What’s happened in March already?
Well, if the extracts from the press releases that hit my desk in just two days of March last week are anything to go by we’re going to have a busy month of it on the pensions front. I’ve put a few of them here for you to read or glance over or whatever. They sort of reflect the tone of what’s going on right now.
To start with there appear to be further rumblings about strikes if pension changes aren’t dropped, this time from the rail unions. They’re not happy with what’s going on with their pension schemes and want them left open for new employees. If the strike goes ahead it could happen as early as April or May. Similar problems have hit the 'dairy to doorstep' company Dairy Crest and a strike is threatened there too with support of seven to one in favour of strike action. Once again this is over plans for the current final salary pension scheme to be closed to new employees. Their strike could start on 6th April (A-Day as it happens) following a postal ballot of all the members. But just to demonstrate that it’s not all bad news on pensions a new pension scheme for new police officers was unveiled on the 9th of March. It’s a final-salary scheme with plenty of attractive add-ons.
Mind you, the Conservative Party put out a sobering release noting that estimates of unfunded pension liabilities for public sector employees are slightly higher than the Government’s claim of £530 Billion in March 2005. Call me old-fashioned, but I think £530 Billion in sounds like a lot of money on its own, so I was a bit shocked to hear that a recent estimate puts this figure at much nearer £1,000 Billion.
The TUC thinks that things are getting out of hand a bit with pensions and ended the week by calling in effect for pensions to be taken out of politics. Their idea is that the Pensions Commission should be made a permanent body responsible for joined-up pension policy.
8 March 2006
Union leaders have urged Ministers to intervene over an estimated £600m rail pensions deficit or face a total strike.
Rail unions and Amicus have put forward four key demands in relation to pensions. These include merging the 100 or so railway pension funds into three for the whole industry – one for train operators, one for infrastructure and rail engineering companies and one for other employees.
They also say that employees should not have to pay more than 10.56% of pay for their pensions, that benefits should be kept at the current level and that the schemes should stay open to new employees.
The unions are seeking an urgent meeting with Alistair Darling, the Secretary of State for Transport; the train companies have refused to negotiate with them. Bob Crow, the general secretary of the RMT, warned a strike ballot could begin in late April or early May if Mr Darling failed to "get a grip" on the situation.
8 Mar 2006
The dairy to doorstep company, Dairy Crest, has been accused of selling its workforce short and jumping on the fast-moving bandwagon by closing its final salary pension scheme to new entrants from 6th April.
The Transport and General Workers Union, the largest trade union at the company, confirmed today that a consultative ballot amongst all the door-to-door round staff and drivers as well as cheese, yoghurt and dairy products processors has shown a massive seven to one support for a full strike vote. According to the T&G this brings strike action to coincide with the company's planned start date for the pension changes a step nearer.
Chris Kaufman, T&G national secretary, said Dairy Crest's plan is to axe the final salary scheme for new entrants and force them into a money purchase scheme, which transfers the risk onto the individual worker. He added that this was felt to be unnecessary as until relatively recently the company had been giving assurances of the health of the funds. "As far as we're concerned there is no reason for Dairy Crest to make this change as the pension scheme is in a healthy state by normal accounting methods," he stressed as he accused the company of moving the goalposts. "We don't accept their claim that there's a massive deficit and neither do the workforce."
All the unions involved, the T&G, Usdaw and amicus, supported the 'Yes' vote in the consultative ballot, which is the usual first step before a full strike vote is called. Mr. Kaufman said the overwhelming feeling was if Dairy Crest goes ahead with their plans there are no guarantees they won't then move to close the scheme lock, stock and barrel.
"We've seen a rash of companies jump on the pension scheme closure bandwagon before they are obliged to formally consult their workforce on changes," he continued. "All we have asked of Dairy Crest is that they delay the implementation of their plans for three months. They have refused so we are where we are."
The T&G said the joint unions hope to press ahead with a full postal ballot of their members which, they said, could be completed by the end of March in time for possible action on 6th April.
9 March 2006
Unmarried partners are to receive pension benefits for the first time under a new police pension scheme, Minister for Policing Hazel Blears announced today.
The new benefits, which extend to same-sex partners, form part of the New Police Pension Scheme (NPPS) that takes effect on 6 April. Under the current pension scheme, only spouses are entitled to benefits.
In the first major overhaul of police pensions in over 80 years, the NPPS provides a modernised scheme for a modern police service that reflects the lifestyles and work of today's officers.
Key features of the scheme include:
- All new recruits to the police service from 6 April 2006 onwards will become members of the NPPS;
- Police officers contribute 9.5 per cent of their pay to the scheme (compared with 11 per cent under the current scheme);
- A maximum final pension of half final pay plus a lump sum of four times pension (compared with two-thirds final salary and option to exchange part of pension for a lump sum);
- New option to nominate an unmarried partner - including same sex partner - as pension beneficiary;
- New lifelong benefits for surviving spouses, civil partners and nominated unmarried partners;
- Even build-up of pension scheme benefits over a career, which gives late joiners a fair deal (compared with the current scheme which has two rates of pension accrual depending on length of service); and
- Option to exchange all or part of the lump sum for more annual pension.
Launching the scheme and a Members Guide setting out the new arrangements, Hazel Blears said:
"The current pension scheme has benefited generations of police officers but it is time for a new, more affordable and flexible scheme to fit modern lifestyles and working patterns of officers today.
"Pension benefits are key to an officer's peace of mind and these new arrangements will ensure that they can carry out their role with confidence, knowing that they and their dependants will be provided for.
"The new pension scheme will play an important part in the police modernisation programme. With its more flexible survivor benefits and a rate of pension build-up which does not disadvantage late joiners, the new scheme will make the police service more attractive to a wider range of recruits in terms of lifestyle and age. This will mean a modern service that reflects the diversity in today's society and is better able to respond to the community's needs."
The NPPS takes effect for all new entrants to the police service from 6 April. Officers who are members of the current Police Pension Scheme (PPS) will be able to remain on that scheme, but they will also be offered the choice of transferring to the NPPS later this year.
The new pension regulations will be laid before Parliament shortly.
8 March 2006
Conservatives have called for far-reaching pensions reform after it emerged that the true cost of public sector pension liabilities is now more than 80 per cent higher than the Government's latest official estimate – amounting to £40,000 per household in the UK.
And Shadow Work and Pensions Secretary Philip Hammond has demanded greater transparency as the big debate on the future of pensions funding – covering private, state and public sectors – gets underway.
He called for action after the actuarial consultants, Watson Wyatt, estimated that the accrued liabilities in all unfunded public sector pension schemes stands at £960 billion – in contrast with the Government's own estimate of £530 billion.
Mr Hammond said: "It is worrying that the Government are continuing to play down the size of public sector pensions liabilities. This latest estimate of £960bn is some £430 billion higher than the Government's own estimate and represents 80% of UK GDP."
He declared: "We need greater transparency in the accounting treatment of public sector pension liabilities. The Government must be open and honest about the rapidly growing public sector pension deficit if it really wants a 'national debate' on the future of pension provision."
Mr Hammond said: "It is now clear that we need far-reaching pension reform across all pension provision in the private, state and public sectors."
9 March 2006
A permanent Pensions Commission should be set up to oversee the future of the UK pensions system, the TUC has told the Government today (Thursday) in its submission responding to the Pensions Commission report.
The TUC says that it strongly backs the new pensions architecture recommended by Adair Turner's report of a National Pensions Savings Scheme with:
- compulsory employer contributions unless an employee opts out,
- a restored link to earnings when uprating the state retirement pension
- a universal (rather than contributory) state pension which would provide particular help to women.
But the TUC remains opposed to helping pay for more generous pensions by increasing the state pension age. The submission says this would 'have little impact on the retirement age of the better off, so it would be those on lower incomes who would be more likely to work longer to pay for better pensions ... There is a four-year gap in life expectancy at age 65 between men in the highest socio-economic groups and men in the lowest socio-economic group. Among women the gap has increased over the past twenty years. Moreover, those from lower socio-economic groups are less likely to enjoy good-health in retirement.'
The TUC says that a permanent Pensions Commission above the day-to-day pressures of party politics could help rebuild trust in pensions. It should produce a four yearly report including both research and recommendations to government. Trust has been destroyed, according to the TUC, for three reasons:
- 'repeated changes by past governments that reduced the generosity of future promises without this being clearly explained to the public'
- 'the fall in the value of the Basic State Pension as an unstated way of containing cost pressures'
- 'miss-selling scandals of the 1980s, driven by a misguided attempt to extend personal provision'
TUC General Secretary Brendan Barber said, 'The Pensions Commission proposals make sense. In particular they offer a new deal to women and the increasing numbers of private sector employees who no longer have access to a decent scheme. Our one major disagreement is that we remain opposed to increasing the state pension age as it will hit the poor and those with stressful or physical jobs.
'The future of pensions is now a big political test for this government. We do not underestimate the strength of the employer and industry lobbying that is trying to get ministers to scrap compulsion or increase costs to give pensions companies a cut of a guaranteed market. But Adair Turner and his colleagues have won the intellectual argument for their proposals. The government should make clear they will implement them and then establish a broad but independent Pensions Commission that can help ensure a continuing consensus.'
13 March 2006
Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.
1. The Pensions Advisory Service
2. Transport and General Workers' Union
3. The Home Office - Police
4. The Conservative Party