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Removal of Final Salary Pension
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I recently signed a new contract with my employer due to harmonisation required after a merger. Guidance notes on the contract provided by my employer stated that I would definitely remain in the final salary pension scheme; however, the level of my contributions could change. After signing the contract based on this information, my employer has informed me that I am being removed from the final salary pension, as it is too expensive for the company to operate. It was also explained to me that the company can remove me as a consultation on the removal overrides any contractual agreement. I obviously feel cheated as I signed my contract on the basis that I would remain in the pension scheme. My employer has also advised during the consultation that there would be no negotiation as the board had already finalised the final salary pension scheme would be pulled. Why did the contractual agreement not protect me against this decision?
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The contractual agreement doesn't bind you and the company to whatever it says until you leave employment. With appropriate notice given and consultation, any part of it can be altered on either side by the parties. Whether or not the modifications are 'fair' or not depends on what was being changed and how much consultancy is/was done over the proposed change.
I guess there are going to be a number of these Final Salary Pension scheme things going on so it would as well for folks to get their heads around what is happening.
What SHOULD be happening, I trust, is that company no longer will support the final salary principle after some date shortly to occur until the date you leave. HOWEVER you had a contractual obligation to FS pension from the date you joined until now. The company cannot deny that to you - you have an accrued historic right.
The easiest way to think about it is effectively you are leaving the final salary scheme at your salary now and based on the number of years earned in the scheme - and an entirely new scheme is starting based upon different parameters. You get a separate right to a pension from that but you can by damn sure it won't provide the same level of benefits as the existing one - that's the whole reason why the schemes can't continue to deliver the historic right into the future.
I said that is the easiest way to think about it - but that may not actually be the way it is negotiated out - some companies are substituting 'career average salaries' rather than 'final year salary' that drives the base eventual pension. The implication of that is that some employees are gainers and some are losers (compared to my simple way to think about what is happening) - and it may not be possible to work out whether you would be a net gainer or a net loser (compared again to my simple way of thinking about it).
Does that help - complicate?
I guess there are going to be a number of these Final Salary Pension scheme things going on so it would as well for folks to get their heads around what is happening.
What SHOULD be happening, I trust, is that company no longer will support the final salary principle after some date shortly to occur until the date you leave. HOWEVER you had a contractual obligation to FS pension from the date you joined until now. The company cannot deny that to you - you have an accrued historic right.
The easiest way to think about it is effectively you are leaving the final salary scheme at your salary now and based on the number of years earned in the scheme - and an entirely new scheme is starting based upon different parameters. You get a separate right to a pension from that but you can by damn sure it won't provide the same level of benefits as the existing one - that's the whole reason why the schemes can't continue to deliver the historic right into the future.
I said that is the easiest way to think about it - but that may not actually be the way it is negotiated out - some companies are substituting 'career average salaries' rather than 'final year salary' that drives the base eventual pension. The implication of that is that some employees are gainers and some are losers (compared to my simple way to think about what is happening) - and it may not be possible to work out whether you would be a net gainer or a net loser (compared again to my simple way of thinking about it).
Does that help - complicate?
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