Employer Consultation

Pension changes could amount to a variation of contract

Initially only employers with 150 or more employees are affected, although the scope of the legislation will extend to those with 100 or more employees from April 2007 and to those with 50 or more employees from April 2008.

The new regulations impose an obligation on employers to consult with employees if they are making certain ‘listed changes’ to pension arrangements.

The listed changes are different, depending upon the type of scheme in question, but for occupational pension schemes will include increasing the normal pension age, preventing new members from being admitted to the scheme, preventing the future accrual of benefits under the scheme in respect of members, removing an employer’s liability to make contributions towards the scheme, and introducing member contributions when they were not previously payable.

Where there is a proposal to make a listed change, the employer must provide employees and their representatives with information in writing about the change and its effect on scheme members, as well as the proposed timescale for their implementation. This information must be provided at least two months prior to the implementation of the change, and the employee representatives must be given a chance to consider the changes and to give their views to the employer.

The employer must also then consult with employee representatives, though if information and consultation arrangements are already in place, these may be used instead of the statutory regime introduced by the new regulations. Consultation must be for an appropriate period, and in any event, must not be less than 60 days. During the period of consultation the employer is under a duty to work in a spirit of co-operation, taking into account the interests of both sides.

When considering the implementation of pension changes, employers must now consider their consultation obligations carefully and must organise and prepare themselves in order to comply. Employers should also remember that pension changes might amount to a variation of contract and must be handled accordingly.

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