Private sector pension 'collapse'

2 January 2012 Last updated at 19:01 ET

The ACA said a fifth of private sector employers were looking to reduce their pension spend

There has been a "seismic collapse" private sector pensions, and the gap between private and public pensions is widening, a report warns.

The Association of Consulting Actuaries (ACA) says that nine out of 10 private sector defined benefit schemes are now closed to new entrants.

The ACA wants bold government action to reinvigorate workplace pensions.

Automatic enrolment, set to begin later this year, would enable millions of people to save, the government said.

But Stuart Southall, chairman of the ACA, said that while automatic enrolment should widen private sector pension coverage, "the fact that recently the government had to delay its introduction for smaller employers, because of the deteriorating economic climate, is discouraging".

Defined benefit schemes give members a guaranteed pension, based either on their final salary or their average pay over the length of their career, depending on the scheme.

There are some 23 million workers in the private sector in the UK, and six million in the public sector.

The ACA said that while more than five million public sector employees enjoyed "open" defined benefit pension schemes, fewer than two million workers in the private sector were now in largely "closed" schemes.

Incentives needed

The ACA, whose members advise pension schemes, surveyed 468 employers who run 560 pension schemes.

As well as those private sector defined benefit schemes closed to new entrants, it found that four out of 10 are closed to future accrual.

It said that just over a quarter of employers had budgeted for the cost of workplace pension auto-enrolment, which is being phased in from October, while a fifth of employers were looking to decrease their pension spend.

Stuart Southall said an easing in regulatory controls and new incentives were needed to encourage employers and employees to boost pension savings.

"The government needs to be bold in helping private sector employers so they can consider new ways to boost pension savings over the mid to longer-term so public sector pensions are not 'far better'," he said.

"A more level playing field between private and public sector pension provision is clearly a sensible aim but it is possible that the current government's attempts to achieve this have already been undermined by the seismic collapse of private sector pensions and, in both sectors, it seems probable that the later the cure the stronger will have to be the medicine."

A spokesperson for the Department for Work and Pensions said: "Automatic enrolment is the most radical action taken by any government to help address the question of saving for retirement.

"It will enable millions of people to save, many for the first time.

"We will continue to work with industry as we bring this forward as it is in everyone's interest to help people save for their retirement."

Continue Reading... Labels: 'collapse', Pension, Private, sector

Pension deal urgent, says Hutton

4 December 2011 Last updated at 08:00 ET

 

Lord Hutton is often cited by ministers in support of their controversial pension reforms

The downgrading of Britain's growth forecasts has made the case for public sector pensions reform more urgent, Labour peer Lord Hutton has said.

The former minister, who conducted the coalition's review on pensions, said change was now the "order of the day".

He also told the BBC the government's offer was a "perfectly credible" one.

But unions, who say two million workers went on strike over the issue last week, argue their members will have to work longer and pay more, but get less.

The government wants public sector workers to pay more towards their pension schemes, retire later and accept a pension based on a "career average" salary, rather than the current arrangement based on their final salary.

On average workers face a 3.2% rise in their contributions.

The recommendations from Lord Hutton's independent review are at the heart of these proposals.

The former pensions minister told BBC Radio 4's The World This Weekend that his original assessments about the sustainability of future pension arrangements had been too optimistic.

'Heading for rocks'

He said the savings from an overhauled system should be brought forward as quickly as possible.

He was speaking days after the Office for Budget Responsibility said it now expects growth of 0.9% this year, down from the 1.7% predicted in March.

The prediction for next year has fallen to 0.7% from 2.5% predicted in March.

"Growth is slower. We know that by 2016 on the latest projections the economy is going to be about 3.5% smaller than we thought it would be," Lord Hutton said.

"That is going to affect the sustainability of public sector pensions in a negative way.

"The ground underneath those estimates has changed radically and I'm afraid in the wrong direction so we cannot be sure that the costs will fall over time and that we get to a more sustainable balance.

"The events of the last couple of weeks have confirmed that change is going to be the order of the day now, if we're going to remain competitive, successful as an economy... we could be heading for the rocks unless we make adjustments now."

He said the government's offer would give "significant protection" to workers close to retirement as well as "very generous accrual rates".

But he also said the unions had raised some genuine concerns, and he agreed with warnings that current plans could force large numbers of people on low or moderate incomes to opt out of their pensions altogether.

"I think there is a genuine issue between the unions and ministers about the pension contributions, which I hope is the subject of further discussion," he said.

'No concessions'

"I don't think you can build long-term reform on forcing people out of saving for pensions, that is a crazy way to do it."

He added: "I hope ministers can look again at some aspects of the way they're planning to increase pensions contributions."

For Labour, shadow home secretary Yvette Cooper said the government was going further than Lord Hutton's recommendations and had effectively introduced a "3% surcharge" on workers' contributions.

"That is not something that was in Lord Hutton's report," she told the BBC's Andrew Marr show.

Brian Strutton, from the GMB union, said Lord Hutton had not taken into account that caps on pay rises and job losses in the public sector meant the cost of pensions as a share of overall GDP would still fall despite the drop in economic output.

He added: "It is good that Lord Hutton has belatedly agreed with unions that the government's 50% contribution increase on public sector workers is too much and will drive people out of pension saving.

"In all the months of talks, the government has made no concessions on this point which is necessary if substantive progress is to be made in the ongoing talks."

MPs' pensions

Meanwhile, ministers themselves face a £4,000 rise in their pension contributions in a move aimed at showing they share the financial burden felt elsewhere in the public sector.

Prime Minister David Cameron has written to colleagues, the Mail on Sunday reported, to say they cannot expect low-paid workers like nurses and dinner ladies to "take on a burden we are not prepared to assume for ourselves".

Rises planned over the next three years would see Cabinet ministers contributing 17.9% of their £69,000 salaries to get the same benefits - equivalent to an extra £4,000.

Continue Reading... Labels: Hutton, Pension, urgent

Pension deal 'could be withdrawn'

26 November 2011 Last updated at 00:49 ET

Members of many trade unions are set to take industrial action on Wednesday

The government has warned unions that an improved offer on public sector pensions could be withdrawn if an agreement is not reached.

Chief Secretary to the Treasury Danny Alexander, in the Guardian, also urged union leaders to persuade their members to accept the "generous" offer tabled.

It comes as more than two million workers are set to strike on Wednesday over changes to public sector pensions.

Teachers and border control staff are among those expected to strike.

Unions say proposals which require their members to work longer before collecting their pension and contribute more are unfair.

The government says change is needed to keep down the cost to the taxpayer, because people are living longer.

'Harden opinions'

Mr Alexander told the Guardian the strike action was "a distraction" to the ongoing negotiations and "a risk to it" because "part of going on strike will harden opinions on the union side and might make it harder for them to sell a deal to their members".

"I think we've got the basis of an agreement that is a pretty good deal for both sides," he said.

"I believe that many unions I talk to are serious and sincere about their desire to reach an agreement, but they are obviously going to have to persuade their own members who they've marched up this hill that in fact the agreement and the nature of the deal on offer is a good one."

The minister warned that two changes to the offer being put forward by the government - enhanced accrual rates for the new pension schemes and protection from pension changes for anyone within 10 years of retirement - could be withdrawn.

Mr Alexander told the Guardian: "I reserve the right to take those enhancements off the table if an agreement can't be reached.

"I don't want to do that. I don't want to be in that position. I want to be in a position where we have got an agreement."

BBC political correspondent Ben Wright reports that a senior trade union negotiator, responding to Mr Alexander's comments, said they wanted to "get Wednesday's strike out of the way, meet ministers quickly, knock heads together and try to get a deal done by the end of the year".

Mr Alexander has been leading negotiations on behalf of the government alongside Cabinet Office Minister Francis Maude.

'Perverse incentive'

Mr Maude told the Daily Telegraph there was a case for changing the law to make striking more difficult.

Under current legislation, once a union has voted to strike a walkout must take place within 28 days or a new ballot must be held. However, if a strike is held the union then has a legal right to take part in more industrial action until the dispute is resolved.

Mr Maude told the Telegraph the rule gives trade unions a "perverse incentive" to strike.

He suggests there is a case for changing the law to make unions hold a new ballot every few months.

"There is a case for change. We'll want to look at this carefully," he said.

Danny Alexander said he felt the government's offer was "pretty good" for both sides

Lucy Morton, deputy general secretary of the Immigration Services Union, said she regretted its members were striking.

"This union hasn't taken industrial action at all in its 28-year history. This is something our members feel deeply and desperately strongly about, but nonetheless it's no-one's wish to disrupt the border, or to cause chaos to the travelling public.

"It's the only way we have left to get the government to hear us."

Meanwhile, Heathrow airport has asked airlines to halve the number of passengers they fly into the airport next week to try to minimise disruption caused by a strike.

Its operator, BAA, warned of "gridlock" and said passengers could face 12-hour delays on Wednesday when immigration officers go on strike over pensions.

Hospital managers are planning to postpone thousands of non-emergency operations next Wednesday and patients across the UK have been sent letters warning them of the disruption.

Continue Reading... Labels: 'could, Pension, withdrawn'