Company changing Defined Benefit scheme

R

robgolfer72

Guest
Hi all,

I am in my mid forties and am in a non contributory defined benefit pension scheme. I have learned that the company is changing this to contributory and that that it is no longer defined benefit.

I had always considered this as a major plus factor in my employment that I pay nothing into the pension scheme and get a guaranteed index linked 40/60 ths pension (less state pension) at retirement.

It would now seem that I am far worse off and I have to contribute with the results are not guaranteed nor index linked.

Can you outline my rights if any or the company's obligations ?

Am I entitled to compensation for example or should I seek specialised advice ?

Thanks
 
Is there a union. What is there openion. The unions are currently trying to stop what your company is trying to do. The outstanding issue of the current pay deal concerns pensions.

You should be entitled to one year for every year worked up to a max of 40 years at age 65. This is in effect deferred pay.
You should have received a statement every year detailing the amount of the fund you would receive in the event of you leaving the scheme. You should look to get this as a minimum and transfer this to a pension
Will the company be making a contribution to the new pension or will you have to contribute the amount. I take it that the new scheme will be a defined contributions scheme.
If there is a union see if they will engage the services of an actuary or someone very familiar with pensions.
Who are the trustees of the scheme? Are there employee reps as trustees.
 
Hi RG,

When you say you are in a non contributory DB scheme are you sure? Im asking because this type of DB scheme is quite rare (mostly Banks and Financial Institutions). Is there a deduction from your salary each month?

aj
 
Hi all

Thanks for the initial feedback. To answer the ponts raised :

- I am not in a union and the company is non unionised.
- I have an up to date pension statement and have never had to make a pension contribution. As I understand it my existing benefits will be frozen and a new pension started which I will have to contribute.
- The pension is guaranteed at 40/60ths on retirement less the state pension. As I understand it this makes it defined benefit. In the future for the "new" pension, I will have to make a contribution and the company will also.
- In the new pension the pension will not be defined at 40/60ths I assume it will depend on the performance of the fund
 
Hi RB,

Thanks for clarifying that.

asdfg asked :
Who are the trustees of the scheme? Are there employee reps as trustees.
Click to expand...

Is your company a subsidiary of multinational or is it largely based in this juristiction?

You should call the pensions board, they are very helpful in these matters.
aj
 
Will your final salary be based of current salary (index linked) or salary at retirement. What happens if you are promoted?

Make sure that the calc is salary * no of years worked/60 less pension * no of years worked/40.

Example

Start work at 22
Current Age 45
No of years worked 23
Current salary 60,000
State Pension 10,000

60K * 23/60 less 10K * 23/40
23K less 5.75
17.25K

Also ask for projections if you contribute X amount. It will give you some idea of how much you have to contribute to make up this shortfall.
Just remember that the max pension is 40/60 or 2/3 of final salary (without deduction of state pension) per P60 and you can get tax relief on any contributions you make. You could ask for an increase in salary as the company will also make a saving (does not have to pay employers 10.75% PRSI)
 
Hi Rob

To answer your initial questions...

In all likelihood your DB pension plan is governed by a trust deed and rules and it will state in that that the employer may wind-up the plan at any time (maybe with certain notice period).

It is most likely that you can't stop them - and your contract of employment probably does not state if pension plan must be DB or DC, so they are probably covered there too.

However, the company is making a money-saving measure here.

So, as I see it, you have two areas to check out:
  1. Will you get a fair value for youe pension accrued up to wind-up date - legally they must give you a fair transfer value except in extremly exceptional circumstances of employer difficulty.
  2. How much was the company contributing for you before (to DB) and how much will they put in now (to the new DC plan)...the difference is probably a saving of money by company and you might look for this in form of salary?
I hope this helps you.
 
Many thanks for the contributions plenty for me to follow up on
 
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