UK – Employers could be fined by the Pensions Regulator should they fail to properly adhere to the new 60-day consultation period regarding proposals for any major changes to their pension funds.
Pensions reform minister Stephen Timms yesterday announced that employers would no longer be able to make significant changes to their schemes without first consulting scheme members.
The regulations, introduced under the 2004 Pensions Act, require employers to consult current and prospective scheme members for “at least” 60 days before any changes can be implemented.
“These regulations will mean that employees will now have a voice about any major changes to their pension scheme,” said Timms. “Members need to fully understand their pension scheme, and the effect that changes will have on it and their future positions.”
Employers with more than 150 employees will need to comply from 6 April 2006, those with more than 100 employees from 6 April 2007 and those with more than 50 employees from 6 April 2008.
According to the Pensions Regulator, scheme members can report employers to the organisation should they feel the consultation process was not properly conducted.
Employers failing to comply with the Regulator’s recommendations will be issued with an investigation and improvement notice. The Regulator could fine an employer that failed to co-operate.
The Confederation of British Industry (CBI) has endorsed the need for consultation between employers and employees. But CBI deputy director-general John Cridland stated: “Government must ensure the new requirements do not add to the regulatory burden by mirroring existing information and consultation processes.”
He added: “The ability of employers to make changes vital to the long term well-being of companies must not be restricted by the new requirements.”
A spokesperson for the National Association of Pension Funds (NAPF) told IPE that these new development were merely “putting into regulation what has been normal practice” among its members.
He added that while employers could theoretically press ahead with changes even where employees disagreed, it would go against the notion of good industrial relations.
“It is better to take your employees along with you than impose it big_changes on them,” he said.
Hewitt pensions consultant Tony Baily said that he doubted there would be a backlash against the legislation.
“The majority of our clients typically consult with their employees, in any case,” he said.
A department for work & pensions spokesperson told IPE that the minimum 60-days for consultation was a “reasonable standard period” and that it was unlikely to change.
“It’s intended to give employees a say in pension schemes and to let them know about the changes,” she said.