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Restructuring defined benefit schemes
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Practice notesRestructuring defined benefit schemes
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Practice notesAn employer may propose the restructuring of a Defined benefit pension scheme for a variety of reasons. These include:
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the need to ensure that the pension scheme complies with and properly reflects recent statutory and case law developments
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a desire to harmonise pension provision across the relevant corporate group, and
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a desire to control or minimise future pension Costs
Types of scheme restructuring
Common ways of restructuring defined benefit schemes include:
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changing the scheme’s Accrual rate for future service (eg from 1/60th of final salary for each year of pensionable service to 1/80th)
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changing from final salary to career average accrual rates
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pension scheme incentive exercises (eg an enhanced transfer exercise)
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closing the scheme to new entrants
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closing the scheme to future Accrual (with or without retaining a link to final salary)
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merging one or more schemes
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buying out members' benefits
For more information, see:
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Pension scheme incentive exercises
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Changing from final salary to career average accrual rates
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Scheme closure—overview
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Pension scheme mergers—considerations for employers and
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