Comments on this re Tata pensions and knock on effect.

Andypandyboy

https://www.theguardian.com/business/2016/may/26/tata-steel-warning-that-pensions-restructure-could-set-risky-precedent

What is the feeling on this?

I believe there is a petition to try to stop it.

Well_excuse_me.

FS schemes are unaffordable.

The private sector has all but closed them, only the public sector get them now.

jamesd

The Tata pension scheme has a clause saying that the inflation linking benefit can be reduced or eliminated if it becomes unaffordable. It's seldom mentioned and there is a group of members who might have an exception to that clause due to negotiations when they joined the scheme.

One of the proposals in the consultation is to switch to CPI instead of RPI partly on the basis that if the company failed and the scheme entered the PPF, the PPF uses CPI. The proposal is to be specific to the Tata scheme, not more general.

Many defined benefit pensions switched to CPI as soon as they could, with only those who had a clause that specifically mentioned RPI compelled to stick with RPI. Another possibility, not in the Tata context, would be to allow future accrual of benefits to be getting CPI instead of RPI, via a change in the law which would permit that and place defined benefit pensions and their responsible firms in a more even position.

kidmugsy

jamesd wrote: »

The Tata pension scheme has a clause saying that the inflation linking benefit can be reduced or eliminated if it becomes unaffordable.

In which case what's the problem? Why is there any need for government intrusion?

jamesd wrote: »

The proposal is to be specific to the Tata scheme, not more general.

As we used to say when I was young "I've heard that one before". Or even "Pull the other one".

jamesd

Government action might be needed for the group possibly not covered by that clause and also to help remove any doubt about whether and when something can be considered to be unaffordable. It's pretty clear that potential buyers already consider it to be unaffordable but is that enough? Just how close to business failure and entering the PPF does a scheme have to get before it can be called unaffordable? Legislation can remove ambiguity and say protect the scheme trustees from legal action by the scheme members who would be better off inside the PPF.

A better off group inside the PPF would those who have taken the pension and chose the option to have a higher pension now and a lower one once they reach 65. Under PPF rules they would keep the higher level for life instead of having it do what it's supposed to do and go to the lower value so the cost to the scheme is the same as the level option. No merit to their enrichment but naturally they might oppose anything that keeps the company in business or otherwise prevents the scheme entering the PPF.

Thrugelmir

Andypandyboy wrote: »

I believe there is a petition to try to stop it.

This is the tip of a very large iceberg. Petitions are an opportunity to express an opinion. Don't provide any answers to the problem though.

kidmugsy

jamesd wrote: »

Government action might be needed for the group possibly not covered by that clause ...

So the govt proposes to rob them of a contractual entitlement just so that it can save face over the bad PR of a not very important minister? Madness.

jamesd wrote: »

Government action might be needed ... to help remove any doubt about whether and when something can be considered to be unaffordable.

!!!!!! the government; that should be a matter for the courts.

Thicko2

The government had no issue enforcing the switch from RPI to CPI for the public sector 5 years ago.

If such a clause exists in the scheme, surely it should be used?

jamesd

kidmugsy wrote: »

So the govt proposes to rob them of a contractual entitlement just so that it can save face over the bad PR of a not very important minister? Madness.

It's not about face-saving, its' about the jobs and pensioners. Last I read the trustees were looking into the specific terms by which the pensions of that group were transferred into the new scheme to determine whether they are or aren't covered by the clause.

kidmugsy wrote: »

!!!!!! the government; that should be a matter for the courts.

That's only likely to be a matter for the courts after the company has failed and the scheme has entered the PPF, at which point it's too late and the fact of being in the PPF has proved that it was unaffordable.

The point is to protect the employees, industry and pensioners instead of having most of them suffer bigger harms.

Andy_L

Thicko2 wrote: »

The government had no issue enforcing the switch from RPI to CPI for the public sector 5 years ago.

If such a clause exists in the scheme, surely it should be used?

In the Tata scheme the switch is for future accrual so won't help the current funding shortfall.

kidmugsy

jamesd wrote: »

It's not about face-saving, its' about the jobs and pensioners.

Good grief, jamesd, these people are politicians.