Transcript Title of presentation

Campaign Training
– Champions
Course (Scotland)
May 2011
The crisis is not of our making
"The price of this financial crisis is being
borne by people who absolutely did not
cause it, now is the period when the
cost is being paid, I'm surprised that the
degree of public anger has not been
greater than it has."
Mervyn King – addressing the Treasury Select Committee
Campaign Objectives - no one can do
everything but everyone one can do something!
 Prepare members and staff to resist attacks on
public sector pensions and their members
 Support negotiators to achieve the best outcome
possible and prepare for industrial action
 Make sure that UNISON members and staff gain
a greater understanding of public sector pension
schemes – remove the pension jargon fog
Scottish Campaign Plan
 Raise pension awareness
•
•
•
Briefings for activists and staff
UK and Scottish campaign activity & materials
Lobby and public awareness
 Branch organising plans
 Train activists
•
•
Pensions Champions – one day Scottish course
Pensions Contacts – half day local courses
 Negotiations at UK and Scottish levels
 Prepare for industrial action
Branch Organising Plan
• Pension Champions & Contacts
• Communications
• Ballot readiness (RMS)
• Recruitment
Champions and Contacts –
training
and support will be given
Pensions Champions - Will take a greater role by making make
sure union briefings and information on changes to
public sector pensions are understood by the branch, workplace
pension contacts and members. They will take a lead role in
Supporting contacts, developing local campaign initiatives
making sure that the branch and members are prepared to take
action to protect public sector pensions.
Pension Contacts - Distribute material, take actions when
requested. They will be the workplace feedback link between
members and the campaign/negotiators. Talk to and recruit non
members.
Types of Pension Scheme – Defined
Contribution
Member contributes X%, Employer
contributes Y%
Pot builds up
 Monthly contributions
 Investment returns
At retirement: purchase an annuity
 Market rate
 Seller takes account of life expectancy
etc
Consequences for members
Risk is all with the member
Employer’s commitment is fixed
Employee’s risk:
 Investment return
 Annuity rate
Types of Pension: Defined Benefit
Employee’s commitment: pay X%
Employers Commitment: pay Y%
Employer’s further commitment:
pay a pension of a defined amount
It’s bit like a bucket with holes in
the bottom
 Put money in according to the
size of the holes
Consequences
Risk is mainly with the employer
Employee’s commitment is fixed subject to valuations
Employer’s risk:
 Investment return
 Cost of providing the pension
The Risks
Investment return
Inflation
Wage inflation
Life expectancy
Annual accrual....or how your
pension savings build up
Final salary: 5/60ths of £24,310 = £2,025.83 assuming 5% wage inflation
The main public sector schemes
Funded or Unfunded – What Does This Mean?
Six out of the seven main public sector pension schemes are
unfunded
The exception is the LGPS.
Unfunded schemes: benefits are met by current government
income as and when they fall due.

Public sector employer pays contributions to a sponsoring
government department as if the scheme were funded.

Under this system, known as SCAPE (Superannuation
Contributions Adjusted for Past Experience), employer contributions
form part of the employer’s annual budget. The sponsoring
government department pays out pensions to retired pension
scheme members, netting off the employer and member
contributions received.
A pension system without
the bucket of savings!
The invisible bucket
No money, but the
scheme acts as if it
were still there
What Happens in the LGPS?
 101 administration bodies (11 Scotland) – collect
contributions – pay out pensions – invest the rest
 Use the returns from investment as income
 Investments are usually 60% stock markets, 20%
government debt, 5% corporate debt and others,
PFI e.g.
 Total assets are around £135bn (20bn Scotland)
What happens if it all goes wrong?
Entitlements depend on contract
Even if the Scheme went bust you are still
entitled
“Crown Guarantee” is a consequence of
being a Crown employee, not the nature of
the Scheme
Pensions in Scotland
• Primary legislation UK reserved
•
Hutton ‘common framework’
• Regulations devolved to Scotland
•
More flexibility in LGPS than NHS scheme
• Policy pressure - ‘expectation’
• Financial levers – Barnett formula
• Separate negotiations
•
Implications for campaign/action
Group Task
How many public sector schemes are there?
What are the differences in the scheme’s
funding?
How many use investment returns as
income?
How can you get more income into of the two
types of scheme?
What decisions are devolved to Scottish ministers?
Public Sector Pensions - What Are
The Key Issues We Face?
 Change to the way pension increases are
calculated – RPI/CPI
 UK Budget measures 2011
 Hutton 27 recommendations
 Scheme contribution increases
 Retirement age increases
 Benefit changes to career average
 Fair Deal/2TW – TUPE transfers and pensions
Key UK Budget Measures
 Enshrines contribution increases of 3.2%
and could be more Osborne says
 Create a flat rate state pension of £7,280pa
which will be considered in future public
sector benefit design to develop an
adequate pension - what is adequate?
 May remove the contracted out National
Insurance subsidy for employers/employees
 No date firm but 2014/15
Pension Benefit Increases – robbing
pensioners today and scheme members tomorrow

The UK Government has laid legislation which will mean increasing
public service pensions by Consumer Price Index (CPI) instead of
Retail Price Index (RPI) from April 2011

An official Pensions Increase Order increasing pensions in line with
the CPI next April was passed in UK Parliament on the 17th of March
– we expect it to be implemented soon.

The consequences are very significant. CPI is typically, on average,
0.7% per year lower than RPI

Lord Hutton says move represents a 15% cut in benefits
 A member receiving the overall average pension in public service
schemes of approx £7800pa will be around £117 worse off this year
Contribution Increases – a pension
tax to pay back the bankers debt not to
support your pension
 UK Government cut in funding of £2.8 billion a year by
2014/15: 40% - 40% - 20%
 This equates to a 3.2% contribution increase on average
for members – a 50% increase
• Scottish Government consultation Jan – Barnett formula
• Expected savings: NHS £137-143m. LGPS £140m
• March – deferred discussion post-election
• Now Barnett scoring for NHS & Teachers only
• No financial pressure on LGPS - ‘expected’
The move away from a final salary
scheme to career average
 Hutton stated that final salary schemes
“disproportionately” favour high flyers
 He has recommended switching to a career
average scheme for public service workers by
the end of the next parliament – i.e. 2015
 Crucially he has stated that each year’s
pensionable pay should increase in line with
increases in average earnings up to when you
leave or retire
What is a career average
scheme?
 This is a scheme that rather than base benefits on the
final salary you retire on it calculates them on your
average earnings during your scheme membership
 Such a scheme could potentially benefit members
whose annual salary increases are generally less than
the index used to increase pensionable pay and who are
unlikely to benefit from regular promotions
 There is no detail yet so UNISON cannot comment on it
CARE scheme but it must not be a cost-cutting exercise
Making us work longer
 The UK Government has already brought forward the
State Pension Age (SPA) meaning that from November
2018 the SPA will be 65 for both men and women
 From April 2020 the SPA will be 66 for both men and
women. Under current legislation the SPA is due to rise to
67 between 2034-2036 and 68 between 2044-2046
 Lord Hutton has stated that with exception of “uniformed
services” retirement should increase in line with SPA
 For those now 34 or younger it would be 68. For those
between 34 and 42 it is 67. For those between 42 to
around 57 it will be 66.
Fair Deal Over? – Making it cheaper to
privatise
 The UK Government has started a consultation on Fair
Deal. Changes to Scottish provisions for Scottish Govt.
 Fair Deal is the agreements that enable TUPE transferred
staff from public services to either remain in such a
scheme or be provided with a “certified” broadly
comparable scheme. Scotland PPP & s52 regs.
 UK Government will look to scrap because of the relative
cost to companies bidding for public service contracts
 This would leave TUPE transferred staff at the pensions
mercy of private contractors
Other issues to be aware of
 A limit on how much employers should pay into the new
schemes and increasing the share of that cost that
scheme members pay. Scotland cost sharing.
 Discount rate 3.5% to 3%. PayG schemes cost more
 Only public sector workers should be in the new
schemes..what is a public sector worker? We don’t
know yet..no definition provided
 New and improved governance in all schemes
 Representation on LGPS investment boards
 Incentives to merge LGPS funds. CoSLA/IS project
 Privatisation of scheme administration
The Key Issue – Contribution
Increase
 This is a tax to pay back UK government debts that
were raised to bail out the banks
 None of the money will go into the schemes
 It threatens the whole system – if enough members optout
 It unites all public sector workers in or have access to a
scheme
 It could allow public sector unions to co-ordinate action
 We need to consult members and prepare for a ballot
for industrial action
Where can you find everything?
Scottish Pension Web Pages
http://www.unison-scotland.org.uk/pensions/index.html
UK Campaign Web Pages
http://www.unison.org.uk/pensions/protectour.asp
Advice on Pensions
http://www.unison.org.uk/pensions/index.asp