Benefit changes

The world of employee savings, including retirement savings is changing fast, with fluctuating cost, technological improvements, improved defined contribution (DC) offerings and other tax efficient savings available.

These factors along with the significant increase in the cost of providing defined benefit (DB) pensions to employees means that these benefits sometimes need to be reduced or schemes need to be closed altogether. Indeed, closure of schemes is sometimes needed to protect the benefits that past and current employees have already built up. However, the process is both complicated and emotional.

20-20 Trustees have been involved with both benefit changes and scheme closures and understand the logistical, regulatory and emotional dynamics of these types of changes, especially where unions and employee representative groups are involved. Information, education and support, are critical even after the consultation is over and a decision has been made.

There are a number of issues that need to be considered and dealt with when scheme benefits are amended or a scheme is closed to accrual. One very current example or benefit change is the potential for some schemes to change indexation from Retail Prices Index (RPI) to the Consumer Prices Index (CPI). However, the legal and regulatory landscape needs to be carefully navigated and robust decisions will need to be made.

In addition to legal and regulatory issues, the standout consideration is member communication, which should be joined up, informative and unbiased. Clearly, in most circumstances, either a 60 or 90 day consultation needs to be run by the employer, and the trustees of a pension scheme will need to work closely with senior officers from the company to understand and implement any administrative, investment and funding changes that are required as a consequence. The communication from the Trustees should enhance rather than negate employer communications, and the employer and the scheme’s trustees will need to enter into agreements to support each other, including the potential sharing of data whilst being compliant with Data Protection Laws.


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