Question
Is there an obligation on employers to consult / notify in advance changes they make to final salary pension schemes? Having been with my employer for over 20 years and now 61, I find that the early retirement penalty in 2010 is double the clawback of 2009. This means taking early retirement now pays me a lower pension than last year ! No communication from the employer -only a " these are now the terms" from the pension administrator. Can this be actioned without notice/consultation? It seems that a selected few were tipped off and got out quick!
Could this be a way to help taxpayers and relieve the burden on public sector pensions costs?Answer
An employer’s obligations with respect to final salary pension schemes are set out in the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and I’m afraid reading the regulations is as tedious as the title suggests.
In a nutshell an employer must consult employees for at last 60 days when they propose to:
However, the regulations specifically exclude a need to consult when the proposed change “has no lasting effect on a person's rights to be admitted to a scheme or on the benefits that may be provided under it”. I suspect this probably applies to changes in early retirement penalties as the impact is not lasting if you instead work until the normal retirement age – although the rules are ambiguous.
I suggest asking the scheme administrator why you weren’t consulted and see what they say.
If some members were ‘tipped off’ then this is a potentially serious issue. When an employer makes announcements regarding the pension scheme it should be to all members (if it affects them) and not just a select few. Again, you might want to pursue this with the scheme administrator and if their answer is unsatisfactory you could take your complaint to the Pension Ombudsman.
The Government obviously has the power to reduce future public service pension benefits and let’s face it; such changes are probably inevitable over the next 5-10 years given the Government’s financial deficit. However, they would have to consult affected public sector employees and it will probably turn ugly with strikes etc, so the changes probably won't happen without some all round pain.
Is there an obligation on employers to consult / notify in advance changes they make to final salary pension schemes? Having been with my employer for over 20 years and now 61, I find that the early retirement penalty in 2010 is double the clawback of 2009. This means taking early retirement now pays me a lower pension than last year ! No communication from the employer -only a " these are now the terms" from the pension administrator. Can this be actioned without notice/consultation? It seems that a selected few were tipped off and got out quick!
Could this be a way to help taxpayers and relieve the burden on public sector pensions costs?Answer
An employer’s obligations with respect to final salary pension schemes are set out in the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and I’m afraid reading the regulations is as tedious as the title suggests.
In a nutshell an employer must consult employees for at last 60 days when they propose to:
- Increase the normal scheme retirement age.
- Close the scheme to new members.
- Stop existing members from accumulating future benefits.
- Stop contributing into the scheme.
- Require members to make contributions when not previously required.
- Increase the amount members are required to contribute into the scheme.
However, the regulations specifically exclude a need to consult when the proposed change “has no lasting effect on a person's rights to be admitted to a scheme or on the benefits that may be provided under it”. I suspect this probably applies to changes in early retirement penalties as the impact is not lasting if you instead work until the normal retirement age – although the rules are ambiguous.
I suggest asking the scheme administrator why you weren’t consulted and see what they say.
If some members were ‘tipped off’ then this is a potentially serious issue. When an employer makes announcements regarding the pension scheme it should be to all members (if it affects them) and not just a select few. Again, you might want to pursue this with the scheme administrator and if their answer is unsatisfactory you could take your complaint to the Pension Ombudsman.
The Government obviously has the power to reduce future public service pension benefits and let’s face it; such changes are probably inevitable over the next 5-10 years given the Government’s financial deficit. However, they would have to consult affected public sector employees and it will probably turn ugly with strikes etc, so the changes probably won't happen without some all round pain.
Read this Q and A at http://www.candidmoney.com/questions/question191.aspx
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