Consultation by employers
- Many employers already consult employees who are members of pension schemes or their representatives, before making major changes. This measure will ensure that all employers follow this good practice.
- This measure will ensure that employees will have the opportunity to feed in their views on proposed changes to their pension arrangements before the employer makes a decision.
- Not a requirement to agree changes with employees, or give employees a veto on change – recognise that employers make pension provision voluntarily.
Background
The Green Paper recognised that it was good practice for employers to consult individuals and/or their representatives before making changes to pension arrangements but that not all employers followed this. Views were sought about a statutory requirement to consult being put on employers and assurance given that these views would be considered alongside the implementation of the EC Information and Consultation Directive, which must be transposed into UK law by March 2005.
Working and saving for retirement: Action on occupational pensions, published in June 2003, confirmed that the proposal to introduce a requirement to consult had been widely welcomed. The main issues raised in consultation responses were that any new requirement should not hinder business flexibility to make long term commercial decisions; that it should cover significant rather than minor changes; and that there should be recognition that there are already a range of consultation mechanisms in place.
What is changing?
There will be a new duty on employers to consult in the manner to be set out in regulations, where they are proposing to make one of a prescribed set of decisions in relation to their occupational pension scheme or work-based group personal pension arrangements. Where scheme rules give certain power to trustees, they will be required not to make prescribed decisions unless they are satisfied that the employer has consulted. Compliance will be enforced by the Regulator.
- Find out more about The Pensions Regulator .
How will this improve employer/employee dialogue?
- Strengthens the pensions partnership
- Encourages employees to take an active interest in their pension arrangements and value employer pension provision.
Whom will the employer consult?
Where there are recognised Trade Unions, or appropriate information and consultation arrangements which have been approved by employees, employers will be required to consult one or more of these. This is in line with our Green Paper commitment to implement the pension consultation requirement alongside implementation of the Information and Consultation Directive.
The Government is continuing to discuss the detail of the regulations on who must be consulted with the TUC and the CBI.
What kinds of decisions will trigger the requirement to consult?
It is envisaged that the regulations will cover decisions such as closing a scheme completely, closing a scheme to future accruals, closing a scheme to new members, changing from a defined benefit scheme to a defined contribution or hybrid scheme, and significantly reducing or removing an employer contribution to a defined contribution scheme or group personal pension scheme.
- Find out more about the Government's pension reform plans.