The UK has fallen out of the top 10 list of countries with the best pensions for the first time in history coinciding with an alarming swell of companies in an apparent ‘frenzy’ of defined benefit pension scheme closures.
The Melbourne Mercer Global Pension Index, which ranks state funded and private components of 27 countries’ pension systems, has downgraded the UK from 9th to 11th place.
In the past month the Post Office, carmaker BMW, AWE Plc (the Atomic Weapons Establishment), US multinational Honeywell and Gatwick Airport Ltd have all announced plans to close defined benefit schemes.
“BMW workers in the UK have worked hard to deliver record profits for the company and view a cut in their future pension as no different than a cut in their pay packet,” said Tony Murphy, Unite national officer.
BMW had record profits of £5.7bn last year, The Post Office’s pension scheme is in surplus of more than £143m and the MoD (Ministry of Defence) promised that the AWE Plc pension would not suffer when the workforce were transferred to the private sector in the 1990s.
“BMW’s rush to close the final salary pension scheme is short term opportunism which will rob world class carmakers of the future retirement they have worked hard for,” added Murphy.
Unite has pledged to fight the move to close final salary pension schemes by all of these organisations and ballots for strike action are all at different stages at each of the workplaces.
“We cannot stand by and see the retirement incomes of our members eroded by thousands of pounds,” said Brian Scott, officer for the Post Office.
The accelerating trend of companies closing their defined benefit pension schemes, which are based on an individual’s career earnings, is disturbing.
But replacing them with defined contribution schemes, which rely on the roller-coaster vagaries of the stock market, could leave hundreds of thousands of people in retirement poverty.
“It is becoming increasingly too easy for highly profitable multi-national companies to energetically salami-slice workers’ pensions in pursuit of even greater profits,” said Murphy.
The most shocking example is high street store BHS which went into administration shortly after being sold by Sir Philip Green, with a £571m pension scheme deficit, to Retail Acquisitions Limited for £1.
Almost 2,000 members at Gatwick Airport Ltd are being balloted for strike action as the company stands accused of blatant opportunism over the closure of its final salary pension scheme.
“Yet again we have ordinary hardworking people losing out on security in retirement at the expense of greedy, fat cat bosses and massive shareholder pay-outs,” said Unite officer Phil Silkstone.
The scheme closure comes despite the company raking in record profits of £142m last year and paying out tens of millions of pounds to shareholders since 2014.
“The pension deficit is easily affordable and could have been wiped out with the £178m in shareholder pay-outs it has made over the last few years,” added Silkstone.
Unite has been pressing the company to explain why it has failed to tackle the pension deficit when it has paid out millions in shareholder dividends since 2014.
Pressure is mounting on the government to overhaul Britain’s companies pension schemes, which more the 11m workers have savings in, as final salary pension schemes now have the biggest ever shortfall at almost £1tn.
Unless the government can find a solution to ailing pension schemes they will most likely collapse in the Pensions Protection Fund.