Changing a pension scheme

Out-Law Guide | 11 Aug 2011 | 10:15 am | 2 min. read

This guide was last updated in August 2011.

Pension schemes are around for a long time, so it's not surprising that they are sometimes changed. Some changes introduce a different way of calculating benefits or contributions. Others are designed to reflect changes in the law, such as changes in the tax laws or new age discrimination laws. Whatever the reason, it is important that all changes are made properly or else they may be invalid.

Following the scheme procedure

The procedure for changing your existing pension scheme will be set out in the scheme rules, and must be followed. For example if the rules state that you need a trust deed or a certificate from the scheme actuary in order to change the scheme, then you must have this document. Some rule changes need a certificate from the actuary, for example if they affect contracted-out final salary benefits. This should be considered at an early stage.

The most common procedure to change an existing pension scheme requires the agreement of both the employer and the scheme's trustees to the change. Where the trustees' agreement is required, they must consider the impact any change will have on the scheme's members.

Changes to benefits

Any changes implemented cannot worsen benefits which have already been earned under existing arrangements, unless the affected scheme members consent to this. Some schemes are more restrictive and also prohibit any change to future benefits, although this is rare. More commonly, a pension scheme's rules sometimes prevent certain types of change.

If the change involves members ceasing to earn benefits, it is important to check that this will not result in the scheme being wound up.

Where an employer is proposing a change to an existing benefit, any conflicts of interest for the trustees should be considered. For example, do they owe duties to the employer or are they members of the scheme? Conflicts of interest for advisers should also be considered.

The duty to consult

Affected scheme members should usually be consulted before making significant benefit changes. This involves explaining the changes to members, and listening to their concerns. Any consultation period should usually last for at least 60 days.

Other restrictions

Employment contracts should also be checked, to ensure that changing the pension scheme will not result in breach of contract. Often, these contracts are loosely worded and will allow the scheme to be changed without the member's agreement.

If a scheme cannot be changed in the desired way - for example, because the rules of the scheme prohibit a certain type of change - it may be possible to achieve the same result in other ways. It may be possible to agree a change directly with the scheme's members, but this is complicated and changes are usually only made this way as a last resort.


Every pension scheme is different. In each case, the correct procedure as laid out in the rules of the individual scheme must be followed.