AGM AGENDA 2010
Please click here for a copy of the agenda.
DEFENCE OF PUBLIC SECTOR PENSIONS
In the run up to the General Election, in conjunction with our colleagues in the Public Service Pensioners’ Council, we sent a letter and a briefing to the candidates of all the major political parties, calling on their support for the protection of accrued benefits for existing public sector pensioners and for the maintenance of decent defined benefit schemes for all working public servants. We received assurances from spokepersons for the three main political parties that accrued rights, including index-linking arrangements, would be protected. However, the Budget announcement on 22 June 2010 now puts the substance of assurance on index-linking in doubt. (Please see next item.)
The new Coalition Government has now set up a Commission to review the future of public sector pension provision. The announcement, including the terms of reference, can be found at www.hm-treasury.gov.uk/press_14_10.htm
The announcement makes it clear that "Existing accrued rights will be protected." The Alliance's submission to the review can be found here (Word doc.)
Defence of Public Sector Pensions (PDF)
INDEX-LINKING OF PUBLIC SECTOR PENSIONS
The index-linking arrangements for public sector pensions stem from the Pension (Increase) Act 1971. The law is complicated but it has had the effect of ensuring that each April public sector pensions have been increased in line with the Retail Prices Index, as recorded for the previous September, so as to maintain their purchasing power. The RPI link has been applied since 1972, employees have been led to believe by pension scheme literature that the RPI link would be maintained and many have made financial choices based on that understanding. Following much media speculation about the future of the current arrangements, we sought clarification from the three main political parties about their intentions and we received the following assurances.
At a meeting held on 30 March 2010, Angela Eagle said on behalf of the Labour Party "Following the agreement for change reached with the unions in 2005, we are satisfied that public sector pensions are affordable, sustainable and fair. We have no plans to change the current index-linking arrangements."
In a letter dated 12 April 2010, Steve Webb said on behalf of the Liberal Democrats "We are very clear that all accrued rights should be honoured: a pension promise made should be a pension promise kept. Therefore we would not make any changes to pension rights that have already been built up. I have confirmed that I regard accrued index-linked rights as protected."
In a letter dated 27 April 2010, Philip Hammond said on behalf of the Conservatives "Indexation of pensions in payment is an established part of pensions legislation. The Conservative Party has no plans to change the current index-linking of public sector pensions in payment. We agree with the view that the right to indexation of pensions already accrued is part of the accrued pension rights and those rights will be protected. Our proposed £50,000 cap on public sector pension rights accrued was always intended to be a real-terms cap and therefore will be subject to indexation to reflect inflation. It would make no sense to express a long-term cap on pensions in nominal terms."
Notwithstanding these assurances, yesterday’s emergency Budget said the following:-
Indexation of benefits and tax credits
The Government will use the Consumer Prices Index (CPI) for the price indexation of benefits and tax credits from April 2011. This change will also apply to public service pensions through the statutory link to the indexation of the Second State Pension. The Government is also reviewing how the CPI can be used for the indexation of taxes and duties while protecting revenues.
State Pension
The Government will uprate the basic State Pension by a triple guarantee of the highest of earnings, prices or 2.5 per cent from April 2011. The CPI will be used as the measure of prices, consistent with the Government's decision to index all benefits and tax credits by the CPI, although the basic State Pension will increase by at least the equivalent of the Retail Prices Index (RPI) in April 2011 to ensure its value is at least as generous as under previous uprating rules. The standard minimum income guarantee in Pension Credit will increase in April 2011 by the cash rise in a full basic State Pension.
It is possible, that the new Coalition Government will agree to honour the current index-linking arrangements for pensions already in payment. We will check that out with Ministers. But, in the light of the budget statement, it seems pretty clear that the Government intends to move from RPI to CPI index-linking for all public sector pensions. If they do, indeed, intend to move to CPI for pensions already in payment, their pre-General Election assurances were extremely duplicitous and we will do all we can to expose that.
The comparison of RPI/CPI September figures since 2000 has been as follows:-
RPI +3.3%; +1.7%; +1.7%; +2.8%; +3.1%; +2.7%; +3.6%; +3.9%; +5.0%; -1.4%
CPI +1.0%; +1.3%, +1.0%; +1.4%; +1.1%; +2.5%; +2.4%; +1.8%; +5.2%; +1.1%
Since CPI is usually well below RPI, a move to CPI could have a disastrous affect on both our public sector and state pensions.
We will be in touch with our Colleagues in the Public Service Pensioners’ Council, the National Pensioners Convention and the public sector trade unions to discuss how best we might challenge the move.
We will keep you posted.
Please write to your MP protesting about the proposed move to CPI and get your friends to do likewise. Click on Labour, Lberal Democrat or Conservative for model letters, but do not let these cramp your style.
Labour,
Liberal Democrat,
Conservative.
If you are not yet a member of the Alliance and your pension is paid by Capita, please click here for an application form. If your pension is not paid by Capita, please ring us on 020 8688 8418 and ask for a direct debit application form.
If you have old colleagues who are not yet members of the Alliance, please ask them to join and take an active part in protecting their pension benefits.
ACCRUED PENSION ENTITLEMENTS
The courts have ruled that occupational pensions are deferred salary and, therefore, are protected by contract.
Section 2(3)of the Superannuation Action 1972, as amended, (which relates to our Civil Service pension scheme) says "No scheme under the said section 1 shall make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity,in so far as that amount is directly or indirectly referable to rights which have accrued (whether by virtue of service rendered, contributions paid or any other thing done) before the coming into operation of the scheme unless the persons consulted in accordance with section 1(3) of the Act have agreed to the inclusion of that provision." The Government would have to consult the Alliance and we would NOT agree to any such reduction.
Protocol 1, Article 1 of the European Convention of Human Rights (incorporated into the Human Rights Act 1998) says:-
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
The courts have ruled that pensions are "possessions" and, therefore, enjoy the protection of the Act. This applies both to pensions already in payment and to pension entitlements already accrued but not yet in payment.
The major political parties have made the following commitments:
Conservative Party (Theresa May 23 June 2009 to CBI Pensions Conference)
"And one thing on which we are absolutely clear is that accrued benefits would be protected."
On 10 September 2009 Philip Hammond repeated the commitment in similar terms.
Liberal Democrats (Nick Clegg 23 July 2009 A Fresh Start For Britain)
Public Sector Pensions. "We will honour all commitments which have already been made but examine ways to keep the cost of of future pension obligations, particularly to the higher paid, under much tighter control."
Labour Party (Cabinet Office Briefing 31 July 2009 Q&A on Reform of the CSCS)
"We have recently completed a major reform of the Civil Service pension arrangements and have no plans for further changes."
CALL TO ACTION
Call to Action (PDF)
In conjunction with our colleagues in Unite, the Federation, we launched our Call for Action seeking improvement for pensioners the following areas:
- Pensions - the introduction of phased increases in the State Retirement Pension to reduce means-testing and to lift pensioners above the official poverty threshold
- Health & Social Care - the establishment of a National Care Service focused on maintaining people's independence, supporting carers and financed fairly
- Transport - decent affordable public transport, with the concessionary bus pass to be used in place of the Senior Rail Card
- Social Exclusion - provision of the means so that older people are able to access services and play a full part in their local communities
- Energy - the elimination of fuel poverty and the proper regulation of energy tariffs
- Crime - actions to address crime and the fear of crime, so that older people are able to enjoy secure and peaceful retirements
We will continue to campaign on these points in the coming months.
INFLATION
In June 2010 the RPI was 5.0%, the RPIX (RPI excluding mortgage interest payments) was 5.0% and the CPI was 3.2%.
In May 2010 average earnings (excluding bonuses) rose by 1.8% and average earnings (including bonuses) rose by 2.7%.
CIVIL SERVICE PENSION FOR 2010
The September RPI determines the pension increase for the following April. Since the September 2009 RPI was minus 1.4%, there will be no Civil Service Pension increase in April 2010, nor will there be any reduction. Civil Service Pensions will stay at 06 April 2009 levels.
BASIC STATE PENSION FOR 2010
From 12 April 2010, the Basic State Pension will rise by 2.5%, from £95.25 to £97.65 for a single person and from £152.30 to £156.15 for a couple.
BASIC STATE PENSION FOR 2011
From 11 April 2011, the Basic State Pension will rise by the higher of the increase in earnings, the increase in prices or 2.5%.
THE NATIONAL INSURANCE FUND
A recent report by the Government Actuary Department showed that at the end of 2007-2008 the National Insurance Fund was in surplus to the tune of £46 billion. By the end of 2012-2013 the surplus is expected to rise to £114 billion. In January 2008 the Secretary of State for Work and Pensions said, in a reply to a Parliamentary Question, that the cost of increasing the basic state pension to the pension credit guarantee level would be £21 billion in 2008-2009.
OUTSTANDING CS PENSION ISSUES
The five long-outstanding Civil Service pension issues are:
- Widow's/widower's pensions for life, irrespective of re-marriage or co-habitation;
- Pensions for widows/ widowers of post retirement marriages;
- Pre-1948 service to count in full;
- The National Insurance Modification to be scrapped; and
- Pay-pause victims to be recompensed.
We have been campaigning on these issues for many years but have not yet persuaded the politicians. We will continue to make representations on all these issues whenever the opportunity presents itself.
NPC's PENSIONERS' CHARTER
We are affiliated to the National Pensioners' Convention and we support their Pensioners' Charter in the following terms:-
" Every man and woman on reaching state pensionable age will have the right to:
- a basic state pension set above the official poverty level and linked to average male earnings,
- a warm and comfortable home,
- free health care treatment based on clinical need and an annual comprehensive health check,
- free community care and services to assist living at home,
- free long-term care,
- free nationwide travel on all public and local transport,
- free education, access to and participation in leisure and cultural activities,
- goods, services and benefits without age discrimination,
- active engagement and consultation on national and local issues affecting older citizens,
- advocacy, dignity, respect and fair treatment in all aspects of their lives,
As a first step towards establishing these rights we call on the government to implement the Pensioners' Manifesto."
THE STATE PENSION
One hundred years ago the first 'pensioners' collected their state pension at the post office. It was set at 5 shillings a week and paid to men and women on reaching 70 years of age. Even though the pension was means-tested, it was a tremendous advance in social policy and the first time that the state had recognised that it had a responsibility to look after those in old age.
But today, figures show that after a century of the state pension, pensioner poverty remains:
- In 2007/8 2.5 million pensioners were living below the official poverty line and 600,000 pensioners were living in severe poverty;
- About two thirds of those pensioners living in poverty are women. Up to as many as 5m do not qualify for a full state pension because they were unable to pay the full national insurance contributions because of caring for their families or being in low paid employment;
- 62% of pensioner couples have an annual income of £15,000 or less, and 45% of all single pensioners have an annual income of £10,000 or less;
- In a recent EU survey, only pensioners in Latvia, Spain and Cyprus were more likely to fall into poverty than those in the UK. The Institute for Fiscal Studies concludes that the proportion of pensioners below the poverty threshold will remain at its current level for at least the next decade, despite government reforms;
- A recent survey by Scottish Widows found that 1 in 3 future pensioners will not have sufficient income to avoid poverty when they retire. Up to 9m workers currently have no other pension provision than that which will be provided by the state when they retire;
- Means-tested benefits fail to reach 1.8 million pensioners and about £2.8 billion a year remains unclaimed.
Therefore, we support the National Pensioners' Convention in their claim for the basic state pension to be set above the official poverty level of £165 a week, to be paid to all men and women and increased each year in line with earning or the retail price index, whichever is greater.
