Reducing the cost of a pension scheme

The issue

The UK arm of a global manufacturer – the world’s leading producer of bathroom and kitchen fixtures – needed to reduce the cost of its UK pension scheme. While the company continued to be committed to providing a high level of benefits to its employees, financial pressure on its pension scheme meant that refining the arrangements was vital.

Our approach

PricewaterhouseCoopers suggested a pay conversion arrangement in conjunction with an increase in the cost of membership of the scheme. (Pay conversion involves members sacrificing salary in return for the employer making an equivalent payment directly to the pension scheme). Financial modelling tools allowed us to assess the impact of different cost saving measures and we were able to advise on all aspects of the change – tax, communications and legal. A proposal was discussed with all the stakeholders – pension

scheme trustees, the parent’s HR team, and the 6 trade unions representing their employees. After agreement had been reached we advised on the implementation. Effective communication of the change to pension scheme members was key to success. We ran a road show – with 70 presentations across the 8 sites over a 2 week period – and offered direct access to our tax and pension specialists through a telephone helpline. We continue to support members through regular updates.

The outcome

After implementation we liaised with the actuaries of the US parent to ensure the cost savings were immediately recognised.

“PwC’s advice helped us manage the increase in pension costs we were faced with in the UK. We were able to keep our costs some £1.9m lower than they might otherwise have been - an impressive achievement in current financial conditions. PwC also helped our 2,500 members appreciate why the changes were necessary and understand our ongoing commitment to their future financial security.”

 Company Secretary, UK company of global manufacturer