The government’s green paper on the security and sustainability
of defined benefit pension schemes shows there is no coherent,
long-term policy for tackling the challenges facing occupational
pensions provision, Prospect union warned today.
The paper also fails to deal with the underlying problems for
defined benefit schemes – the method used for calculating
deficits.
These are based on bonds and gilts and can often lead to
overestimates of the actual deficits, resulting in knee-jerk
decisions and increased pressure on businesses.
Prospect union deputy general secretary Dai Hudd called for a
reassessment of the methods used to assess schemes’ liabilities
to more properly reflect the long-term nature of the financial
commitments pensions schemes need to make.
Although recent changes made by the Pensions Regulator are
welcome, they have not gone far enough.
Speaking on behalf of 140,000 professionals, managers and
specialists across the private and public sectors, Hudd said:
“There is no new thinking in this green paper. We challenge the
simplistic notion that changing the indexation of some pensions
currently in payment from RPI to CPI will improve the medium to
long-term funding of schemes or future occupational pensions
provision.
“These employers are likely to see this as a neat way of reducing
their costs and are unlikely to redirect any savings into future
pensions provision.
“At a time when large employers pay £5 in dividends to
shareholders for every £1 paid in to the occupational pension
scheme, we have little confidence that any changes will create
sustainable improvements in the funding of such schemes.”
Hudd also said that the green paper’s proposal to reverse the
principle enshrined in law that accrued pension rights are
protected will be fiercely opposed. The important principle that
only members can consent to changes should not be diluted.
The green paper says that recently-introduced defined
contribution schemes are “more affordable”. But evidence shows
that employer contributions to these schemes have been
falling.
“Government, employers and trade unions need to work together to
create a pensions system that is fair, flexible, secure and
sustainable,” Hudd concluded.
