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T wo of the biggest names in UK road transport, Exel
Page 47
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and Wincanton, have this month switched from final-salary to money-purchase plans—where the employer pays in less, with no risk to itself. Another company following suit is worldwide distribution firm TDG.
TDG, in line with most companies winding down their schemes, offered existing staff the chance to join the final-salary scheme before the 5 April deadline.
A spokesman for TDG says: "We decided to expand our existing money-purchase scheme. Our employees were unsurprised at this decision given the number of other companies that are going through the same process." So could it be that while the unions are up in arms—citing a serious erosion of staff rights—the employees are nonchalant?
"I don't think truck drivers think about pensions particularly," says Noreen Hoskin, company director of transport distribution company Parsons, near Exeter in Devon. We prepared a stakeholder pension package through Legal & General and sent information packs and a memo out to our 70 employees. We had a few enquiries, but not one per
son took it up."
116
, Employment law , Employment law
So what are the legal barriers to ending a final-salary scheme? According to Keith Hearn, employment law expert and senior partner at Leeds-based solicitors Ford & Warren: "It's legally possible to end a finalsalary scheme, even where it's part of the employee's contract of employment.
"There's been surprisingly little litigation over this," notes Hearn, "although that's probably because the principles are fairly clear."
Any operator considering changing their pension scheme should see it within the context of employment law, as well as just pension law, says Hearn.
"Under employment law, an employer can't unilaterally vary a contract of employment unless the contract expressly permits it, which is rare," he reports.
However, an employer can consult to bring the current contract to an end by giving notice—this will ulti mately amount to a dismissal— although they can then offer a fresh contract on different terms and conditions to take effect at the expiry of the notice, justifying that dismissal on the grounds of "some other substantial reason".
"As long as the employer shows a
or-:..... proper business justification and acts 0---. within a fair procedure of consultation r and explanation, there is every prospect of the dismissal being fair—and the new con
tract being accepted."
Meanwhile, Hearn also warns that any employer winding up a scheme must do so in accordance with pension law. "This requires giving information to the employee about the benefits accrued, holding the funds for that employee as 'paid up' benefits to be paid at retirement, or offering to transfer the funds into the new money-purchase scheme or even an employee Inland Revenue approved personal pension plan."
Whatever the choice, he recommends that employees seek proper independent financial advice before making any decision.
Short-term view
Len Beddows, owner of international haulage firm Falcongate in Liverpool, agrees with Hoskin's views. Out of his staff of 36, under half has taken up the firm's money-purchase scheme.
"I think drivers take a short-term view," says Beddows. "Because we have quite a high turnover of staff in the industry, those moving around don't look ahead. I don't think pensions are a particular incentive for drivers. They put more value on the type of work, what kind of vehicle they'll be driving and what the
hours are," he says. So, for the big players the pension headache will soon be relieved—as long as employees don't mind the change.
"We are waiting for feedback from our members," says Bob Monks of the United Road Transport Union. Perhaps they'll get back to him...