Posted by employee on 11 October 2000 at 13:02:21:

It is of course spurious for the company to claim that it bears the risk.

The employee bears the serious risk that the company will redefine what the definition of pensionable salary is. We have seen this with London allowance and the policy of variable pay in which 10-15% of annual earnings are deemed non-pensionable. What happens to my pension planning if this capriciously increased to say 40% or 50% of salary.

Posted by Current Employee on 12 October 2000 at 11:21:02:

In Reply to: Risk and Defined Benefit Scheme posted by employee on 11 October 2000 at 13:02:21:

The effect of variable pay was explained to me in some detail by my manager last year. An assumption is made that a 10% bonus will be paid when the manager determines the employees position on their pay scale. This effectively reduces base salary, and pensionable earnings, by 10% compared to the position before variable pay was introduced. This can make quite a hole in your pension planning calculations!

Posted by A.N.Other Employee on 20 October 2000 at 08:35:04:

In Reply to: Risk and Defined Benefit Scheme posted by employee on 11 October 2000 at 13:02:21:

Two points.

1. Even if the company does bear the risk, it is in a much better position to do so than individual pensioners.
2. I believe either IBM or the IR did it to us earlier. When I joined IBM some 15 years ago I seem to remember that the FPE was based on the BEST 12 consecutive months earnings in your final 3 years of service, then it became the AVERAGE of the final 3 years. Not a lot of difference for those on a fairly flat salary and in times of low inflation, but a big one for those with pensionable bonuses and/or commission or who have significant rises in their final years.

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