"Pensions, Pensions and more Pensions"

(This is an article I wrote last week for my Branch Stewards newsletter).

"Let’s face it. Many members probably consider Pensions to be a pretty boring issue and something that they would prefer to put off thinking about too much until another day (or preferably never). Well, whether you like it or not, in the coming months, all UNISON members and in fact nearly all employees will have to wake up and start thinking about pensions. 

For those of us in the Local Government Pension Scheme there is an ongoing consultation process at the moment by UNISON on a new look scheme. LGPS 2014 agreed last month with the unions, LGA employers and the Government. You will be balloted on the scheme at the end of the month. Have a look at what is being proposed on the UNISON website http://www.unison.org.uk/pensions/lgps.asp

While members in the Social Housing Pension Scheme (Pensions Trust) will need to be aware that their employers have been sent letters about the deficits in their pension schemes which is causing some employers to panic and start talking of closing the scheme or massive increase in contributions. There has also been some outrageous scaremongering by some financial “advisors” to schemes. UNISON is arranging an urgent meeting with the Pensions Trust. In the meanwhile if your employers start talking of any changes to your pension scheme please contact the branch immediately and ask your employer to send us copies of what is being proposed.

Remember – the current pension so-called “deficits” are valued in a completely discredited and inaccurate manner which even the current Pensions minster has recognised is wrong and needlessly “killing” good pensions schemes. Remember closing a pension scheme does not get rid of any deficit - in fact it can make things worse.

Finally, for those of you who are not in the LGPS or SHPS please be aware that “auto-rolling” is kicking in at the end of this year. Nearly all employees who are currently not in a pension scheme will be automatically enrolled into the employer’s scheme or a state scheme.

Now this is “good news” for those not in a scheme but what we are concerned about is that some employers who currently have decently funded defined contribution schemes (also known as DC, Group personal pensions, Group Stakeholders, money purchase etc) may be tempted to cut existing employer contributions, since they are worried about an increase in the pension bill from more people being in it.

We have to fight this as well. Pensions are expensive. Employer’s have to realise that unless they want their staff to retire in poverty they have to fund pensions properly.

Pensions are obviously not boring nor are they as complicated as you think. We need to have at least one UNISON Pension Champion (or rep) in every employer. If you are interested in being a “Pension Champion” let the branch office know and we will sort out some training for you on the role in the very near future".

John Gray
Branch secretary

Why you should join your company pension scheme NOW! (it's use it or lose it)

It's a no brainer actually (apologies to Homer Simpson whose scan in on right does show he has a brain although it is very small and rarely used e.g tax payers alliance supporter). There are millions and millions of workers in the UK who have access to a pension provided by their employer but they have not joined the scheme.

Sometimes it is because the scheme is pretty rubbish and that there are no real incentives given by the employer to encourage their staff to join. Yet often this is not the case and workers are losing vast amounts of money each year by not joining.

The 25% apparently eligible to join the Local Government Pension Scheme (LGPS) who haven't are losing at least 14% of their wages each year. They also even pay more income tax and national insurance.

However, the real people at risk from not joining their scheme NOW are in defined contribution (aka Group stakeholder or personal pensions) company schemes whose employers pay reasonable contributions if the members also pay something into it. Many of scheme are pretty good. Not as good as say the LGPS but nothing to turn your nose up upon. Decent employers know that any decent pension will cost a lot of money and they have to play their part in providing funding.

The risk ironically to these "decent" schemes is the introduction of pension autro enrolement next year. Enrolement is a "good" thing and will mean that nearly all workers in the UK for the first time will be automatically put into a pension scheme.  What is worrying some employers is that this may mean that the total bill for pensions will rise. If auto enrolling works (and there is some doubt) then instead of 25% of the workforce being in the company pension scheme this may rise to say 50% or more. Potentially doubling the pension payroll.

What many people fear is that some companies (including ones that use to provide non contributory final salary schemes free to all their employees in a more enlightened age) are planning to either slash and burn existing contribution rates or introduce 2nd tier pensions for employees who have not joined the existing scheme. We need to oppose all attempts to reduce contributions. The more in the scheme the more difficult it will be to cut it.

This is a call to arms to all union reps to "encourage" (we cannot give specific individual financial advice) our members to consider joining their scheme.  If they don't, it may not be around much longer. Use it or lose it.

TUC Trustee Conference 2011: Auto enrolement

Catch up from last month's TUC Pension Trustee conference "People & Profits".  I went to a useful workshop by the Pensions Regulator on "Auto-enrolment and workplace pensions reform - the role of trustees".

I don't think (in fact I am pretty certain) that many people realise that in a year or so, if they are not in a pension scheme, they will be compulsory enrolled into one. Employees, employers and the government will have to make minimum payments. Employees will have a month to come out. However, many think that due to inertia they will not "opt" out. This is good news on a number of levels. Currently 2/3rd of private sector employees receive no pension contribution whatsoever from their employers. While 50% of workers in the private sector have no pension provision at all. These workers face desperate poverty in their old age and taxpayers will have to pick up the bill for basic social security.

It's not all good news.  The contribution levels are very, very low. 3% employer, 4% employees and 1% tax relief. 8% of your income in pension contributions is no where near enough to get a decent pension.  The old pension adage use to be you that to get a pension of half pay and a lump sum you needed to have the equivalent of 20% of your income invested for 40 years. There are also a number of exemptions. But it is a start. 

There is also a legitimate fear that employers who currently pay more into pension schemes might level down.  Some people opposed the introduction of the national minimum wage for the same reason that it would depress wage rates but this didn't happen. I am more worried that employers who currently only have say 50% of employees in their scheme may cut back on contributions because the total bill will rise if 75% are now in (or introduce a two tier pension scheme for existing and new scheme members).  The Unions need to be wide awake about this risk. 

I also spoke at a recent UNISON Community Service Group Executive meeting and at last week's NEC about the organising opportunity that Auto-enrolment gives us.  The unions must be at the centre of all what is going on.  The greater the density and the organisation we can achieve - the better the final pension deal.

Of course for the public service pensions schemes, if members have to pay 50% more in  contributions (nearly 10% of their income) after years of pay cuts, as well as retire much later and get less, then existing members, never mind the new ones will simply walk.  They will leave the scheme in droves and the schemes will become unsubstainable and collapse. The Local Government Pension Scheme (LGPS) will turn from being cash positive to cash negative in a few years and all Council finances could be completely and utterly shot to pieces.