Published by Nick Griggs on
The approach taken by employers to mitigate the increased costs will broadly fall under four options, outlined below.
Sponsors can exercise options 2 and 3 without trustee consent. The changes (whether it is to employee contributions, scheme structure or both) must be such that the saving made is not greater than the increase in NI costs, as certified by an actuary (other than the Scheme Actuary). Members must be consulted on any changes and employers are required to consult trustees on the timing of changes.
Which option a sponsor will choose will depend on many factors including its financial position and the number of members still accruing benefits. We conducted a survey to gauge how scheme sponsors are planning to deal with the extra NI costs. The results are as follows:
The results show that the single most popular option among those that responded is to take no action and simply absorb the extra NI costs. This is presumably the option being taken by those companies with a relatively small number of active members left in their DB scheme. However, employers will still need to consider other relevant actions (see below) as a result of these reforms.
Nevertheless, according to our survey, the majority of sponsors will take some form of action with 25% of respondents indicating that they will take the opportunity to carry out a fundamental review of scheme benefits.
There are a number of other consequences of these reforms which employers may have to consider: