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11
The Fire Brigades UnionPensions Campaign
Pensions Crisis
• The Facts
• The Fiction
• The Fight
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The Fire Brigades UnionPensions Campaign
1. Background Information on Pensions
2. Arguments for Change
3. Proposed Changes to FPS
4. Proposed Changes to LGPS
5. Timeframes for FPS
6. Timescales for LGPS
7. Conclusions
8. Is It Legal?
9. What Has Been Done So Far?
10. What Can We Do Now?
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The Fire Brigades UnionPensions Campaign
1.1. Background Information on PensionsBackground Information on Pensions
Types of PensionsTypes of Pensions
• State Pension – Available to AllState Pension – Available to All
• Private Pensions – Private Sector or Private Pensions – Private Sector or Individual InvestmentsIndividual Investments
• Public Sector Schemes – Civil Service, Public Sector Schemes – Civil Service, Teachers, Police, Fire Service, Health Teachers, Police, Fire Service, Health Workers etc.Workers etc.
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The Fire Brigades UnionPensions Campaign
Main Changes For Each SchemeMain Changes For Each Scheme
• State PensionState PensionRetirement AgeRetirement Age
• Private SchemesPrivate Schemes Closure & Final Salary ElementClosure & Final Salary Element
• Public Sector SchemesPublic Sector Schemes Retirement Age, Contribution Rates, Accrual Rates, Ill Retirement Age, Contribution Rates, Accrual Rates, Ill Health/Injury Benefits & Closure With New Lesser Health/Injury Benefits & Closure With New Lesser SchemesSchemes
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The Fire Brigades UnionPensions Campaign
Firefighters Pension Scheme & Local Firefighters Pension Scheme & Local
Government Pension SchemeGovernment Pension Scheme
• Firefighters Pension Scheme: Firefighters Pension Scheme: Open to Wholetime Firefighters OnlyOpen to Wholetime Firefighters Only
UnfundedUnfunded
Is it Expensive?Is it Expensive?
• Local Government Pension Scheme:Local Government Pension Scheme:FundedFunded
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The Fire Brigades UnionPensions Campaign
Issues Common to all Pension SchemesIssues Common to all Pension Schemes
• Mortality AssumptionsMortality Assumptions30% Improvement in the 8 Years to 200230% Improvement in the 8 Years to 2002
• Longevity – Life ExpectancyLongevity – Life Expectancy
• Government Report states that:Government Report states that:People are not paying enough ContributionsPeople are not paying enough Contributions
People are Living LongerPeople are Living Longer
People are Retiring too earlyPeople are Retiring too early
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The Fire Brigades UnionPensions Campaign
Nearest Comparable Scheme to FPSNearest Comparable Scheme to FPS
• Police Pension SchemePolice Pension Scheme
• New Police Scheme for new entrants, with New Police Scheme for new entrants, with existing scheme ring-fencedexisting scheme ring-fenced
• Fire Service only Emergency Service not Fire Service only Emergency Service not being afforded the Protection of Ring-being afforded the Protection of Ring-FencingFencingUnion PolicyUnion Policy
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The Fire Brigades UnionPensions Campaign
2. Government Arguments For Change2. Government Arguments For Change
• Affordability!Affordability!
• Flexibility!Flexibility!
• Modernisation!Modernisation!
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The Fire Brigades UnionPensions Campaign
Phil Woolas Quote:Phil Woolas Quote:
""All public sector pension schemes are facing change and All public sector pension schemes are facing change and it is right that we modernise firefighters' pensions - the it is right that we modernise firefighters' pensions - the most expensive scheme in the public sector. most expensive scheme in the public sector.
"We have carefully considered the responses to our "We have carefully considered the responses to our pensions consultation and these proposals reflect the pensions consultation and these proposals reflect the comments we have received, particularly the concerns comments we have received, particularly the concerns of serving firefighters. We want a new scheme which is of serving firefighters. We want a new scheme which is generous but affordable for both firefighters and the generous but affordable for both firefighters and the taxpayers that fund them and changes to the existing taxpayers that fund them and changes to the existing scheme which will help limit future costs. scheme which will help limit future costs.
"These proposals are in line with our aim of developing a "These proposals are in line with our aim of developing a modern Fire and Rescue Service and honour our modern Fire and Rescue Service and honour our commitment to introduce new pension arrangements. commitment to introduce new pension arrangements. They also reflect changes in the new legal They also reflect changes in the new legal requirements, for example on pensions taxation." requirements, for example on pensions taxation."
*Local Government Minister Phil Woolas – September 2005
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The Fire Brigades UnionPensions Campaign
ResponsibilitiesResponsibilities
• Home Office: Home Office: PolicePolice
• Department of Work & Pensions: Department of Work & Pensions: Health, Health, Teachers, Civil Service, EtcTeachers, Civil Service, Etc
• Office of the Deputy Prime Minister: Office of the Deputy Prime Minister: Local Local Government (LGPS) & Firefighters (FPS) Government (LGPS) & Firefighters (FPS) SchemesSchemes
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The Fire Brigades UnionPensions Campaign
3. Proposed Changes to FPS3. Proposed Changes to FPS
ODPM Consultation ExercisesODPM Consultation Exercises
1.1.Existing Scheme (FPS)Existing Scheme (FPS)2.2.New Scheme (FPS)New Scheme (FPS)
*Still Awaiting Detailed Consultation Documentation *Still Awaiting Detailed Consultation Documentation from ODPM on Injury/Ill Health Retirements, (due from ODPM on Injury/Ill Health Retirements, (due since 14since 14thth January 2005) January 2005)
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The Fire Brigades UnionPensions Campaign
ODPM Proposes To:ODPM Proposes To:
• Amend The Existing FPS Scheme For Amend The Existing FPS Scheme For All All Existing Members.Existing Members.
• Introduce a New FPS Scheme For New Introduce a New FPS Scheme For New EntrantsEntrants
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The Fire Brigades UnionPensions Campaign
Eligibility For The New FPS SchemeEligibility For The New FPS Scheme
• New Wholetime Firefighters.New Wholetime Firefighters.
• New & Existing Retained FirefightersNew & Existing Retained Firefighters
• Existing Wholetime Firefighters Who Existing Wholetime Firefighters Who Choose To Opt In.Choose To Opt In.
Control Staff Are Deemed Ineligible!Control Staff Are Deemed Ineligible!
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The Fire Brigades UnionPensions Campaign
Main ChangesMain Changes
• Retirement Age & Accrual RatesRetirement Age & Accrual Rates• Transitional ArrangementsTransitional Arrangements• Deferred PensionDeferred Pension• Ill-Health RetirementIll-Health Retirement
– Higher Tier: with enhancementHigher Tier: with enhancement– Lower Tier: without enhancementLower Tier: without enhancement
• Survivor PensionsSurvivor Pensions• Death BenefitDeath Benefit
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The Fire Brigades UnionPensions Campaign
Example 1Example 1
If a member reaches the age of 50 to 55 and has If a member reaches the age of 50 to 55 and has attained a minimum of 25 years pensionable attained a minimum of 25 years pensionable Service, but not 30 years, they will be able to Service, but not 30 years, they will be able to retire on pension.retire on pension.
The Pension calculation, however, would be split The Pension calculation, however, would be split between pre and post 1between pre and post 1stst April 2006 service. April 2006 service.
The pension for pre 1The pension for pre 1stst April April 2006 will be 2006 will be unreducedunreduced..
Cont’dCont’d
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The Fire Brigades UnionPensions Campaign
Example 1 (cont’d)Example 1 (cont’d)
However, the Pension post 1However, the Pension post 1stst April 2006, April 2006, will be reduced, by 5% for each year, will be reduced, by 5% for each year, between age of retirement and age 65 (deferred between age of retirement and age 65 (deferred pension age)pension age)
ScenarioScenario:: A member retires at 50 with 25 years A member retires at 50 with 25 years pensionable service. The post April 2006 pensionable service. The post April 2006 Pension will be reduced by 75%, (15 Pension will be reduced by 75%, (15 Years x 5 %)Years x 5 %)
*5 % is the Government Actuary figure*5 % is the Government Actuary figure
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The Fire Brigades UnionPensions Campaign
Example 2Example 2
A Member with 30 Years pensionable service A Member with 30 Years pensionable service completed by age 50, continues to work until age completed by age 50, continues to work until age 55.55.
Accrual Rate = 1/60Accrual Rate = 1/60thth per year for years 1 – 20. per year for years 1 – 20.
Fast Accrual rate = 2/60Fast Accrual rate = 2/60thth per year for years 21 – per year for years 21 – 30.30.
Members can though, now accrue up to a maximum Members can though, now accrue up to a maximum of 35 years pensionable service.of 35 years pensionable service.
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The Fire Brigades UnionPensions Campaign
Example 2 (con’t)Example 2 (con’t)
Accrual rate for last 5 Years (or part thereof) is Accrual rate for last 5 Years (or part thereof) is
1/451/45thth (equivalent to 1.33/60 (equivalent to 1.33/60thth))
Therefore with 35 years pensionable service Therefore with 35 years pensionable service
achieved, the pension will be 35/45achieved, the pension will be 35/45thth of final of final
pensionable salary, (equivalent to 46.7/60pensionable salary, (equivalent to 46.7/60thth))
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The Fire Brigades UnionPensions Campaign
Example 3Example 3
Member continues to work to age 50+, and after Member continues to work to age 50+, and after 30 years pensionable service in existing scheme, 30 years pensionable service in existing scheme, joins the new scheme.joins the new scheme.
At eventual retirement age the pension would be At eventual retirement age the pension would be 40/6040/60thth plus 1/60 plus 1/60thth for each completed year of for each completed year of pensionable service in the new scheme.pensionable service in the new scheme.
Accrual Rates = 40/60Accrual Rates = 40/60thth + 5/60 + 5/60thth = 45/60 = 45/60thth
Reason for Choice? = Possible lower contributions Reason for Choice? = Possible lower contributions would boost members take home salary.would boost members take home salary.
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The Fire Brigades UnionPensions Campaign
4. Proposed Changes to LGPS4. Proposed Changes to LGPS
• Removal of the “85” Rule Removal of the “85” Rule – this would increase normal retirement age from this would increase normal retirement age from
60 to 65; and60 to 65; and– raise the earliest retirement age from 50 – 55,raise the earliest retirement age from 50 – 55,
excluding Ill Healthexcluding Ill Health• Increased contribution rates (Increased contribution rates (currently 6%currently 6%) to a ) to a
range between 5.5% & 9% (range between 5.5% & 9% (dependant on dependant on earningsearnings))
• Restrict Pensionable Pay (Restrict Pensionable Pay (basic salary, excluding basic salary, excluding allowancesallowances))
• Ill Health RetirementsIll Health RetirementsTwo Tier SystemTwo Tier System
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The Fire Brigades UnionPensions Campaign
Two Tier Ill Health Scheme proposals intended to Two Tier Ill Health Scheme proposals intended to differentiate between;differentiate between;
1. Those that are 1. Those that are permanently incapablepermanently incapable of of performing performing anyany gainful employment; and gainful employment; and
2. Those incapable of continuing in their current 2. Those incapable of continuing in their current role, but capable of role, but capable of other gainfulother gainful employmentemployment. . (Pension based on length of service only)(Pension based on length of service only)
NB: Only those in the first category would be NB: Only those in the first category would be eligible for an enhancedeligible for an enhanced pensionpension..
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The Fire Brigades UnionPensions Campaign
5. Timeframes for FPS5. Timeframes for FPS
• ODPM Plan To Close Membership Of The Existing ODPM Plan To Close Membership Of The Existing FPS Scheme & Open The New Scheme on;FPS Scheme & Open The New Scheme on;
1st April 2006
• It is Still Possible that Timeframe May Slip
• It Is Possible That Different Timeframes will Apply Across The UK.
• ODPM Still Have Yet To Publish Ill Health/ Injury Proposals
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The Fire Brigades UnionPensions Campaign
• At This Time We Must Assume, that At This Time We Must Assume, that ODPM Will Try To Meet Their 1st April ODPM Will Try To Meet Their 1st April 2006 Timeframe For The Implementation 2006 Timeframe For The Implementation of a New Scheme and Changes to the of a New Scheme and Changes to the Existing Scheme.Existing Scheme.
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The Fire Brigades UnionPensions Campaign
6. Timeframes for LGPS6. Timeframes for LGPS
• Government decided not to proceed Government decided not to proceed with changes to LGPS in April 2005 with changes to LGPS in April 2005 just prior to the Election, and in the face of just prior to the Election, and in the face of Public Service Strike ThreatPublic Service Strike Threat
• Government said they intended to seek Government said they intended to seek further consultation with key further consultation with key stakeholders stakeholders
• the Pensions Green Paper proposals the Pensions Green Paper proposals are intended to be implemented at the are intended to be implemented at the beginning of April 2006beginning of April 2006
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The Fire Brigades UnionPensions Campaign
7. Conclusions7. Conclusions
The proposals will effect different Members in a The proposals will effect different Members in a variety of different ways. This will be dependent variety of different ways. This will be dependent on the member’s:on the member’s:
•AgeAge•Length of ServiceLength of Service•Duty System WorkedDuty System Worked•RoleRole•Health Health •Family CircumstancesFamily Circumstances
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The Fire Brigades UnionPensions Campaign
8. Is it Legal?8. Is it Legal?
• Government ConsultationGovernment Consultation
• Fire & Rescue Services Act 2004Fire & Rescue Services Act 2004No Protection for Accrued RightsNo Protection for Accrued Rights
• Superannuation Act 1972Superannuation Act 1972No Protection for Accrued RightsNo Protection for Accrued Rights
• Human Rights Act 1998: Human Rights Act 1998: ““Peaceful Enjoyment of Property”Peaceful Enjoyment of Property”Protection for Accrued Rights Prior to ChangesProtection for Accrued Rights Prior to Changes
• Protection for Future Service Benefits?Protection for Future Service Benefits?Seeking QC’s OpinionSeeking QC’s Opinion
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The Fire Brigades UnionPensions Campaign
9. What has been done so far?9. What has been done so far?
• Firefighters’ Pensions Committee (FPC) Firefighters’ Pensions Committee (FPC) established & chaired by the Office of the established & chaired by the Office of the Deputy Prime Minister (ODPM)Deputy Prime Minister (ODPM)
• FBU Responses in Consultation ProcessFBU Responses in Consultation Process
• Lobbying PoliticiansLobbying Politicians
• Press & MediaPress & Media
• Campaign to inform Members of issues:Campaign to inform Members of issues:Firefighter Magazine Specials, Circulars, Regional Firefighter Magazine Specials, Circulars, Regional Mass Meetings, Regular Reports through the Mass Meetings, Regular Reports through the Committee Structures, Press & MediaCommittee Structures, Press & Media
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The Fire Brigades UnionPensions Campaign
10.What Can We Do Now?10.What Can We Do Now?
• FBU Conference PolicyFBU Conference Policy
• Members must decide:Members must decide:Accept or Fight?Accept or Fight?
• Keep up to Date with the IssuesKeep up to Date with the Issues
Ensure regular attendance at Branch Meeting, Read All Ensure regular attendance at Branch Meeting, Read All Literature produced by the Union & watch the Press & Literature produced by the Union & watch the Press & Media coverage.Media coverage.
• Lobby your MP, both individually & collectively, as Lobby your MP, both individually & collectively, as a Brancha Branch
• Discuss & Debate with other members - RegularlyDiscuss & Debate with other members - Regularly
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The Fire Brigades UnionPensions Campaign
• Over 1 Million Public Sector Worker Over 1 Million Public Sector Worker Affected Voted Affected Voted YESYES in Strike Ballots last in Strike Ballots last year.year.
• The TUC is still campaigning at The TUC is still campaigning at Government levelGovernment level
• Other Unions involved in LGPS talksOther Unions involved in LGPS talksGMB, TGWU, UNISON, NAPO, AMICUS, UCATT, CYWUGMB, TGWU, UNISON, NAPO, AMICUS, UCATT, CYWU
• Coordinated action is still a possibility.Coordinated action is still a possibility.
WE ARE NOT ALONEWE ARE NOT ALONE
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The Fire Brigades UnionPensions Campaign
It’s your PensionIt’s your Pension
It’s Your Future Financial SecurityIt’s Your Future Financial Security
It’s the Financial Security of your It’s the Financial Security of your FamiliesFamilies
Fight To Keep ItFight To Keep It