Barber accuses employers of breaking pensions promise
The general secretary of the TUC has launched a stinging attack on UK employers for allegedly failing to keep their “pensions promise” to employees.
In his speech to the Confederation of British Industry (CBI) conference, Brendan Barber said that employers had reneged on an implicit promise to support pension schemes through bad times as well as good.
He pointed to the contribution holidays taken during the 1980s when funds were in surplus and the stock market was high, and argued that this should be repaid by increased funding in today’s more difficult circumstances.
Mr Barber said that until recently pensions had been a “very positive example of social partnership in practice” with employers, employees and state playing a role.
“Although the retreat from good occupational schemes has recently accelerated, the employer commitment to such schemes has been on the wane for some time. Employer pension contributions as a percentage of GDP hit a peak at the beginning of the 80s and then fell sharply. There has been an increase in contributions recently but they are still well below where they were.
“Many employers used the convincing argument that, since they shouldered the investment risk in final salary schemes, they should have control of the surplus. And while the bull market lasted, employers certainly took advantage. According to the latest Inland Revenue statistics, employers used surpluses to take contributions holidays and reductions worth £18.15 billion between 1988 and 2003. And in the same period they took direct refunds of surplus worth £1.2 billion.
“But, the argument ran, if things became tight the employer would fulfil their part of the bargain and keep the scheme going. There was an implicit promise that employers would do the right thing.
“This promise has been broken. Rather than shoulder the burden of investment risk as they had promised, many employers decided they wanted to get shot of it once and for all.”
He called on employers to remember that “their success is a shared endeavour with their workforce, and that together we can seek to restore the pensions promise”.
Mr Barber said that the “wholesale flight from defined benefit provision has angered many people within the union movement and beyond” particularly that “what was once regarded as the norm in pensions – a secure, guaranteed retirement income – has been taken away from more and more employees”.
Pointing out that a good pension scheme can be good for companies in helping to recruit and retain good staff, Mr Barber also pointed to the “anger” many employees feel about “double standards” on pensions within companies.
“Too often these days we see some companies piling huge amounts into the pensions of directors whilst claiming that pensions for staff are too expensive..and we have seen examples of companies shutting DB schemes for staff but retaining them in the board room, and cases of supposedly closed DB schemes admitting new directors.”
Though Mr Barber welcomed recent CBI guidelines that directors should be members of the same scheme as staff, he called for this to go further so that all are on equal terms within the scheme.
