Fines proposed for employers who breach duty to consult pension scheme members

The Department for Work and Pensions has proposed imposing fines on employers who breach their duty to consult scheme members over changes to aspects of their pension arrangements.

It has opened a consultation on proposals which would give the Pension Regulator the power to impose fines on employers who are in breach of their existing duty to consult on pension scheme changes. The consultation closes on 30 January.

Under current legislation, employers must consult on changing the accrual rate in a defined benefit scheme, changing a defined benefit scheme to a money purchase scheme and reducing employer contributions.

Bill Galvin, strategic development director at the Pensions Regulator, said: “Members have a right to voice their opinions on changes to their pension scheme. The consultation process need not be onerous and we expect employers to carry this out, where practical, and to listen to member responses before any final decisions are made.”

For schemes with more than 50 members, the consultation period must be at least 60 days and during that time, members must not be coerced or induced, or made to feel that the changes will take place regardless of the outcome of the consultation. The Regulator also states that employers should not treat employees who did not agree with proposals any differently.

The requirements can be relaxed or waived by the Regulator if it is in the interests of the majority of scheme members. Where breaches occur, the government is consulting on proposals to fine employers.