Carillion Pensioners Action Group?

Game_Over_2

Hi there

I have an elderly relative who was a member of the Carillion Final Salary pension scheme that has just been turned over to the PPF.

He's been told the amount he receives each month will remain the same but, because he took retirement before 1997, it will not be inflation-proofed -- and nor will his wife's 50% continuing share if he predeceases her.

This is being sold to them as 'don't worry, no change'. But of course it's a huge change. If inflation runs at 2.5%-3% then in 10 years time (if they live that long, and people do live a long time in my family) then it might be worth 70%-75% less in real terms than if he was continuing to get the c2.5% discretionary increases he was being awarded from time to time under the old arrangements.

I can find no professional comment in our wonderful, unfaked mainstream media that's on top of this -- and no Carillion pensioners action group. Is there one? Would other people affected by the Carillion collapse like to start one? Let me know.

PeacefulWaters

It is what it is.

While you correctly identify the flaws of they system there is nothing that is likely to change it.

The last thing I'd suggest they do is throw away money on joining an action group if one was ever formed.

zagfles

It's how the PPF works - they use legal minimums for inflation proofing, which for pre-1997 service is zero in payment.

I'm not sure about the GMP, I would have thought they'd have to increase that for 88-97 service, but can't see anything about it on the PPF website. Might be that it'd result in the contracted out deduction being frozen which could mean an increase in state pension (I'm assuming your relative reached state pension age before 2016).

hyubh

Game_Over wrote: »

because he took retirement before 1997, it will not be inflation-proofed -- and nor will his wife's 50% continuing share if he predeceases her.

This is being sold to them as 'don't worry, no change'.

It's not a 'no change' situation, correct (PPF compensation levels here work according to the statutory minimum increases the scheme had to provide). However, when the scheme deficit for PPF compensation levels alone runs into hundreds of millions of pounds, you aren't going to get any better.

no Carillion pensioners action group. Is there one? Would other people affected by the Carillion collapse like to start one? Let me know.

You could try, but if the ultimate aim is to make the taxpayer be on the hook, the brutal truth is that you wouldn't (nor frankly shouldn't) succeed.

Game_Over_2

Bits and pieces of these three responses are making sense, but not as a complete picture:

1) I understood the PPF was paid for by a levy on existing pension funds, not the taxpayer.

2) I know this 1997 cut-off point exists but I'm unclear what the rationale behind it is. Why should older pensioners be treated differently from younger pensioners?

3) Ordinary people seem oddly fatalistic on the subject of pension reform. I can find no active campaigns apart from the WASPI women -- and thanks to their energy, they're making progress!

hugheskevi

Since 1997, all pension schemes which were underfunded when their employer wound-up have received the same (or very similar) cuts - first through the Financial Assistance Scheme (FAS) between 1997 and 2005, and through the Pension Protection Fund (PPF) thereafter. Prior to 1997 it was less common for schemes to be underfunded, and so for members to lose pension.

If there is a problem with the system, it has been there for nearly 20 years - Carillion is just one of many employers and pension scheme to have entered FAS and the PPF since 1997, all members in schemes entering the PPF are treated as Carillion members will be treated.

The last appropriate time to have made representations would have been during consultation for the 2004 Pension Act, which established the PPF and compensation terms.

I can find no professional comment in our wonderful, unfaked mainstream media that's on top of this -- and no Carillion pensioners action group. Is there one?

It took a long time to convince a Labour government to enact the FAS, which was progressively extended from covering only those very close to retirement to all members. Back then, the members losing out would routinely lose 60% of their pension, with many losing over 80%. Despite that, it took a concerted campaign, by groups such as the Pension Action Group, to progressively improve compensation levels.

Trying to co-ordinate or expand the remit of an existing group such as the Pension Action Group is the closest I know of in terms of an action group to join.

This is being sold to them as 'don't worry, no change'. But of course it's a huge change. If inflation runs at 2.5%-3% then in 10 years time (if they live that long, and people do live a long time in my family) then it might be worth 70%-75% less in real terms than if he was continuing to get the c2.5% discretionary increases he was being awarded from time to time under the old arrangements.

Those who were just below normal pension age will also have had their headline pension reduced by 10%, as well as reduced revaluation and indexation. Those with the highest pensions will have lost more due to a cap on compensation.

You could try, but if the ultimate aim is to make the taxpayer be on the hook, the brutal truth is that you wouldn't (nor frankly shouldn't) succeed.

Indeed - special treatment for Carillion would open the gates to higher compensation for all. The deficit on PPF-level pension benefits is £247 billion across all schemes covered by the PPF, and on a full buy-out basis the deficit is £742bn.

If the taxpayer doesn't fund any improvement, the alternative is a higher PPF on industry, and such a regulatory intervention, costing business many billions, is unlikely to be high on the list of a Conservative government.

2) I know this 1997 cut-off point exists but I'm unclear what the rationale behind it is. Why should older pensioners be treated differently from younger pensioners?

The rules around statutory indexation changed for post 1997 accruals. Prior to 1997 schemes did not have to provide any indexation (except on Guaranteed Minimum Pension). If the PPF paid indexation on pre-1997 accruals, it would in some cases be paying members more indexation than their scheme would have paid them.

Game_Over_2

The PPF has very deep pockets -- it has £6bn in reserves and £28bn of assets under management. This is deep enough to fund the £0.5bn Carillion deficit and much more.

However, that 'taxpayer' comment would make more sense on the understanding that final salary pensions are in such a mess that even this will not be enough.

This might be true.

But if that's the case then it's a grave matter of public debate and everyone should be actively involved. The nation has some important decisions to make about division of spoils.

We ordinary people shouldn't be bludgeoned and brainwashed into thinking we aren't clever enough to understand or powerful enough to act.

hyubh

Game_Over wrote: »

The PPF has very deep pockets -- it has £6bn in reserves and £28bn of assets under management.

It needs 'deep pockets' because the PPF itself getting into trouble would be a complete disaster. It also cannot say 'no' to any given scheme entering it.

This is deep enough to fund the £0.5bn Carillion deficit and much more.

Why special treatment?

However, that 'taxpayer' comment would make more sense on the understanding that final salary pensions are in such a mess that even this will not be enough.

No, it was made on the assumption that PPF compensation is what it is, therefore anything beyond it would have to be taxpayer funded, either directly or with some sort of special guarantee. (The fact for historical reasons there are some private sector DB schemes with government guarantees isn't a good thing, and shouldn't be added to.)

This might be true.

Things are proceeding as intended - a private sector organisation with a big set of DB schemes goes bust, there's no chance of the schemes being self-supporting, therefore they enter the PPF, which provides a good (if not outstanding) safety net for members. And the PPF itself lives on to accept future failing schemes of a similar size.

But if that's the case then it's a grave matter of public debate and everyone should be actively involved. The nation has some important decisions to make about division of spoils.

Not sure that's a debate you're likely to win, when DB schemes are completely unheard of for most private sector workers under 40.

Game_Over_2

It might be helpful to clarify that DB means 'defined benefit' scheme - as opposed to 'defined contribution'.

It's the difference between having a pension linked to your final salary and one that comes from an investment pot you've paid into.

It's the final salary ones that are running the deficit. Defined contribution ones only pay out what they can. This might be more/less than what you expect according to how the investments have done.

I can understand the widespread jealousy of final salary pensioners -- my own small pension is defined contribution.

But a company board can make decisions about whether to fund the pension or pay out senior management bonuses and dividends to shareholders. And I believe there are real questions to be asked about the behaviour of the Carillion board.

The Pensions Action Group (thanks for that!) is clearly the way to go for general pension reform such as altering the PPF's rules.

But it seems to me there are also specific truth-and-justice questions to be asked in the Carillion case.

Game_Over_2

Here's what the TUC has to say:

https://www.tuc.org.uk/blogs/carillion-pensions-do-not-trust-horse-trojans

Their angle seems to be that final salary (defined benefit) schemes are perfectly good when funded properly -- and that it's a long history of inadequate funding by wealthy employers, not any intrinsic lack of viability -- that's the issue.

Sounds to me just like the NHS debate!

zagfles

Game_Over wrote: »

It might be helpful to clarify that DB means 'defined benefit' scheme - as opposed to 'defined contribution'.

It's the difference between having a pension linked to your final salary and one that comes from an investment pot you've paid into.

Do you really think anyone posting in this thread wasn't aware of that??

It's the final salary ones that are running the deficit. Defined contribution ones only pay out what they can. This might be more/less than what you expect according to how the investments have done.

I can understand the widespread jealousy of final salary pensioners -- my own small pension is defined contribution.

But a company board can make decisions about whether to fund the pension or pay out senior management bonuses and dividends to shareholders. And I believe there are real questions to be asked about the behaviour of the Carillion board.

The Pensions Action Group (thanks for that!) is clearly the way to go for general pension reform such as altering the PPF's rules.

But it seems to me there are also specific truth-and-justice questions to be asked in the Carillion case.

Indeed. Same with BHS, and others. But a completely different issue to whether the PPF should replicate scheme benefits in full.