of the past 10 years the company therefore doesn't actually have any significant share of the fund's overall deficit (if it had only joined in the past 5 years then the chances are its share would be zero).

There are about 200 of us left in this pension out of a workforce of about 600 and anyone who has joined in the past 10 yrs has joined another type of pension and they are saying our pension will be frozen

Technically 'deferred', i.e. pension benefits will be calculated using your salary at that point as your leaving salary for pre-2014 scheme membership, and will then rise by CPI every year after that.

How much does the company contribute to its own DC scheme (assuming that's what the 400 are in)? Ultimately you (and the union) should be focusing on that, with reference to their current LGPS employer rate - this will be public information, and included in the pension fund's valuation report (the last report would have been in 2013, and will set out each employer's rate for the following three years near the end). If you're not a low earner then potentially a generous DC contribution would not be so bad given how the CARE LGPS is structured. However, you'd need to win the generous DC scheme contribution first.

Dionysusjones

Thanks for all your replies, I will let you know the outcome in the coming months.
When I started over twenty years ago the pay was less than all my friends and still is but with the pension and sickness pay which I have never used it made it worthwhile staying, in the future it will be like any other job.
The new starts are coming and going all the time unlike the ex council workers who tend to stay because of the pension and the like.
Just an example of how good our pension is and worth fighting for, they are also letting people go and someone who has been there 40 years is going to get over £100,000 lump sum and £13,000 a year pension albeit on a much better pay scale than me.
Last month my contribution to the pension was £125.22 with the employer putting in £351.97.

hyubh

Dionysusjones wrote: »

Last month my contribution to the pension was £125.22 with the employer putting in £351.97.

What's the percentage rate? Do they also pay a capital deficiency contribution on top?

someone who has been there 40 years is going to get over £100,000 lump sum and £13,000 a year pension albeit on a much better pay scale than me

By the by, sounds like retiring colleagues are making their personal contribution to reducing pension liabilities! You could only get 100K lump sum on a pension of 13K or so by commuting, and the LGPS' commutation rate is (intentionally) poor from the member's point of view - this person must have given up something like 4K of index-linked pension for 48K of extra lump sum.

pandora205

The lump sum was frozen in 2008, so it is likely that the person in this example has commuted some of their pension to get such a large one. (My LGPS pension after a similar period is predicted to be around twice this amount but the lump sum is about half).