Whilst, generally, pension benefits already earned by members in a scheme cannot be amended or reduced (without their consent), it is usually possible to change future benefit provision.
Many companies have closed their defined benefit pension schemes to future accrual in order to stop continued growth of their pension risk exposure. Instead, members have been given the option to join Defined Contribution (DC) arrangements, into which the company pays contributions but does not guarantee any level of pension at retirement.
Employer contributions to DC arrangements are generally lower than the contribution rates paid to Defined Benefit arrangements, and therefore this could also generate ongoing cash savings.
Companies to consider a wide range of factors when deciding on their strategy for future provision, including employee expectations and reactions, potential cost savings and risk reduction. Employee expectations can sometimes be managed by introducing enhanced transition terms or other benefits.
Importantly, changes to future benefit provision do not address the legacy of past benefits, and these can be managed through some of the other options below.
We have extensive experience advising and supporting clients who want to move from DB to DC pension provision. Our support can include: