The TUC has reacted angrily to a suggestion that employers should be able to cut benefits built up by employees in pension funds, describing the proposal as a ‘smash and grab raid’.
TUC general secretary Brendan Barber said: “This call for employers to be able to make smash and grab raids on their staff’s pension benefits is completely unacceptable.
“This is no more than a retrospective pay cut, cutting wages that have already been paid. Unions will fight this tooth and nail, both politically and in the courts.
His comments followed a speech to the National Association of Pension Funds’ (NAPF) conference by its chief executive of the Christine Farnish in which she said that employers should be allowed to roll back some pension benefits promised to their staff because the costs have become too burdensome for the economy as a whole.
In her speech, which was leaked to the FT, Ms Farnish added: “Employers now face costs and risks to their pension schemes that were never there in the past. The scale and magnitude of these and the future uncertainties are far greater than anyone had ever imagined.
“Many DB schemes are now up to 70% more expensive to provide than was anticipated when they were first set up, because of a combination of regulatory requirements such as compulsory indexation, and the fact that scheme members are living longer but scheme retirement age hasn’t changed.
“For many companies, funding pension schemes now accounts for over 30% of their payroll costs. Both the Treasury Select Committee and the Bank of England have commented on the dampening effect this appears to be having on business investment and economic growth.”
At the same conference, pensions secretary John Hutton confirmed the view in the government’s White Paper that nothing had been ruled out of the review of pensions regulation, saying the review was about “a real drive to cut red tape and make it easier for you to deliver workplace pensions”.
But Brendan Barber said: “If this were allowed, there would be an inevitable chain reaction with every employer facing city pressure to break the pensions promise to their staff.
“It is odd to see the leader of what is meant to be a pro-pension body putting forward a proposal of collective self-harm.”
