The Chartered Institute of Personnel and Development (CIPD) has announced it is to close its defined benefit (DB) pension scheme and replace it with a defined contribution (DC) plan.
The HR and development professional body, which employs around 300 staff, said its existing DB scheme has suffered from unpredictable swings in liabilities due to external factors. These include changing actuarial assumptions, investment performance and regulatory changes, which have led to frequent calls for substantial cash injections that cannot be planned or budgeted for.
It also had low levels of take-up, particularly amongst lower paid members of staff. Only 55% of current CIPD staff are members of the pension scheme, which is made available to all employees after six months of service.
The announcements, all subject to a consultation with CIPD staff and the pension scheme trustees, include:
• The decision to close the existing DB pension scheme to new members from January 2010.
• Giving advance notice to all staff of an intention to consult on the closure of the current DB pension scheme to future accruals for existing members from 2012.
• Establishment of a new DC scheme to replace the defined benefit scheme, which will offer more flexibility for employees to decide the levels of their own contributions, and will see employee contributions more-than-matched by employer contributions that rise with employees’ own contributions. The new scheme will be in operation from January.
• The intention to secure independent endorsement of the new CIPD DC scheme by ensuring it is among the first employer schemes to secure the recently announced “kitemark” from the National Association of Pension Funds.
Jackie Orme, CIPD chief executive, said: “We have two clear objectives in making these changes, and we won’t judge the move a success unless both are achieved. Firstly, we need to take control of the current and future pensions liabilities of the CIPD to ensure we are not facing potentially unmanageable risks that could undermine our business and the service we provide to members in the future. But secondly, we are determined to significantly increase the numbers of our staff who are members of a CIPD pension scheme and to encourage more saving for retirement.
“We are not happy with a situation where our own pension scheme only attracts 55% of our employees to join it. Through the new scheme we are aiming to significantly increase the proportion of our staff saving for their retirement.
“This is a challenge facing many members of the CIPD when making decisions about defined benefit pension schemes in their own organisations. We have set out to demonstrate best practice in resolving our own challenges. We are clear that the pension is an important part of the reward package we offer to people working at CIPD, and are determined that this will remain the case into the future.”