UK - A major trade union has accused employers of "stealth cuts" in scheme contributions.
The Communication Workers’ Union hit out in the wake of NAPF research which shows that, on average, firms halve their contributions when they switch from defined benefit to money purchase provision.
The NAPF found that employers, on average, pay 6% into a defined contribution scheme against 12% for final salary plans.
Communication Workers’ Union assistant secretary Bill McClory said unions would be taking a more “vigourous” approach when employers put forward proposals to either close their schemes to new members or wind them up.
He said: “These figures are likely to result in unions either adding pensions to the general, annual pay claims, or by tackling it simply by asking for greater pay increases to compensate for the fact that employers are reducing their costs, almost by stealth.
“They have capped their liabilities and are reducing their contributions. Either way, that is a bad deal for the people affected. Very often, companies say that when they set up these DC schemes – that they weren’t looking to save money.”
However, McClory also urged unions to be realistic when pressing for increased contributions and said firms should be paying in enough to ensure that the DC scheme provides the same level of pension as a final salary scheme.
“There’s no point in unions arguing for a contribution rate that simply bankrupts the company. Then nobody gets any pensions at the end of it.
“It is a question of what would the company be paying if it were a DB scheme and what would you need to get broadly the same outcome as you would do in a DB scheme.”
This week's edition of Professional Pensions is out now.
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