UK: Unions' warning on safety net for pensions

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UK: Unions' warning on safety net for pensions

By Alexander Jolliffe, Financial Times

June 9, 2003

UK - Unions warned ministers yesterday not to cut guarantees that protect millions of pension scheme members from rising prices.

They were reacting to news that Andrew Smith, the work and pensions minister, will announce plans this week to scrap the rule that raises pensioners' payments by 5 per cent or in line with inflation, whichever is the lower.

The Trades Union Congress said: "If inflation rose, pensions would be worth less and that would be unacceptable. Unions might have to think about negotiating higher wages."

While it welcomed plans to bring in a safety net that would pay pensions to former employees of bankrupt companies, the TUC said it would urge ministers to reconsider the inflation-proofing proposals.

Amicus, Britain's biggest private sector union, accused ministers of caving in to business lobbying by proposing to cut the inflation-proofing guarantee. It said: "This is a very dangerous move. It is just another sop to the CBI."

Because inflation is low, ministers believe the obligation to finance inflation rises of up to 5 per cent is placing unnecessary costs on final salary schemes.

The comments came as Amicus - a vocal critic of pensions policy - admitted it had a £30m deficit in its final salary pension scheme. It said there were no plans to cut benefits, raise staff contributions or increase the retirement age.

The warnings follow a weekend march in London by former employees of ASW, which went into liquidation last July leaving many people with a fraction of their expected pensions.