Tata worker pensions under threat
How can a buyer be trusted with jobs and communities if they won't take on workers' pensions?
It is becoming increasingly clear from the different bids to take over (or be virtually given) all or part of Tata Steel's UK operations that none of the potential buyers won't take on the £15 billion pension scheme. In fact. It is likely that they will make this a 'red-line' issue in negotiations with Tata and the UK government. This is because the steelworkers, like an ever decreasing number of workers, still retain a final-salary defined-benefits (DB) pension.
DB pensions have been an historical gain for workers such as those in Tata and other well-organised union workplaces in the private and public sector because the pension risk is on the employer as the pension on retirement is based on a workers' salary (usually the best year in the last 10) and years' worked. In inferior pension types such as defined contribution (DC) schemes, the risk is on the workers as they build up a pension fund through weekly/monthly payments out of their wages by themselves and the employer. But whereas the average employer's contribution in a DC scheme is now under 3%, in a DB scheme it will be determined by ongoing valuations, meaning that it could have to be five times bigger or more.
This cost impinging on their profits has meant that companies have been trying to close DB schemes altogether or at least to new starters. In fact, this actually nearly caused a strike in Tata Steel UK last year, which had the effect of getting the company to reduce the deficit to under £500 million. A recent survey found that of companies in the FTSE 250, only 49 are still providing more than a handful of current employees with DB benefits.
As BHS workers are finding out at the moment, the tactic of choice of companies, is to put the business into administration bankruptcy with the pension liabilities going into the Government-run Pension Protection Fund (PPF). This 'guarantees' that 90% of pensions will be paid but it is capped so some can lose up to half of their retirement benefits, while only a certain amount is indexed-lined against inflation.
Ex-Ford workers who had been spun-off by the company to Visteon, including hundreds in Swansea, saw their pensions go into the PPF when it went into administration in 2009. But the pensioners won £28 million compensation from Ford after a struggle lasting five years. One of our big concerns was how could the PPF guarantee our pensions when it covered pension scheme deficits not by the Treasury but through levies of companies, most of whom were shutting their schemes!
The position of the unions should be "How can we trust a buyer with our jobs and communities if they won't take on our pensions?" You can't take over heavy industry and invest in it for the long-term on the cheap. The pensions issue is yet another argument for all of Tata Steel's UK operations to be nationalised 100% on a permanent basis. Only through public ownership can workers have a really guaranteed future on the pay, terms & conditions and pensions that they have fought for.
Rob Williams, ex-convenor at Visteon, Swansea
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