A top figure in the world of pensions finance has demanded a renewed assault on workers’ futures.
Unsatisfied with the carnage already caused, Christine Farnish, the chief executive of the National Association of Pension Funds, is arguing that employers should be able to retrospectively cut benefits built up by employees in “guaranteed” occupational schemes.
Employers are leaning on the government to include clauses in a new pensions bill allowing them to scale back their commitments to pay specific benefits.
Farnish’s plan could mean that benefits already being paid to pensioners should be reduced, cutting the amount that people of 70 or 80 are now getting.
Contracts are sacrosant – except when bosses want to rip them up to make more money.
This new plan is the equivalent of getting to the end of paying your mortgage after 25 years and then the bank telling you that you have to keep going for another five years because they feel a bit strapped for profits.
This new assault comes as a survey has underlined the devastation already caused to millions of workers’ pensions.
Those workers who do still retain final salary pensions have been forced to pay more and work longer, according to a survey by the pensions advisors Watson Wyatt.
Almost half of final salary schemes now ask members to pay more than 5 percent of their salary towards their pension against just a quarter of scheme two years ago.
Average member contribution rates have also risen from 4.6 percent to 5.2 percent over the same period.
So in just two years, millions of workers have seen a serious pay cut – and their pensions are still getting worse.
Almost 80 percent of companies said they expected their normal retirement age to rise to 65.
Other measures to worsen schemes include no longer counting bonuses as pensionable pay, taking advantage of recent changes that reduce the amount by which pensions have to be increased to allow for inflation and, in some cases, limiting the amount of any pay rise that counts as pensionable.
Taken together the attacks mean an average worker is losing 2 percent of their salary this year.
lThe Unison union says that consultation over the proposals for the local government pension scheme will continue into 2007.
The department for communities and local government is circulating proposals that only give full pension protection rights for workers who are 50 or over in September 2006.
Anyone under 46 would lose all their rights under the “rule of 85”. Unison leaders say that there will be informal consultation on this plan from next month and then formal consultation into 2007.
There will be a ballot when the final proposals emerge.
This is a plan to kick the issue into not so much the long grass as the densest forest. It is vital the union respond much more aggressively than simply consulting members.