Ask James – Final Salary Scheme Pensions

Q: I have recently received a letter from my UK pension scheme to advise that the Trustees are reviewing my future pension benefits. Surely my final salary pension scheme is guaranteed so how can they change this?

A: Unfortunately, final salary scheme pensions are not guaranteed and do rely on the scheme remaining solvent when you retire and for the duration of your retirement. With unprecedented levels of pension deficits in the UK we are seeing a growing number of schemes looking to change the level of benefits that members will receive.

The most popular change has been to change the level of pension increases from RPI to CPI. With CPI currently a third less than RPI this change, when compounded over many years, can have a significant impact on your annual pension payment. While these changes willhelp the balance sheets of companies, it is only as a result of paying fewer benefits to pension members.