DB Pension Suspension?

My employer has announced that it proposes to suspend its contribution to my DB pension for the next two years. The pension scheme does not have a surplus such that would justify this. If the employer suspends their contribution my understanding is that I cannot contribute thereby impacting on all my benefits through length of service etc.

My question is can they do this? The company is not in such difficulty as that would warrant this action - 77k off last year, year to date.

Any advice as to when and if an employer can do this and what to do if they try would be greatly appreciated.

susan

I think the important question is whether you continue to accrue benefits even though the contribution is suspended - I understood that some of the Irish banks suspended contributions to DB schemes in the 90's or early 00's as there was a large surplus in the schemes at the time but staff still accrued benefits for this time - ie if you had 8 years service and qualified for 8/60ths of final salary, and the company suspended for 2 years, at the end of the two years you would have 10/60ths even though the company had not made any payments to the fund.

I wonder is the suspension an pre-cursor to changes to the scheme? What information has been provided?

The fund is acutally in deficit, seriously so. The funding levels are well short of that required. In fact the last pension report stated that they would be making a proposal to the pension's board to address the shortfall - this was as recently as March 2010.

From what little information is available it seems they are 'suggesting' a pension holiday which will not only mean that the employer contribution is with-held but also the individual contribution. Surely this can't be legal?

They have suggested that it is an individual issue - i.e. that each person will need to decide whether to accept or reject. Again this doesn't make sense to me. What if some do and some don't. Surely that will impact on the available pot of monies? Surely if I reject the proposal my pension is impacted anyway?

What of the trustees? Surely it is they who decide and not management?

I also wonder what happens to my other benefits like death in service etc. Should I die during the two year suspension will I not be covered?

I suspect that the company saw this simply as a quick and easy way to save money without fully understanding the consequences. I think it is driven by the finance dept who have failed to grasp the seriousness of what is proposed.

What of the trustees? Surely it is they who decide and not management?


Hi

On this issue Trustees have no say. Trustees are responsible for money once invested in the scheme and to encourage participation in the scheme. They have no authority to dictate to the company its level of contribution.

Cheers

Thats interesting, I thought the trustees were responsible for ensuring funding levels were appropriate - how can they do that if they have no control over the contribution levels required?

By any chance do you know Fatman if a suspension impacts on the death in service etc?

thanks a mill

Susan

susan12 said:

The fund is acutally in deficit, seriously so. The funding levels are well short of that required. In fact the last pension report stated that they would be making a proposal to the pension's board to address the shortfall - this was as recently as March 2010.

From what little information is available it seems they are 'suggesting' a pension holiday which will not only mean that the employer contribution is with-held but also the individual contribution. Surely this can't be legal?

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It seems strange that they would decide to suspend your contributions as well as their own as this will only exacerbate the problem. What contribution do you make? Is yours a very small company? are they taking external advice?

No its not a small company at all. Who knows if they are taking external advice - they simply aren't saying. The trustees have indicated that they have sought legal advice which the company has to pay for.

The contributions are generous - 13% employer (to address shortfall) and 6-8% employee.

Honestly I suspect it is just a money saving idea someone thought up and it has just grown legs. I really don't think they considered the consequences fully.