Union to meet UK government to discuss DB closures
UK – The Trades Union Congress (TUC) is to meet the government to discuss the TUC’s concerns over the number of defined benefit (DB) schemes being closed.
The news come as the financial workers union, Unifi warns that financial institutions could face legal action for breach of contract for closing their DB plans altogether. It claims that banks and building societies are simply following a trend, rather than acting out of necessity. “Financial institutions traditionally contribute little to their pension plans, so they don’t need to change,” says a spokesman.
A spokeswoman for the TUC says its main concern is that defined DC schemes fall short of providing people with same guaranteed level of provision as DB schemes. “We are not saying that DC schemes are a bad concept per se, but since employers are not obliged to contribute as much to them as to DB plans, not even a good DC scheme can offer the same level of pension income as a DB one,” she says.
She says the proof can be seen in the statistics concerning contribution levels of pension schemes of companies that have switched from DB to DC in the last few years. “We find there is a general tendency for contribution levels overall from both employer and employee to drop by 5%-7% when companies change their arrangements.”
The TUC would like to see the government “fill in the gaps” in its pensions policy and take action to help employers retain their DB structures. “Possibly the main way to do this is to simplify the regulatory framework surrounding DB, since it is incredibly bureaucratic and then the government needs to make its pensions policy less ambiguous in terms of occupational versus private provision, ” says the spokeswoman.
The TUC believes stakeholder pensions could be seen as an alternative if employers contributions became compulsory. “Without employers contributions stakeholder is seen comparatively as being a bit cheap,” says its spokeswoman.
Elsewhere she attacks employers for using the new accounting principle FRS17 to justify restructuring their pension arrangements. “Employers saying that they are closing their schemes as a result of FRS17 is basically an excuse to get out of having to contribute to them,” she says.