Pensions

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:
CPIRPI.GIF
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:

To: group.pensions
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.

National Insurance

  1. How much would my monthly National Insurance contributions increase by when I leave the ICL DB pension plan? What percentage reduction in my take home pay would this be?
    Indexation
    The government has announced its intention to change the way Defined Benefit pensions are index-linked from April 2011, so that they would be linked to the Consumer Price Index (CPI) rather than the Retail Price Index (RPI). I am concerned that this could substantially reduce the value of my pension. I understand that it is not yet clear whether or how much this might affect me, and that this is likely to depend on further detail from the government and on decisions of the ICL DB trustees.

  2. When does the company expect to be able to tell me what the trustees decide about whether and how the change affects the ICL DB plan?
  3. If the change affected my pension in deferment (between my Expected Exit Date (EED) and the age of 65), when and how can I work out how much this is likely to reduce my ICL DB pension?
  4. If the change affected my pension in retirement, when and how can I work out how much this is likely to reduce my ICL DB pension between the ages of 65 and 75 and between the ages of 65 and 85?
  5. Many previous pension documents have been provided to me by the company which clearly state that my pension will be index linked to RPI (within limits), and I have contributed to the ICL DB plan on that basis. If the trustees do decide to change indexation and reduce my pension, how will the company compensate me?
    Illustration and Advice

  6. Last year the company provided an illustration that compared expected pension in the ICL DB plan if it remained open until I retired with expected pension under the company’s original proposal. Will the company provide me with a new illustration reflecting the company’s decision and based on reasonable assumptions discussed with the Pensions Forum?
  7. The company is suggesting we use Independent Financial Advisors. Given that this has been suggested to several thousand staff, will the company organise and fund this centrally, which must be more efficient in time and money?
    Permanent Health Insurance (PHI)

  8. I understand that the mechanism for providing this benefit may change from time to time, but can you confirm that the benefit to me will not be removed or reduced without my consent?
  9. Can you confirm that the company will provide an equivalent benefit if PHI does not pay out and I would have qualified for ill-health early retirement under the rules of the ICL DB pension plan?
  10. Can you confirm that in the future the company would not dismiss me for a reason arising from my ill-health before I have been off for the qualifying period for PHI?
    Life Assurance

  11. I understand that the mechanism for providing this benefit may change from time to time, but can you confirm that the benefit to me will not be removed or reduced without my consent?
    Salary Swap

  12. Can you confirm that I would have the option to make contributions from my salary rather than through the Salary Swap scheme if participation in the scheme would reduce my entitlement to contributory state benefits, for example because my income fell below the Lower Earnings Threshold for National Insurance?

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:

  • 10 years indexation: 93%
  • 20 years indexation: 87%
  • 30 years indexation: 81%
  • 40 years indexation: 76%
  • 50 years indexation: 71%

Two main justifications have been advanced in favour of the change:

  1. Inflation for pensioners is closer to CPI than RPI, because many pensioners do not pay housing costs. Even if this was correct, how could it justify eroding my deferred pension while I’m still working?
  2. It would reduce the liabilities of defined benefit pension funds, helping keep them open. On the contrary, changing the indexation of deferred pensions would have the opposite effect, increasing the incentive to close schemes. Employers were already attracted to closure because accrued pension was devalued by being linked to RPI instead of (typically higher) future salary growth. The difference between CPI and future salary growth is generally even greater, increasing the incentive to close schemes.

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!
What are your views on the proposed change, and particularly on it affecting deferred pensions as well as pensions in payment?

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.

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Sign the petition – defend the union

Unite members across Fujitsu Services Limited in the UK are fighting over job security, for union recognition, against victimisation of reps, and over pay and pensions. Members nationally took industrial from 28 February including 15 days of strikes and ongoing action short of strike, after 12 days of local strikes in Manchester.

INDUSTRIAL ACTION IS CURRENTLY SUSPENDED but members have voted by 92% to reject a company offer.

Further information is available here including a downloadable appeal for support leaflet and how to donate to our strike fund.

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