England got three points and the sun is shining. I have no desire to wreck your feel-good factor but there is a new threat to your occupational pension. The NAPF, which represents the pension providers, is proposing that companies should be allowed to renege on pension promises. Their CEO has said "In considering whether to allow a roll-back of benefits, the government must weigh the collective interest in the economic competitiveness of businesses against the interest of individuals in getting a fair deal and having promises honoured".
The government has not announced anything specific on these lines but if corporations get their way then you will feel the effects via inflation (and maybe loss of spouses' pension). In IBM terms, you have recently lost out on increases on the part of your pension that comes from pre-1997 service. The new threat is to increases on post-1997 service and the GMP part of your pension. Currently IBM cannot reduce these because of the regulations. The increases on a deferred pension between when earned and when taken are also currently protected by regulation.
There is opposition to NAPF's proposals. The TUC said:
'This call for employers to be able to make smash and grab raids on their staff's pension benefits is completely unacceptable. This is no more than a retrospective pay cut, cutting wages that have already been paid. Unions will fight this tooth and nail, both politically and in the courts.
'If this were allowed, there would be an inevitable chain reaction with every employer facing city pressure to break the pensions promise to their staff. It is odd to see the leader of what is meant to be a pro-pension body putting forward a proposal of collective self-harm.'
The national organisation representing occupational pensioners has lobbied a relevant Parliamentary Committee. (Link below)
The Financial Times has responded with mockery:
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Steal our pensions, but do it discreetly
By Michael Skapinker
Published: June 9 2006 20:42 | Last updated: June 9 2006 20:42
Hats off to Christine Farnish, chief executive of the National Association of Pension Funds, for her call on Friday for companies to be allowed to renege on their pension promises - but did she have to be so public about it?
Leaking her speech to the Financial Times, which gave it front-page treatment, is the last thing pension providers need. If word gets around that employers are asking for what Alan Pickering, another pensions luminary, recently called "a one-off opportunity to renegotiate the past", won't everyone start demanding one?
Next thing we know, mortgage providers will be insisting that their profits are under pressure, too, and that they should be allowed to extend loan periods.
When proud householders make the last of their monthly payments and request the title deeds to their homes, lenders will also want the right to say: "Sorry, but we've decided you have to carry on paying your mortgage for another five years."
As for the suggestion that pension plans should no longer have to provide dependant benefits - the insurance industry will soon be clamouring for their own right to withhold payments to widows and orphans.
The real worry is that people will then tumble to what the pension providers are up to. Trouble-makers will run to the tabloids. Some will argue that there is a word for depriving people of assets they have already acquired:it is called theft.
It won't be long before agitators start accusing companies of acting like Robert Maxwell. The more level-headed will start telling their employers that if they really are in as much trouble as Ms Farnish claims, there is a time-honoured way of dealing with that: to go to their pension fund members and reach an arrangement with them - as they would with any other creditor - rather than taking unilateral action.
There is no need for any of this unpleasantness. The government is onside. It is already considering legislation that would allow employers to scale back pension benefits they had previously promised.
John Hutton, the pensions secretary, told the NAPF conference that, in the government's review of pension regulation "nothing is off the table".
All that is needed is a little discretion. The pension lobbyists start with an enormous advantage: no one understands what they are talking about. Just uttering the words "accrued benefits" is enough to send normal people to sleep. If the pensions industry does its persuading in private, it should be
able to get its changes through without too much fuss.
Handled properly, it shouldn't be long before indexation, dependants' benefits and the whole idea of pension members' rights are a distant memory - to be found only in executive pension schemes, where they belong.
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The AMIPP question is the usual "what to do". AMIPP's objectives are largely IBM centred (see Contacts page). This threat isn't, although no doubt IBM would take advantage if the government allows more breaking of promises. Is this an issue AMIPP should get heated about (special newsletter urging writing to MP's perhaps?) or are national issues best left to those with some national clout (like the TUC)?