UK - Firms which close defined benefit schemes risk lengthy legal wrangles when disgruntled workers realise the benefits they have lost.
Buck Consultants warns that action is likely when employees find out that their pensions are much lower than they expected.
Buck Consultants head of technical services Kevin LeGrand said: “There may be an increase in attempts at legal action by individuals or groups of disgruntled employees when the full extent of their situation dawns on them.
“Even if these are not successful, considerable time and cost could have to be expended to refute them.”
LeGrand also said that employees would lose out because defined contribution schemes tended to follow non-optimal investment strategies and lacked the same level of knowledge as well-advised scheme trustees.
LeGrand added: “Defined benefit schemes can invest on a pooled basis more effectively and for longer as they do not have to switch each person’s ‘pot’ on their approach to retirement.”
Although many in the industry cite cost cutting as the main reason for the shift away from DB provision, few companies are explaining exactly what this move means for their workers.
Diageo group pensions and benefits director Steve Mingle said: “If you are going to move to a cheaper scheme, you must tell your employees what it means for them.”
He noted: “Too many employees in this situation are being misled into thinking this move is cost neutral for them.”
By Jonathan Stapleton
The Pensions Regulator (TPR) and Labour MP Stephen Kinnock and will listen to the experiences of steelworkers when transferring their pensions away from the British Steel Pension Scheme (BSPS) next week in Port Talbot.
Just Group has acquired a 75% stake in the holding company of Corinthian Pension Consulting in a bid to strengthen its professional defined benefit (DB) advisory services.
The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.