PAST CHANGEs TO THE RULES OF THE WILLIS PENSION SCHEME - JUNE 2016
The Company announced its intention to seek a change to the rules of the Willis Pension Scheme in June 2016. This rule change was not intended to make any difference to the benefits members expect to receive from the Scheme. Instead, it is designed to simplify the way the Pension Scheme is run and make the arrangements less confusing for members.
As the proposal requires a change to the rules of the Scheme it will require Trustee consent to proceed. In addition we are required to consult with current active members on the change. The consultation period closed on 29 August 2016.
Sessions were held to help members understand the prosposed changes and a video of the London session is available here.
Questions and Answers
Q1 What, in a nutshell, is happening?
A1 Last year the Company announced that any future pay rises would be ignored when salary was assessed for use in in The Pension Scheme. The way that that policy was implemented has proved very difficult to administer and confusing to members. The Company wants to change the way it is implemented to make it easier to administer and less confusing – but whilst retaining the same impact so that future pay rises are still ignored for pension purposes.
Q2 Will this improve or worsen the pension I expect to get from the Scheme?
A2 No - it will have no impact on the pension you expect to receive.
Q3 Will this have any impact on the contributions I pay?
A3 No – it will have no impact on the contributions.
Q4 How is the restriction on pensionability of pay rises achieved at present?
A4 At present it is done through the way the pay rise is given. Instead of an addition to salary, pay rises are awarded by means of the granting of an additional Non Pensionable Allowance (NPA). This NPA is simply a cash allowance, kept separate from salary on pay systems and pay slips.
Q5 How would the restriction be achieved in future?
A5 The Company proposes that the Trust Deed and Rules of the Scheme are explicitly changed so that the definition of Pensionable Salary explicitly excludes any future increases in basic salary. This means that future pay rises can be given by increasing basic salary, without increasing Pensionable Salary. The net effect would therefore be that pensionable salary did not increase even when basic salary was increased.
Q6 Why didn’t the company adopt the approach proposed now in the first place?
A6 The Trustees and the Company were engaged in detailed negotiations about other issues in early 2015 and there was no desire to upset those negotiations. The current approach was able to be adopted at short notice without delaying those negotiations and hence was preferred at the time.
Q7 What is the problem with the current arrangements?
A7 Although the current approach is fully effective, experience at the recent pay review has shown that it is exceptionally cumbersome and difficult to administer. The NPAs have to be kept separate from salary in payslips and on HR systems and documentation at pay review date has to be clear about the nature of the payment and must be acknowledged by the Colleague. Further, the NPA has to be added back on to salary when benefits other than pension are calculated. This has all proved confusing and unpopular with Colleagues and their managers alike.
Q8 I am already receiving an NPA because I got a pay rise at 1 April 2016. What will happen to that?
A8 Once the rules of the Scheme are changed any existing NPAs will be consolidated into basic salary shortly afterwards. In total your pay will stay the same but it will all be payable as basic salary and you will not receive an NPA anymore.
Q9 If you consolidate the NPA into basic salary doesn’t that mean it will become pensionable again?
A9 No. Because the consolidation will happen after the change in the rules the increase in basic salary will be excluded from pension calculations.
Q10 I am one of the people whose pensionable salary is still increasing because although my basic salary is not increasing the cap that applies to it still is. Will I continue to benefit from this effect?
A10 Yes you will. The change to the rules will exclude future pay rises from the salary definition used in the pensionable calculation, but the interaction with old scheme caps will be unaffected.
Q11 Would the Trustees need to agree the change?
A11 Yes they would. The Trustees will need to be satisfied that the changes do not impact on members’ benefits before they would make the change.
