UNISON urges caution over new pension scheme

Government’s new collective defined contribution pension scheme could help some public service workers, but shouldn’t erode the pensions of others

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UNISON is urging caution after this week’s announcement by the Department for Work and Pensions (DWP) that it is launching a new UK pension model.

The UK government seeks to introduce collective defined contribution schemes as an alternative to the UK’s current two primary pension scheme models – defined contribution and defined benefit.

The new scheme is a result of the Pensions Schemes Act that was passed in 2021.

UNISON sees defined benefit schemes as vital in providing decent pensions for many public service workers. However, millions of public service workers – including UNISON members – are not eligible to join such schemes and are dependent on defined contributions schemes instead.

The union has negotiated with employers in these sectors and has successfully brought about a number of relatively high-quality defined contributions schemes for members in recent years.

UNISON head of pensions Glyn Jenkins said that caution was needed when employers consider any changes to existing pension arrangements. “These new pension arrangements must not erode current provision,” he commented.

“UNISON supports improving member outcomes through the introduction of collective defined contribution for members in defined contribution schemes, but the new schemes should not be used to replace viable defined benefit schemes.”

Mr Jenkins pointed out that, on the basis of the union’s experience, many defined contribution schemes will not provide an adequate income for their members.

This is for a number of reasons, including, “woefully inadequate levels of contributions – especially from the employers – and charges on investments.”

He continued: “Collective defined contribution schemes should improve the position for members in defined contributions schemes. Even though such schemes do not guarantee benefit levels, they do set a target benefit level that may be reached.”