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More employer consultation obligations proposed - this time it's pensions
It is the Government's intention that, from 6 April 2006, employers with more than 150 employees will have a statutory obligation to consult with prospective and active members of occupational and personal pension schemes, and their representatives, before making certain specified changes to future pension arrangements. A consultation document on the draft Occupational and Personal Pension Scheme (Consultation by Employers) Regulations 2006 has just been issued.
The obligation to consult in relation to substantial and significant changes will be triggered regardless of whether the decisions are made by the employer or the trustees or managers of the scheme.
Basic provisions
Consultation process
In essence, if a proposed change to an occupational or personal pension scheme is listed in the Regulations, this will trigger an obligation on the employer to provide written information to all employees who are affected members of the scheme, and their representatives, at least two months before the change takes effect. The employer must then embark on a consultation process with one or more of the following:
- a trade union representative recognised for collective bargaining purposes;
- an elected information and consultation representative; or
- affected members of the pension scheme.
The written information must:
1) advise the recipients of the effects of the change on the scheme and its members;
2) provide background information;
3) indicate the time scale over which the measures are proposed to be introduced; and
4) notify them of the closing date for submission of their comments.
After the consultation period closes, the employer must consider the responses received before implementing the proposed changes. There does not, however, appear to be any obligation to reach an agreement in respect of the proposals. Where the employer does not have the authority to take the decision, the responses received must be forwarded to the relevant pension trustees or managers. The trustees are not entitled to make the proposed changes unless they have considered the responses in question and are satisfied that the employer has complied with the consultation requirements.
Unfair dismissal
Employee representatives will benefit from statutory protection against unfair dismissal and detrimental treatment because they have been carrying out their representative functions. The representatives will also be entitled to a reasonable amount of paid time off work in order to perform their consultation duties.
Breach
In the event of a breach, a complaint may be made to the Pensions Regulator, who will be able to issue a fine of up to £50,000. However, changes will not be invalidated due to lack of consultation.
Comment
The proposed regulations seem to lack real 'bite', in essence building in a slight delay into any process for amending pension scheme arrangements and providing employees with some advance warning of changes that, in reality, they can do very little about.
E-mail: tania.stevenson@cliffordchance.com;
Tel: 020 7006 8938.