Defending Our Pensions

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2011 National Delegate Conference
13 June 2011

Conference notes that pensions represent the most important condition of employment after pay itself. Pension is deferred pay that enables workers to survive into old age and, hopefully, avoiding poverty. Conference believes that every worker in the UK deserves a decent income on reaching retirement.

Public Sector pensions have consistently been under attack from employers and the previous Labour government and the threat continues with the Coalition government which will begin a consultation process on changes to Public Sector pensions in June. This consultation will include:

1)how our yearly pension increases are going to be calculated;

2)increases in our pension contributions, that will not be paid into the Pension scheme but will go direct to the Government and be used to close the deficit; this is to be phased in over the next four years, which would mean a flat rate contribution increase of around 3.2% of pensionable pay. This represents a contribution increase of over 50% starting in 2012 and a cut of £4billion in funding.

3)recommendations to be made on the future structure of our schemes and the benefits they may deliver, and;

4)what pension contractors may have to pay if jobs are privatised.

We believe that whilst any proposals will have to go through a period of consultation and legislation it would be mistake to delay taking any action until the end of that process. We believe that it essential that we go into any consultation or negotiation in a position of strength.

The government also announced in the Budget that it would be cutting the funding to public sector pension schemes. Meaning that instead of paying for workers’ retirement, five million public sector workers will be paying the debts raised to save the banks. The money in the scheme will drop dramatically.

Conference condemns the UK coalition government’s decision to change the measure it uses when uprating public service pensions by switching from the Retail Price Index (RPI) to the Consumer Price Index (CPI) which will, at a stroke, reduce the value of benefits by around 15%. Conference believes the UK Government should be encouraging people to save for their retirement, not attacking the workers who do.

This will mean:

a)a woman receiving the average pension for women in the Local Government Pension Scheme (LGPS) of approximately £2,600pa will be around £40 worse off this year;

b)a member with the average pension in the LGPS of approximately £4,100pa will be around £62 worse off this year;

c)a woman on the median women’s pension in the NHSPS of approximately £3,500 will be around £53 worse off this year;

d)a member receiving the overall average pension in public service schemes of approximately £7,800 will be around £117 worse off this year.

The effect of these differences is that uprating on the basis of CPI is on average about 1% less than uprating on the basis of RPI. One percent may not seem very much for one year, but the cumulative difference will become substantial over the course of a retirement lasting a number of years. After 10 years in payment a pension increased on the basis of CPI would be worth about 10% less than one based on RPI increases. After 20 years, a CPI increased pension would be worth about 20% of what it would have been under RPI. If you should be fortunate enough to survive to be 90, your CPI pension would be worth 30% less than an RPI one

This change would appear to breach the government’s commitment not to interfere with accrued public service pension rights.

Conference notes that without public service pensions many more retired workers would have to rely on means tested benefits including Pension Credit, a passport to further benefits.

Conference condemns the attacks from politicians and the media on public sector pensions. Conference notes that many directors of leading companies can retire, at 60, with a final salary pension 25 times higher than the national average which they accrue twice as fast as both their own and the public sector workforce.

Conference further condemns arbitrary increases by the UK coalition government to pension contributions that are not based on real increases in scheme costs. These increases are simply a stealth tax on public service workers and will discourage low paid workers in particular from investing in a pension.

Conference expresses our opposition to the final recommendations of the Hutton report which include ending final salary schemes in the public sector, massive increases in contributions for employees and raising normal retirement age in line with state retirement age to 66 in 2020 and then to 67 and 68. Hutton wants us to pay more, work longer, and receive less in pension benefits. We recognise that these recommendations, if implemented, would not only have a massive regressive impact on the pensions of public sector workers but would threaten the continued viability of the pension schemes themselves in some cases. This is certainly a view shared by many Local Government employers.

The Tory led government’s proposals on state pension reform have dealt yet another blow. The removal of opted out status for people who are in occupational pension schemes will increase national insurance contributions by a further 1.6%. This affects all members of occupational schemes in both public and private sectors

Conference knows that women, Black and disabled workers are already the most adversely affected by the government cuts across the public sector and the small pension that these workers have earned is neither gold plated or huge sums, that’s why we must fight together against all changes that are another detriment to the most vulnerable in our union and communities.

Conference further notes the double whammy for women in that government plans contained in the Pensions Bill include changes that will deny over 500,000 women more than £5000 because of accelerated increases to their state pension age. Women are already at a significant disadvantage when it comes to pensions. The generation of women affected by the changes has tended to earn far less during their working careers, were often prohibited from joining a private pension scheme when they started working and have had interrupted careers that gave them less chance to build up a pension outside the state system.

Conference notes that, last year, we instructed the National Executive Council to place “defence of the LGPS at the centre of a strategy to build unity across service groups and sectors and with other unions to oppose any proposed detrimental changes to pension rights.