Employer wants to wind up DB scheme

[Jister]

The company I work for wants to wind up our DB scheme, mainly because the workforce is now about 10% of what it was at its peak and only around 3% of the schemes members are now still employed by the company (me included!) The scheme is closed to new members for many years.

Can they just do this?

How do they portion up the total fund?

What are my options?

Any other bright ideas?

 

[rust40]

Jister,

Went through this a while ago,

Can they just do this? Yes, if you look up the rules of the DB scheme there will probaly be a clause permitting Company to wind up scheme. What's happened here is that the company cannot afford scheme and wants liability taken off their books.

How do they portion up the total fund? Company's actuary will calculate a Transfer Value (TV) for all members (inc. those who have left but are still members). Take this value to your financial advisor for his opinion, more than likely it'll be much less that the "DB" value of your accrued pension but this is all company is permitted to pay you.

What are my options? Depends on how generous the company is.
Your financial advisor will determine the increased level of contributions required from you to match what the DB scheme would have paid out. You could ask company to share the cost of this with you. Alternatively a once off payment to your new DC pension (presume the company will now offer you a DC pension) along with the TV might help. From now on you are carrying the investment risk.

The unions in the banks have negotiated a hybrid DB/DC scheme where company will guarantee a %age of salary (DB) with the rest being DC.

Any other bright ideas? Join the Civil Service.

Rgds

 

[johnnygman]

DB schemes will all be wound up id say in the next few years, they are too expensive to run and given market preformance over last 10 years they are probably starting to frighten the last few emplyers still offering them to opt out.

 

[mbradso]

The company I work for wants to wind up our DB scheme, mainly because the workforce is now about 10% of what it was at its peak and only around 3% of the schemes members are now still employed by the company (me included!) The scheme is closed to new members for many years.

Can they just do this?

How do they portion up the total fund?

What are my options?

Any other bright ideas?

1. Yes they can do this. This will be stated in Trust Deed & Rules.

2. Your portion of the fund (transfer value) will be based both the value of your accrued benefit on winding up, and the solvency of the scheme.

3. Not having all the details your options will be transfer to approved insurance contract (personal retirement bond) or occupational scheme. Since you still seem to be employed by same company, you may be able to transfer to the new scheme offered to your fellow employees, once joined.

I imagine the new scheme will be a defined contribution basis, you and fellow could ask for higher employer contribution rate, doubt it be worthwhile asking..

If the scheme's solvency isn't too bad, you should get a decent transfer value and for your time in DB plan. If the scheme is insolvent you could ask employee do they plan to make a cash injection before winding up...

Finally, don't be afraid to ask scheme administrator questions, they will have all the details and that's what they are there for!!