Employers who offer membership of a pension scheme to their workforce are likely to refer to entitlement to join the scheme in their employees' contract of employment. Because of their complexity, pension rights are unlikely to be set out in full in the body of the contract. Pension rights may become contractual by being incorporated by reference (incorporating documents ).
When drafting contracts of employment, employers should take care to ensure that they are not committing themselves to providing pension benefits that they may not be able to maintain. Rather than stating that the employee is entitled to membership of a particular scheme, or to particular pension benefits, it may be preferable to refer in more general terms to the employee being entitled to be a member of any pension scheme the employer currently provides, on the terms and subject to the conditions laid down in the scheme's trust deed and rules. It may also be advisable to state explicitly that any scheme the employer provides may be amended or wound up, in accordance with the scheme's trust deed and rules.
If an employee's contract of employment does give the right to membership of a particular scheme, or to particular benefits, and the employer wishes to change that entitlement in some way, it will need to vary the employee's contract. The possible ways of approaching this are discussed in detail elsewhere in this Guide ( Changes to contracts ). (It should be noted that if an employer with a workforce of 100 or more from April 2007 and at least 50 employees from 1 April 2008, is proposing to make certain changes to its pension scheme, it must consult with the active and prospective members of the scheme before deciding whether to implement the change (consultation on pension changes).
Whether or not employees have a written contract of employment, they are entitled to be given a written statement of the main terms and conditions of their employment, within two months of starting work (documenting the contract) . This information must include any terms and conditions relating to pensions, including whether or not their employment is covered by a contracting-out certificate under the Pension Schemes Act 1993 ( The State Second Pension and 'contracting out' ). If an employee's terms and conditions on pensions change, he or she must be notified in writing at the earliest opportunity and, in any event, not later than one month after the change.