Union calls for pensions action

Employees are finding their pensions under threat

Firms should be forced to give advanced warnings and consult their staff if they plan to close their final salary pension scheme, according to the Amicus trade union.

Employers are tearing up pension promises with no consultation. It's a scandal.

Roger Lyons, Amicus general secretary

The union's general secretary Roger Lyons has had private talks with the Secretary of State for Work and Pensions Andrew Smith in order to outline the union's proposals for pension reform.

The union's call comes only a matter of weeks before the government is due to publish a green paper with the aim of tackling the UK's growing pension crisis.

In a bid to cut costs, companies have been moving employees from final salary schemes to less generous money purchase schemes.

Scheme closure

Recent research from the Association of Consulting Actuaries (ACA) found that just under half of all final salary schemes are now closed to new entrants.

Under final salary schemes, the pension paid is a percentage of the salary on retirement, with the proportion depending on the worker's length of service.

But under a money purchase scheme, workers pay money into a pension fund which is used to buy an annuity - a financial product which pays out a sum each year - on retirement.

The risk of the pension fund not growing sufficiently is therefore borne by the worker under a money purchase plan, instead of the employer in the case of a final salary scheme.

As final salary schemes have traditionally been seen as the best type of pension a worker can get, their closure has alarmed unions.

"Employers are tearing up pension promises with no consultation. It's a scandal," Mr Lyons said.

"The Government must take action now as employers are closing down final salary pension schemes daily."

Biting the dust

The Government plans to publish its pensions green paper on 17 December but Mr Lyons says employees can not wait.

Big name schemes that have bitten the dust include those run by British Airways, BT and Marks & Spencer.

"It is crucially urgent for all employers to have to make reasonable contribution to employees' pensions...refusal to support employees pensions must end," Mr Lyons said.

Main Amicus proposals include:

• An end to the right of employers to modify or discontinue schemes/contributions without restraint - consultation with employees and unions is key.

• The aim of company schemes to be the delivery of a decent level of pension - 50% of earnings - not simply a state safety net set at around 20%.

• Compulsory employee contributions could be facilitated by tax assistance.

• Government needs to recognise and reward employers prepared to take on the risk of running a final salary scheme.