An important gain from our “Jobs, Pay and Pensions” campaign earlier in the year was agreement that:
l) the company confirms that the terms of its Defined Contribution pension schemes are a contractual entitlement for those existing and new employees who are members of such schemes;
This would provide better protection of pension rights, not just for those currently in the final salary ICL DB Pension Plan, but also newer employees in the Fujitsu UK (FJUK) Defined Contribution plan, making it harder for the company to cut pension provision in the future.
Since then, UNITE has been working hard to try to ensure the company implements the agreement properly through appropriate legal wording in the “variation of contract” letters that the company will be sending out soon.
The process has been slower than necessary because the company refused to meet the Pensions Forum, so most communication has been through protracted exchanges of email.
There has been significant progress, particularly on the wording on the main (FJUK) pension provision and the 10% of salary “recompense”. However, the wording in some other areas currently remains unsatisfactory, for example on Life Assurance and the Permanent Health Insurance (PHI) scheme to support you if you’re off long term sick.
UNITE continues to try to get the company to resolve these issues. However, we currently have no assurance that the company won’t issue unsatisfactory letters to ICL DB members within the next week. Please be clear – there is no need to panic or take hasty ill-considered decisions. Though individuals can accept the change earlier, nobody has to do so until well into 2011.
The other major area of concern has arisen from the government’s announcement that it intends to change the basis on which pensions are index-linked from the Retail Price Index (RPI) to the Consumer Price Index (CPI). Figures are available from 1988, during which time the difference between RPI and CPI inflation averaged about 0.7%. Over a number of years when your pension is deferred after leaving a scheme or after retirement, this compound loss could accumulate to a very significant reduction in “defined benefit” pension.
The government plans to make the change effective from April 2011 but at this stage the details are not known. The impact is likely to be different on different pension schemes, so trustees are likely to be seeking legal advice on the interpretation of their trust deed and other documents.
At this stage, it is not known if or how the ICL DB Pension Plan might be affected.
If the change in indexation affected both deferred pensions (after you’ve left the scheme) and pensions in payment, then for example:
- someone who is 50 now could expect a reduction to 91% of their expected DB pension by the age of 65, to 82% by the age of 80, and 76% by the age of 90.
- Someone who is 35 now could expect a reduction to 82% of their expected DB pension by the age of 65, 74% by the age of 80, and 69% by the age of 90.
This graph makes the point:
The government, not Fujitsu, is responsible for its proposed policy, but if the change from RPI to CPI affects ICL DB pensions in deferment, this could make the impact of Fujitsu closing the scheme significantly worse for employees (while saving the company money).
The Pensions Forum (UNITE and IPMC) has been pressing the company to clarify the position, and issued a statement to members on 18th August which covered both the legal issues and the RPI-CPI issue.
What You Can Do
Given Fujitsu’s refusal to engage with the Pensions Forum at a collective level, the forum encouraged members to write to the company Pensions Department individually. A number of members have contacted UNITE asking for help in drafting such a letter, so there here is a template you can adapt and send:
I have received the “It’s Time To Focus On The Detail” booklet from the company, which aims to provide “what you need to know to help you make your important pensions decisions”, and invites our questions.
I have a number of questions which aren’t answered by the booklet and need answers I can rely on when deciding whether to accept the company’s proposed change to my contract of employment.
Most of my questions require answers which are not specific to me, so as well as providing me with individual answers I would like the company to engage with the Pensions Forum to agree clearly worded answers to the general questions which then form part of my contract of employment.
You should keep the company’s response in a safe place.
At the same time as pressing Fujitsu for answers, please contact your MP to lobby against this change to pensions which could affect people so severely.
You can find your MP here: http://www.parliament.uk/mps-lords-and-offices/mps/
It’s usually best to write to them on paper, they take that more seriously than email. You can write to any MP at “House of Commons, London, SW1A 0AA”. Here’s a model letter you can adapt to send to your MP:
I am writing in relation to the government’s announcement that it intends to change the basis of indexation of defined benefit pensions from RPI to CPI, and to ask you to oppose this change.
I work for Fujitsu, which proposes to dismiss me and re-employ me on a new contract next year so that I can no longer contribute to my final salary pension. This would make me a “deferred” pensioner, with my pension index linked from next year up until retirement, as well as when I am drawing it.
At this stage I don’t know whether or how my pension fund will be affected by the change, as we are awaiting further clarity from the government and a decision from our pension fund trustees.
If our fund is affected, the impact on me and my family could be severe. If CPI inflation continues to be about 0.7% less than RPI inflation each year, as it has since 1988, my pension would be rapidly eroded in comparison to what it would have been without the change, dropping roughly as follows with the years of indexation:
Two main justifications have been advanced in favour of the change:
The proposed change is particularly pernicious for people like myself, who work for companies which have already decided to close their final salary pension schemes. After considerable pressure and lengthy negotiations, my employer did agree to provide some recompense for the closure of our scheme, which they said was limited by what they could afford. Now the government is stepping in and proposing to hand over yet more of my pension money to my employer!
Best of all is to visit your MP at a surgery and speak to them face to face.
You could also join the protest against all the cuts at the Tory party conference on 3rd October in Birmingham. The protest, organised by the Right To Work campaign, is supported by several national unions, as well as our Fujitsu UK Combine Committee. Transport is being organised from all over the country. Get in touch if you want to join the Fujitsu contingent.