In politics, pensions are a minefield into which no-one wishes to tread. Any talk of reforming public sector schemes provokes angry accusations at best, full-on strikes at worst. Discussions of what to do with the state pension takes the whole thing to an even crazier level. Immense complexity, vested interest, emotion and unavoidable political manoeuvring; all the ingredients for an unedifying public debate.
But that debate took a small but significant step towards clarity yesterday, with news that Unison (the public sector union) is considering significant reforms of its own final salary scheme, including dropping it altogether.
As the Times reported yesterday:
"...the union’s pension funds are facing a deficit that has more than
doubled in the past year. In December last year Unison had assets of
about £268 million and a deficit of £58 million. But a letter from Dave
Prentis, Unison general secretary, said that the deficit was now at
least £120 million, as the value of pension funds had plunged after
“turmoil in the financial markets”.
Confidential proposals to curb costs sent to senior Unison officials
are to be discussed by pensions trustees next week, and the
recommendations will be put to the 1,400 pension scheme members in a
ballot this autumn."
The article goes on:
"... Unison is looking at raising retirement age from 60 to 65, possibly
even for current members. “If the Unison scheme retirement age was
increased immediately to 65 years, it would reduce immediately the cost
of the scheme by some 3.6 per cent of salaries each year,” the document
“Given the seriousness of the deficit, it is unlikely that a
recovery package is going to be possible without an increase in
employee contributions,” the paper also says.
Senior union officials claimed that there had also been informal
discussions about scrapping the Unison final-salary pension scheme,
based on an employee’s salary over the past three years, and replacing
it with the much less generous career average scheme."
(To read the article in full, see here)
Unison, like any employer, is being faced with the ugly truth about generous final salary schemes; they are unaffordable. As the leading voice in the campaign to scupper Government plans for public sector pensions, the charge of hypocrisy being laid at Unison's door seems fair. As members were out in the cold last December picketing, Union bosses were sitting down to discuss implementing just the kind of changes the Government were trying to enforce.
As always, it's easy to forget that this is not some obscure philosophical issue. The retirement incomes of very real people are at stake. No one should be pleased that people who were promised one thing are now not going to get it. But if this news today represents the beginning of a new honesty about what is affordable, what is possible, the changes that must be made, then there is some semblance of a silver lining; a real debate about the facts, not just about what we'd all like to exist in an ideal world.
But not if David Prentis (Unison General Secretary) has anything to do with it. Even though he conceded yesterday that the union's pension scheme will have to be overhauled, his attribution of blame for the problem on the "greed and irresponsibility of the financial and banking sector" is disingenuous. He's right; the greed and irresponsibility of many in the financial sector has brought the pension scheme to its knees. But at the same time it is just that greed and irresponsibility that allowed Mr Prentis to dodge this bullet for years. Like many executives, he could sweep the 'unsustainable and unaffordable' nature of Unison's scheme under the carpet as long as bankers in the City kept making money. Now they aren't, and Mr Prentis is forced to face the ugly truth. Pity he didn't square with Unison workers when times were good.