In some cases, an employer event may lead to changes that the employer wishes to make to the scheme.
Employers will need to consult with the scheme members about certain changes. For example, to reduce pension costs going forward, the employer might decide it wishes to close the scheme to future accrual or increase member contributions, which are just some of the situations where it will be necessary to consult members. You can read our guidance on the duty to consult on scheme changes (PDF, 49kb, 5 pages) for further information.
Employers may also seek to reduce their pension costs by proposing other types of changes which may require members to consent the changes. This might include the following:
- Certain proposed changes to members’ accrued benefits. See our code of practice on modification of subsisting rights for more information.
- Liability management exercises such as enhanced transfer values or pension increases, ie incentive exercises.
- Transferring members’ benefits to another scheme. This might be because of a sale of the employer or a scheme merger or demerger, or where a successor scheme is offered following a regulated apportionment arrangement (PDF, 248kb, 2 pages).
In all these cases, trustees need to ensure members are given all the information they require to make informed decisions. You should work with the scheme administrator to make sure all members have been contacted by the employer.
All of these types of scheme changes, especially those where the employer is proposing changes on the grounds of scheme affordability, may make members nervous about the security of their benefits so it is important to prepare to answer member queries and be alert to an increase in cash equivalent transfer value (CETV) requests.
Scheme members may want to speak to a financial adviser about how the pension scheme changes affect them.
You could check if the employer would be willing to provide access to an independent financial adviser or a panel of advisers.
If not, you should direct members to:
- use the Pensions Advisory Service
- find an adviser using the Money Advice Service retirement adviser directory
- check if their adviser is authorised by using the Financial Conduct Authority financial services register
Make sure you don’t provide financial advice to scheme members unless you’re authorised to do so. For more information, read the guide to providing support with financial matters without needing to be subject to regulation (PDF, 174kb, 4 pages).
Work with the employer to consider how they can consult most effectively with members. This includes deciding whether to use electronic or paper-based communications and writing in plain English. For more information, read the good communications guide from Pension Quality Mark.
Make sure you comply with the General Data Protection Regulation (GDPR). For more information, read the GDPR Made Simple guide from the Pensions and Lifetime Savings Association.
Agreeing final changes to the scheme with the employer
In most cases, you need to agree final changes to the scheme with the employer.
Work with the employer in an open and transparent manner to agree a scheme change that strikes the right balance between the needs of the scheme and the employer.