Our relationship with CTL Engineering was formed when we were asked to provide consultancy services to an existing defined benefit pension scheme.
A family owned business, with a strong culture of looking after staff, the business was not immune from the challenges of running a defined benefit scheme. Around six years ago, it was decided that the company needed to move from a defined benefit to a defined contribution pension arrangement for employees.
Working with us, the company made decisions as to sustainable and affordable levels of pension contributions for those employees no longer offered defined benefits pensions.
For any business, a transition from final salary to defined contribution must be managed in an effective way, importantly, taking into account the concerns of employees and the need to communicate effectively.
They managed the transition from a Defined Benefit Scheme to a Group Personal Pension Plan very well and individual consultations for employees have been very well received – our staff have now come to know and trust their advisors. M D Kynaston, Company Secretary and Financial Controller, CTL Engineering Co. Ltd Initially, we advised upon staff consultation with regard to the change of pension scheme, and then supported both formal announcement letters and group presentations regarding the new arrangement.
The change did of course lead to employee concerns and a degree of resistance. Through a programme of communication we helped explain why change was necessary, and also that ongoing pension contributions would still be at a very generous level for employees. The company believe that, as independent advisers, we were invaluable in this communication.
The defined benefit scheme was replaced by a Group Personal Pension Plan. Employees were met on an individual basis, explaining the difference between defined benefit and defined contribution pensions, how retirement provision is accrued under each method, and the factors affecting ultimate pensions through each system.
When we individually explained the rationale for change, many employees understood that the open ended liability existing under defined pensions benefit schemes was in fact unsustainable for many companies today, and that many other employers had taken very similar steps in recent years.
We now continue to meet each employee annually. We attend with both statements from the defined benefit and Group Personal Pension schemes, along with State Pension forecasts, so employees have a clear picture of how their retirement will be made up. Through these annual meetings, we are helping many members actually target a level of retirement income close to that which they may have received through the defined benefit arrangement.
Whilst many employees were disappointed to see the demise of the defined benefit scheme, they do recognise, in difficult times, that their employer is providing them with a pension arrangement that is well above the market average and supported by ongoing individual advice and consultation.
