The trustee of the Plumbing & Mechanical Services (U.K.) Industry Pension Scheme, Edinburgh, is seeking comments on a proposal to freeze the pension fund.
The trustee wants input from employer members of the fund, which has more than £2 billion ($2.6 billion) in assets, on the proposal, which would see participants automatically enrolled into an alternative arrangement, said a document on the proposal. No changes would be made before June 30, 2019.
The proposal is in response to a belief that the contributions needed to cover the cost of future benefit accrual would not be affordable for many employees and employers. Employers that support the move to freeze the pension fund would need to carry out a consultation with their employees. The fund has more than 360 participating employers and more than 35,000 participants.
"The good news is that the scheme actuary's calculations show that the scheme has enough money to cover the benefits members have already built up," said the document. "However, because future expected investment returns across all asset classes are so low, the cost of providing new benefits has gone up significantly. This means that the contribution rates paid by employers and employees need to increase significantly."
The document said that, in response to this, the trustee and the fund's constituent organizations have looked at options including reducing or changing benefits and increasing contributions by employers and participants.
Employers have been sent the document regarding proposed changes and must respond with views by Sept. 16.