Q) Surely all of this is not legal?
A) It is perfectly legal and arises from the legislation put in place after the Maxwell affair, (the Pensions Act 1995). This protects pensioners who have retired. However their protection comes at the expense of people yet to retire.
Q) My fund is fully funded so do I have anything to worry about?
A) It depends, a final salary pension fund gets income from three sources; the employees contributions, the employer’s contributions and the dividend/interest income from the investments. If a scheme is closed two out of these three are lost and a perfectly stable fund may have to be wound up. If the scheme is wound up it has to be converted to annuities and that represents a big loss.
Q) My fund meets Minimum Funding Requirements (MFR). Does this mean I am safe?
A) No, MFR does not guarantee anything like the pension you were expecting. In a typical mature pension fund, 100% MFR means that the pensioners will get 100% and everyone else about 40% of what they expect, but this can vary tremendously depending on the fund make-up
Q) I always thought my pension fund is part of my contract.
A) No, it is probably not. Your employer can probably terminate it at any time, even if the firm is solvent, as workers at Maersk have discovered.
Q) I thought the law forbids companies dipping into the pension fund?
A) Companies cannot help themselves to the fund’s money, but they can stop making contributions to the fund. This results in severe under-funding. Eventually legislation will catch up with them but it can take a long time. You are actually better off if your employer has dipped into the fund as compensation can then be paid from the Pensions Compensation Board.
Q) What happens to the pension funds for employees in local government?
A) Easy, if they are under-funded the council just puts up the council tax and poor Bill has to pay more out of his reduced pension.
Q) What can I do?
A) Write to your MP expressing your concern and also write to the following MPs:
David Blunkett, Secretary of State for Work and Pensions
Stephen Timms, Minster for Pensions
Malcolm Rifkind, Shadow Secretary of State for Work & Pensions
Nigel Waterson, Shadow Minister for Pensions
David Laws, Liberal Democrat spokesman for Pensions
Plus, of course, Tony Blair, Charles Kennedy & Michael Howard
Address for all is:
House of Commons
London SW1A 0AA
Trade Union Members
If you are a member of a trade union ask them to campaign for secure occupational pensions. The Labour Party has asked the unions to give them £10 million pounds towards paying off their debts, whilst at the same time, lack of action and foresight from this and previous governments leaves decent hardworking people in retirement penury.To apply pressure to the government to redress this situation would you write or e-mail the following letter to your union's General Secretary.
I am calling on you as my representative to withhold any money to pay off the Labour Parties debts and to recall any existing loans.It would be more appropriate to use those funds to support the fight to protect pensions and to compensate those who have already lost theirs.
Do not assume because your fund is healthy and your employer is profitable you are safe. It only takes one unfortunate event during the forty years of your pension contributions to bring the whole house of cards crashing down. Look at what happened to Marconi, would anyone have predicted that ten years ago?