Is company changing employee benefit a breach of contract?

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sexitoni

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Hi, I'm in permanent employment and am lucky enough to be in a DB scheme. My contract states: "You will be enrolled in the ~~ pension scheme. This is a fully non-contributory pension"

The company has given the Pension Trustees notice that it is ending the DB scheme and switching staff to a DC scheme, with employee contributions, from the end of March.

I have asked if this is a breach of contract and pretty much been ignored. So is it? And is it something a small fry like me will just have to suck up?

I have not been asked to sign a new contract, there has been no discussion with me or people in my position regarding compensation for what is essentially a hefty pay cut and transfer of risk.

In a way my question is not about the pension, it's more about the company unilaterally reneging on a benefit clearly stated in the contract. I just want to know if the company can do something like this without me having any recourse.

Also is the contract itself essentially null and void? Could I, for example, now ignore the bit about working extra hours unpaid as required by business needs?

Thanks in advance
 
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I think this sits better in the pension forum, you could repost there or ask a mod to move it.

in summary you will likely find that the Trust Deed which governs the scheme allows the employer to wind it up or make amendments. This may be with the consent of the Trustees or after consulting with the Trustees or by their own will. You really need to see the deed and all subsequent amendments to the Deed.

Your contract of employment gives you access to the pension but can never take precedence over the running of the scheme, the Deed is paramount. If the deed says the employer can close it then end of. Of course you can use the employment contract to argue against closure but in reality that will be to set the scene for a decent transfer value.

So, the main issue for you will be the transfer value that you get when you transfer to the DC scheme. This is the place to put the pressure so that you get a good transfer value, not the standard minimum transfer value set by law. The courts have already indicated that Trustees have a right to seek ( and depending on the wording of the deed, an obligation) a higher transfer value than the minimum. Also key to this is the role of the actuary as set out in the deed. Does he set the contribution rates or is he consulted on them or does the employer set the rates with actuary advise. This will determine where the power lies in deciding a TV. I have posted on this previously if you wish to look back on my posts.

The second issue will be the employer contribution level to the new DC scheme. Currently they are likely contributing about 20-30% on average to the DB scheme.
So negotiations should be starting high considering the risk they are off-loading. Now is the time to negotiate hard on this. I have seen up to 17% in recent times, although this would be at the top end of the scale. Who will be doing the negotiating ? The current Trustees have no obligation or right to look after this. Their job is with the DB scheme issues only, even if they will be the Trustees of the DC scheme too.
They have no say in setting the contribution rates.

Third issue will be to ensure any additional benefits such as death in service that are currently linked to the DB scheme continue with the DC scheme.


Leaving a DB scheme is not the end of the world even if you have decent service built up as long as the exit value is decent.

Key to this case will be who the Trustees are and who is going to take the lead and put pressure on them. Many don't know what they are doing or only follow what the company wants especially if they are in a senior position.

As a starter have a read of below summary, there are other views out there about it.

https://www.pensionslawireland.com/2015/04/30/the-omega-pharma-case-trustee-and-employer-guidance/

Are you willing to write a registered letter to the Trustees asking for a copy of the Deed and all subsequent amendments and suggesting that you expect them to seek a transfer value equal to a full deferred annuity buy out cost ? This would be the "market value" of your DB promise.

How much effort and stress you wish to put into this must be considered in light of the accrued service you have.
 
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Thank you I really appreciate that angle, and the time you've taken to answer. I suppose I put it here because the same question could apply to the ending of the subsidised private health insurance, which is also a stated benefit in the contract, and is supposed to be the next target.

The part I should have been clearer about, because I was thinking more in terms of what my contract says, is that the accrued service is being left as is in the DB. We're not being forced to exit and the change doesn't affect current retirees. This change affects future service only. The new DC is 15% Employer and 5% employee. There is no negotiating it appears. Death in Service is continuing, so a figure for the DB service accrued, then a figure based on assumptions about the DC and how much of that is accrued.

I am interested in your final suggestion. The fear here is that (like what happened at Irish Independent) we'll wake up some day in our dotage to a letter saying the fund is empty. So maybe I'd be better exiting the DB even though it's supposedly ring-fenced?
 
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