West Midland current, former and retired employees could be in for a big shock as companies are set to reveal the extent of their pension deficits by September 22, it was claimed this week.
New legislation requires all trustees of defined benefit, or final salary, pension schemes with more than 100 members to issue their first annual Summary Funding Statement (SFS).
Aon Consulting, a leading pensions, benefits and HR consultancy, believes that these "revealing documents are expected to stir up big communications challenges and, unless handled correctly, will raise more questions than they will answer".
Under the new pensions disclosure guidelines, the statements must be issued by September 22 and should include very clear information on the exact funding status of the pension scheme and whether there is a shortfall.
Although the pension scheme actuarial valuation has been available to members for the past 20 years, very few members ask to see this complex document and be in a position to fully understand its implications.
For many employees, most of whom are members of schemes with a deficit, this may be the first time that they will see the financial position of their pension scheme set out in black and white.
While it is the pension scheme trustees' responsibility to issue the statements, companies whose pension plan is in deficit also need to be prepared for aggressive questioning from past and present employees, unions and pensioners.
Richard Cox, client management director for Aon Consulting in Birmingham, said: "The numbers, particularly those showing the position on wind-up, can make alarming first reading for someone unfamiliar with the financials of a pension scheme and the way the regulations work.
"The likely knee-jerk reaction is that people will panic and think they won't receive their full pension entitlement - if at all.
"However, most members who are in an ongoing scheme supported by a solvent employer don't need to panic. This is why trustees need to emphasise the amount of protection available for members.
"Employers can't walk away from their pension liabilities and, if all else fails, the Pension Protection Fund will provide some compensation.
Top tips for companies and trustees to ensure the SFS content is understood are: * Work together on a communications strategy; * Do not just rely on the Pension Regulator's specimen wording; * Spend time creating a clear message and FAQs to the inevitable questions on funding from the different groups within the pension scheme; n Use language individuals will understand and cut out technical pensions jargon; n Tailor communications to different groups within the pension scheme.
Mr Cox advises: "Just meeting disclosure is not enough.
"Where a scheme is in deficit, trustees and companies need to address members' fears and explain how benefits will be provided.
"In most cases, employers are working very hard to reduce deficits by implementing robust funding plans and this is an ideal opportunity to demonstrate this commitment to their employees."