Charlie Weston: Expect defined benefits cull after pension ruling
THE way is now clear for more company pension schemes to close.
This is one of the conclusions to be drawn after yesterday’s verdict.
Mr Justice Peter Charleton ruled the trustees of the pension scheme of Element Six in Shannon had acted reasonably when they agreed to accept an offer to wind up the scheme on the basis of a contribution of €37.1m from the company.
The scheme was a defined benefit one – a traditional company pension where the employer used to guarantee to pay a pension based on the years worked and on the salary at retirement.
But these schemes are disappearing fast in the private sector as they have become too expensive to fund.
From once having around 2,500 defined benefit schemes in this country, we are down to around 800 now. And the cull of such\[pedoyle\]these defined benefit schemes is expected to continue in the private sector.
Had the Element Six case gone the other way, trustees of schemes and sponsor companies might have had to pause for thought\[pedoyle\] before any more are shut down.
The fact that the Element Six members lost their case means there is nothing to stop more defined benefit schemes disappearing – apart from in the public sector, where taxpayers fund them.
Trustees have come under pressure in various defined benefit schemes that have either closed or forced through a radical reduction in benefits.
Members complain that trustees, who represent them, should take a more aggressive approach to defending \[pedoyle\]members’ benefits\[pedoyle\] and sure sponsoring employers who break the DB promise.
The loss of the Element Six case shows that is not so simple for trustees to take on sponsoring companies.
Unlike the UK, there is nothing to stop an employer in this country walking away from its responsibilities when a scheme is in deficit.