The Pensions Consultation Commitee
From Ibmukpensions
Will the Committee have any teeth?
Unite Pensions briefing
Employers must now consult on major pension changes Where major changes in company pension arrangements (including employer contributions to money purchase schemes) are proposed after April 6 2005 then a new prescribed consultation procedure must be followed before they can take effect.
This change derives from the Pensions Act 2004 and is brought into effect by 'The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006
Amicus played a key role in persuading the Government to introduce legislation requiring consultation as part of our campaign to strengthen employee rights in relation to their pensions.
What changes are covered ?
• Closure of a scheme to new members or to further accrual by existing members • introduction of or any increase in employee contributions • any reduction in employer contribution to a money purchase scheme • an increase in normal pension age/earliest age a member has a right to retire • any change from defined benefits (e.g final salary) to money purchase benefits • changes in the basis of defined benefit accrual (e.g a switch to a CARE basis) • any reduction in the rate of future accrual of benefits. This last point includes changes proposed arising out of adjustments in benefits proposed as part of the process by which schemes may satisfy the new scheme funding requirements. Changes in contribution arrangements are covered for personal pensions and stakeholder pensions where the employer makes a contribution. Where after consultation a lesser change of the same type is decided on then no further consultation need take place. However, where a different change is proposed there may need to be a separate consultation exercise. For this reason employers may choose initially to consult on a range of changes. Who has to consult ? The employee/scheme member's employer is charged with the duty to consult even where changes may be being made by other parties i.e by a parent company, by trustees or by the Pension Regulator. The employer reports back responses to whoever is proposing/ making the change.
There are some exclusions from the duty to consult. The main one follows the exclusions as apply in respect of the more general statutory Information and Consultation requirements and are based on the number of employees an employer has ( the number of members of the pension scheme)
April 2006 - Employers with more than 150 employees must consult
April 2007 – Employers with more than 100 employees must consult
April 2008 - Employers with more than 50 employees must consult
Employers with less than 50 employees are not covered by the requirement. However, in Guidance on the new Regulations, the Government has said they 'would encourage all employers, irrespective of their size, to consult their employees'
Who has to be consulted ? Consultation is required with active members – and prospective members – but not with deferred or pensioner members. The employer must make arrangements which secure that, so far as is reasonably practicable, all affected members are covered.
The employer must choose to consult with one or more of :-
• recognised independent trade unions • elected or appointed Information and Consultation representatives • representatives specially elected for the purposes of pension consultation
where these arrangements are established
Where none of these arrangements are in place then they must consult with the members directly. Where arrangements are in place but the employer considers that some affected members are not covered by them then they must consult with those members directly
Representatives involved in consultation must be provided with reasonable paid time-off and are protected against dismissal or detriment on account of carrying out their duties (in the same way as are pension trustees).
What information has to be provided ? Where a prescribed change is proposed information has to be provided to each affected member and to any representatives of the members who are to be consulted.
The information provided must :-
(a) be in writing (b) be provided before the start of the consultation period (c) describe the proposed changes (d) state what effect they would have on the scheme and on scheme members (e) be accompanied by any relevant background information (f) indicate the timescale for their introduction (g) be in such a form which enables representatives to fully evaluate them
'Relevant background information' would be taken as including relevant actuarial /funding information about the scheme. The Pension Regulator has indicated that, in relation to proposals to modify future accrual of benefits, such information is needed to make the consultation meaningful..
What must consultation entail ?
The Regulations places a duty on the employer and those consulted 'to work in a spirit of co-operation, taking into account the interests of both sides'
The Government Guidance on the Regulations supplements this by saying that consultation should comprise 'an exchange of views and the establishment of a dialogue'
A minimum of 60 days is laid down for the consultation period, which can only be reduced by direct permission of the Pension Regulator As well as providing the required information before the start of the consultation period the employer must notify the date set for the end of consultation or for the submission of written comments.
The employer must report all responses to the consultation to whoever, if not themselves proposed the change. The responses must be considered before a decision to make the change is made.
Changes cannot be agreed by trustees unless they are satisfied that the statutory consultation has taken place.
The Regulator has powers to issue orders, notices or directions to trustees and employers in the event that consultation has not been properly conducted and can fine employers who fail to consult.
