Sometime later this month, Paul Soete director general of FabriMetal, the organisation representing the 2,000 employers in Belgium’s metal industry, will find out whether the unions are accepting the case for an industry-wide pension scheme available to the sector’s 150,000 blue collar workers.
“The principles of the scheme were agreed in March,” he says. “Since then discussions have continued about implementing the scheme, but there is still the risk that that the unions could say ‘No deal’. We hope not and the union leaders hope not.”
The scheme emerged from negotiations within the country’s horrendously complicated pay rounds, made even more difficult by the government’s policies on settlement levels. “We tried to introduce other items than pure pay into the discussion.” At the same FabriMetal were concerned that the pension area might become competitive between employers, which might unleash a “cascade effect” if negotiations were left on a company-by-company basis.
“We finally proposed to the unions that they have a ‘double approach’ at branch level. So companies could effect their own scheme if they wanted to, but for all other employers, we would organise a collective scheme. Then we agreed 1% of pay as the contribution to be made by employers.” This would also be the level for companies running their own plan, so there would be no discrimination. “We could then guarantee to all blue collar workers that they would have an extra pension based on contributions from their salary.”
The resistance on the unions’ part came from fears that the scheme would undermine the statutory social pension arrangements. On the other hand, with the tax and social insurance advantages, the 1% pension contribution was worth more than the same level of additional pay because of the high level of Belgian taxes,” says Soete.
“We were also able to show the unions that more and more white collar workers have these systems as part of collective agreements. So they are denying their workers, the advantages that while collar employees have. So the difference between white and blue collar workers would diminish by creating the system, which is something that interests blue collar unions.”
So far no decisions has been taken on the structure of the scheme, though there has been considerable discussion about the rights of participants. “The asset liability and other financial aspects have not been considered. We have refused to have any contacts with fund management groups. An RFP will be sent out in due course and then we will chose a custodian and money managers.”
The plan starts collecting money in April next year, when the Y2K bug will be out of the way, he says. “We intend to use a third of an existing collective benefit fund built up from employers contributions, which is used for lay-offs or in case of sickness.” Though still under debate with the unions, the idea is that this sum will be used to upgrade the back service of employees to an extent. “So we won’t have to wait until 2005 until something interesting builds up,” says Soete. He reckons the annual contribution of 1% across the industry could come to E20bn in a full year, with the amount from the reserve account adding a similar sum.
The scheme is likely to be on a defined contribution basis in that it will be individualised, but, he points out there will be collective aspects as well. But the scheme will be transparent and run at minimum costs with employees receiving details of their account and the value of their plan. “The contributions will be linked to wages, but the amounts paid out will not be related to salary at the end of the working career.”
Currently, only perhaps 15% of the industry’s blue collar workers are in employer pension schemes, so this development would increase coverage dramatically in the metal working sector which includes the auto industry. “In the end as a very rough guide, I believe we may have 40% in individual employer schemes, with 60% in the collective scheme.”
No similar scheme has been attempted in Belgium, though some areas such as construction do grant pensions from their benefit funds, but these are not really pension funds, Soete points out. The reaction has been very positive in Belgium, including on the political side, where the fact that smaller employers would be
participating has gone down well.
“I think that in 2001, when we will have the next round of pay bargaining, that others will follow. There is interest among others to go in the same direction.” Of course, this all depends on how things go this month for FabriMetal in its discussions.