Employers: remember duty to consult members on scheme changes

The Government has announced that it is consulting on proposals for the Pensions Regulator to issue fines over breach of consultation requirements. The regulator would therefore like to remind employers of their duty to consult members before making certain specified changes to future pension arrangements.

Pensions Regulator strategic development director Bill Galvin said: “Members have a right to voice their opinions on changes to their pension scheme. The consultation process need not be onerous and we expect employers to carry this out, where practical, and to listen to member responses before any final decisions are made. This will enable members affected to understand the implications for them, and why the proposal has been made.”

Employers should allow an appropriate time for members to respond, taking into account member views prior to any changes being made. There should be no coercion or inducement – employees should not be made to feel that the proposals will be implemented irrespective of their responses and those who do not agree to the proposals should not be treated any differently.

The regulator can agree to waive or relax any of the requirements if this protects the interests of the majority of members.

1. Information on the proposed amendments to the regulations is available from the Department for Work and Pensions.
2. The employer duty to consult with members (or their representatives) applies where employers are considering certain specified changes to future pension arrangements. (Benefits already accrued cannot be changed without member consent.) The employer should allow an appropriate time period for carrying out the consultation, which in any event must not be less than 60 days.
   
   The requirement to consult is set out in sections 259-261 of the Pensions Act 2004, the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 as amended, and the Occupational Pension Schemes (Consultation by Employers) (Modification for Multi-employer Schemes) Regulations 2006. For further detailed information about the regulations see the DWP guidance at www.dwp.gov.uk
3. It is not always practical to consult, for example when restructuring is taking place and employees' jobs are at risk if the process is delayed. In such cases the regulator urges employers to provide as much information as possible to those affected, even if only on a confidential or restricted basis, and to apply the longest possible timescale before the changes are implemented.
   
   Where such issues are not a factor we expect employers to comply in full with the requirement to consult and provide as much information prior to the consultation as possible.
4. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
5. • collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
   • issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
   • direct pension schemes as to how to calculate their liabilities and the contributions required;
   • issue a contribution notice where there is a deliberate attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.
     

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