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Closing a scheme

The challenge for employers and trustees

The costs and risks associated with providing a defined benefit pension scheme have increased dramatically over recent years. Consequently, many employers (if they have not done so already) are considering closing their scheme to new, and perhaps also, existing members in order to limit their exposure.

The decision to close a scheme may trigger opposition from scheme members and trade unions. It is likely that it will also require the agreement of the scheme's trustees. Therefore, it is vital that any decision to close a scheme is handled sensitively and that it is done properly, bearing in mind the scheme rules and the various legal requirements relating to scheme change (including the need to consult affected parties). 
 
Trustees have a duty to protect members' benefits. Therefore, when they are asked to agree to the closure of their scheme, they can find themselves in a very difficult position. Consequently, it is important that trustees obtain legal advice at the earliest opportunity on their powers and duties.

How we can help

Our pensions team has advised a number of employers and trustees on the issues associated with closing a scheme. We can help employers as they consult with affected parties (including trade unions) and as they develop and implement their future pensions strategy. We can also advise trustees on their duties and powers in this context.