Help! Final Salary Scheme closing.

JoeCrystal

Your statements are pretty straightforward (In fact, extremely easy to read with all relevant information needed to understand them) regarding your pension benefits. You can see that your benefit was accrued up to the 31st Match 2024. So, as it stands, you got an annual pension of £6629.72., However, you do not have the final salary DB pension scheme; you have a CARE pension scheme in which you "banked" a percentage of your annual earnings as a pension. (Again, you can see the note that your expected pension of £27k is based on you contributing to your retirement age of 68 or NPA)

Your scheme has already changed from Final Salary to CARE. You can see that you retained a small pension related to the final salary when it was changed over a decade ago. Your senior colleague doesn't know what they are discussing regarding the "Final Salary" pension, as this has not happened since 2014.

Besides, all your statements have the feeling of the LGPS (Local Government Pension Scheme) structure with the rate, section 50:50, and the year. Is your employer paying into the LGPS scheme? Is this the case? If so, the real reason is that your employer is withdrawing from the LGPS scheme. Does that chime with anything you have heard at work?

It is better to start understanding how DC pension schemes work in general. Have they announced which pension providers and the default investment funds (and available funds) they will use for the DC pension schemes? In this context, you will now have to make the decisions and take on all the market risks, so you must understand what you must do regarding your retirement provision within the DC context.

So please do not be afraid to ask any questions if there is anything you do not understand since you mentioned that you are clueless about pensions. If you are already clueless about the scheme in which your employer did all the work for you regarding your retirement provision, you are likely even more clueless when it comes to managing your funds potentially)

Marcon

anonn_2 said:

Hi guys, 
There was no one to contact today so only managed to get a copy of my pension statement. I have been told by a senior colleague that  the Final Salary pension IS in our contract and this is why they are asking us to sign a new contract confirming we are happy to move to the DC model.

I hope someone can make sense of this? 

I'm sorry to labour the point, but that's not precise enough. It may be mentioned in your contract, but you need to be sure exactly what the wording says. Your colleague doesn't seem to have grasped that you aren't in a final salary scheme any more, so I don't attach much credence to what they've told you.

hyubh

JoeCrystal said:

Your statements are pretty straightforward (In fact, extremely easy to read with all relevant information needed to understand them) regarding your pension benefits. You can see that your benefit was accrued up to the 31st Match 2024. So, as it stands, you got an annual pension of £6629.72.

Exactly.

However, you do not have the final salary DB pension scheme; you have a CARE pension scheme in which you "banked" a percentage of your annual earnings as a pension. (Again, you can see the note that your expected pension of £27k is based on you contributing to your retirement age of 68 or NPA)

Your scheme has already changed from Final Salary to CARE. You can see that you retained a small pension related to the final salary when it was changed over a decade ago. Your senior colleague doesn't know what they are discussing regarding the "Final Salary" pension, as this has not happened since 2014.

Besides, all your statements have the feeling of the LGPS (Local Government Pension Scheme) structure with the rate, section 50:50, and the year. Is your employer paying into the LGPS scheme? Is this the case? If so, the real reason is that your employer is withdrawing from the LGPS scheme. Does that chime with anything you have heard at work?

If the employer isn't an LGPS admission body taking advantage of the newish 'deferred employer' provisions in the scheme regs and/or improved funding levels in recent years, I'll eat my hat. Although if my hat stays intact, no chance of maintaining a final salary link and/or linking the future DC scheme to the old DB one.

anonn_2

Hi All, 

I am back from summer leave and there have been a few developments  which i did not know about: my colleague has informed me that:

the 25% employer contribution is only guaranteed for 10 years and we are unable to lower our current 6.8% amount. 

If we do not accept the new contract - we would have to resign or be terminated from our roles. 

We have told to draft up case studies on how the proposal affects us individually  and it seems there maybe room for individual negotiation. 

We cannot vote for this anonymously - each individual will be approached to accept the new contractual terms. 

 
MY head is in a spin about all this and just do not know what to do! The company are unwilling to provide us with financial advisors which has made a lot of employees angry. 

Marcon

anonn_2 said:

Hi All, 

I am back from summer leave and there have been a few developments  which i did not know about: my colleague has informed me that:

the 25% employer contribution is only guaranteed for 10 years and we are unable to lower our current 6.8% amount. 

If we do not accept the new contract - we would have to resign or be terminated from our roles. 

We have told to draft up case studies on how the proposal affects us individually  and it seems there maybe room for individual negotiation. 

We cannot vote for this anonymously - each individual will be approached to accept the new contractual terms. 

 
MY head is in a spin about all this and just do not know what to do! The company are unwilling to provide us with financial advisors which has made a lot of employees angry. 

How would financial advice help? You aren't being given a choice of whether to stay in the DB scheme or move to the DC arrangement.

Your employer is clearly going ahead with this, so your choices are clear: 

• accept it's going to happen
• draw up this famous case study and see if there is genuinely any room for individual negotiation
• accept that you won't have a job if you don't agree.

This has already happened to the vast majority of people in DB schemes in the private sector, so you're trying to push back an incoming tide, I'm afraid.

MX5huggy

I come back to the question you’ve not answered is this job previously a public sector job that was outsourced? The current scheme is LGPS so looks likely. If so there will have been a TUPE agreement covering that are there sticking to that? Are you or anyone on a union? 

anonn_2

The company have said we can put our case forward for compensation / changes to 25%  - the thing is no one knows what compensation to ask for!

Someone on a similar salary and pot to me has said they will lose approx 4k per year x 20 years (expected life expectancy 88)  so will potentially be  80k  worse off! 

anonn_2

MX5huggy said:

I come back to the question you’ve not answered is this job previously a public sector job that was outsourced? The current scheme is LGPS so looks likely. If so there will have been a TUPE agreement covering that are there sticking to that? Are you or anyone on a union? 

Sorry, no this is not previously a public sector job. officially we are a not for profit company. We have no union as a small company but a few colleagues are designated reps

JoeCrystal

anonn_2 said:

Hi All, 

I am back from summer leave and there have been a few developments  which i did not know about: my colleague has informed me that:

the 25% employer contribution is only guaranteed for 10 years and we are unable to lower our current 6.8% amount. 

If we do not accept the new contract - we would have to resign or be terminated from our roles. 

We have told to draft up case studies on how the proposal affects us individually  and it seems there maybe room for individual negotiation. 

We cannot vote for this anonymously - each individual will be approached to accept the new contractual terms. 

 
MY head is in a spin about all this and just do not know what to do! The company are unwilling to provide us with financial advisors which has made a lot of employees angry. 

Not particularly, it is a straightforward choice; you have benefited very well from having access to a pension scheme with lion's shares of the cost born by your employer. Like most private sectors and, indeed, increasingly common across the businesses and organisations that still have access to public sector pension schemes, such eye-watering costs are increasingly found unaffordable by them.

If you are getting a 25% employer contribution into the new DC pension scheme (And why are your colleagues explaining this to you? Do you not have any information about this from your manager or HR?) Have they said anything about the DC pension scheme they are paying into yet? It would help if you had all the facts and details.

Frankly, 25% is more than fair compensation when they could have reduced it down to 3% instead. These kinds of pension schemes are considered a quarter to a third of your salary on top.

So yes, you have to accept the change. There is no need to stress out about this, considering you will likely have deferred £6k per year, which is an excellent foundation for your retirement provision. Focus on educating yourself regarding the DC pensions scheme and take advantage of the extraordinarily generous pension contribution of 25% to build up a large pension fund as well. Indeed, with a salary of £40k, your employer's contribution could be at least £100k into your fund in ten years. 

So you are in win-win position for at least ten years (if they stick to it at least)

Marcon

anonn_2 said:

The company have said we can put our case forward for compensation / changes to 25%  - the thing is no one knows what compensation to ask for!

Someone on a similar salary and pot to me has said they will lose approx 4k per year x 20 years (expected life expectancy 88)  so will potentially be  80k  worse off! 

If they're in a DB scheme there isn't a 'pot', so that sounds like another fellow employee you can safely ignore.