Capping DB pension costs and offering choice of DB or DC

The background

As a result of rising DB contribution rates, an association was faced both with a disparity between the contributions paid for different groups of employees and the strain on their business of additional pension contributions. Recognising that DB pensions were valued by employees, they proposed to cap employer DB contributions (with members paying the balance) and to offer members a choice between DB and DC. Management were concerned about the complexity of this choice and its potential impact on employee relations.

Our solution

We worked closely with management and the administrators to put together communication material to employees, explaining how the situation had arisen and what the options were. We presented alongside management across multiple sites and also provided individual face-to-face and telephone sessions for employees to explain their options, which were very well received by staff.

The outcome

Our client now has more stable ongoing pension costs for future pension provision and a reduction in the level of DB risk accruing after broadly two-thirds of staff opted to switch to the DC arrangement. As a result, our client is able to focus on their overriding strategy to meet the Government’s directive to build new homes, while at the same time providing employee benefits that are as equitable as possible.