Campaign Training – Champions Course (Scotland)

1. Campaign Training – Champions Course (Scotland) May 2011

2. The crisis is not of our making • "The price of this financial crisis is being borne by people who absolutely did not cause it, now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has."Mervyn King – addressing the Treasury Select Committee

3. Campaign Objectives -no one can do everything but everyone one can do something! Prepare members and staff to resist attacks on public sector pensions and their members Support negotiators to achieve the best outcome possible and prepare for industrial action Make sure that UNISON members and staff gain a greater understanding of public sector pension schemes – remove the pension jargon fog

4. Scottish Campaign Plan Raise pension awareness Briefings for activists and staff UK and Scottish campaign activity & materials Lobby and public awareness Branch organising plans Train activists Pensions Champions – one day Scottish course Pensions Contacts – half day local courses Negotiations at UK and Scottish levels Prepare for industrial action

5. Branch Organising Plan • Pension Champions & Contacts • Communications • Ballot readiness (RMS) • Recruitment

6. Champions and Contacts –training and support will be given Pensions Champions - Will take a greater role by making make sure union briefings and information on changes to public sector pensions are understood by the branch, workplace pension contacts and members. They will take a lead role in Supporting contacts, developing local campaign initiatives making sure that the branch and members are prepared to take action to protect public sector pensions. Pension Contacts - Distribute material, take actions when requested. They will be the workplace feedback link between members and the campaign/negotiators. Talk to and recruit non members.

7. Member contributes X%, Employer contributes Y% Pot builds up Monthly contributions Investment returns At retirement: purchase an annuity Market rate Seller takes account of life expectancy etc Types of Pension Scheme – Defined Contribution

8. Risk is all with the member Employer’s commitment is fixed Employee’s risk: Investment return Annuity rate Consequences for members

9. Employee’s commitment: pay X% Employers Commitment: pay Y% Employer’s further commitment: pay a pension of a defined amount It’s bit like a bucket with holes in the bottom Put money in according to the size of the holes Types of Pension: Defined Benefit

10. Risk is mainly with the employer Employee’s commitment is fixed subject to valuations Employer’s risk: Investment return Cost of providing the pension Consequences

11. Investment return Inflation Wage inflation Life expectancy The Risks

12. Annual accrual....or how your pension savings build up Final salary: 5/60ths of £24,310 = £2,025.83 assuming 5% wage inflation

13. The main public sector schemes

14. Six out of the seven main public sector pension schemes are unfunded The exception is the LGPS. Unfunded schemes: benefits are met by current government income as and when they fall due. Public sector employer pays contributions to a sponsoring government department as if the scheme were funded. Under this system, known as SCAPE (Superannuation Contributions Adjusted for Past Experience), employer contributions form part of the employer’s annual budget. The sponsoring government department pays out pensions to retired pension scheme members, netting off the employer and member contributions received. Funded or Unfunded – What Does This Mean?

15. The invisible bucket No money, but the scheme acts as if it were still there A pension system without the bucket of savings!

16. 101 administration bodies (11 Scotland) – collect contributions – pay out pensions – invest the rest Use the returns from investment as income Investments are usually 60% stock markets, 20% government debt, 5% corporate debt and others, PFI e.g. Total assets are around £135bn (20bn Scotland) What Happens in the LGPS?

17. Entitlements depend on contract Even if the Scheme went bust you are still entitled “Crown Guarantee” is a consequence of being a Crown employee, not the nature of the Scheme What happens if it all goes wrong?

18. Pensions in Scotland • Primary legislation UK reserved • Hutton ‘common framework’ • Regulations devolved to Scotland • More flexibility in LGPS than NHS scheme • Policy pressure - ‘expectation’ • Financial levers – Barnett formula • Separate negotiations • Implications for campaign/action

19. How many public sector schemes are there? What are the differences in the scheme’s funding? How many use investment returns as income? How can you get more income into of the two types of scheme? What decisions are devolved to Scottish ministers? Group Task

20. Public Sector Pensions - What Are The Key Issues We Face? Change to the way pension increases are calculated – RPI/CPI UK Budget measures 2011 Hutton 27 recommendations Scheme contribution increases Retirement age increases Benefit changes to career average Fair Deal/2TW – TUPE transfers and pensions

21. Key UK Budget Measures Enshrines contribution increases of 3.2% and could be more Osborne says Create a flat rate state pension of £7,280pa which will be considered in future public sector benefit design to develop an adequate pension - what is adequate? May remove the contracted out National Insurance subsidy for employers/employees No date firm but 2014/15

22. Pension Benefit Increases – robbing pensioners today and scheme members tomorrow The UK Government has laid legislation which will mean increasing public service pensions by Consumer Price Index (CPI) instead of Retail Price Index (RPI) from April 2011 An official Pensions Increase Order increasing pensions in line with the CPI next April was passed in UK Parliament on the 17th of March – we expect it to be implemented soon. The consequences are very significant. CPI is typically, on average, 0.7% per year lower than RPI Lord Hutton says move represents a 15% cut in benefits A member receiving the overall average pension in public service schemes of approx £7800pa will be around £117 worse off this year

23. Contribution Increases – a pension tax to pay back the bankers debt not to support your pension UK Government cut in funding of £2.8 billion a year by 2014/15: 40% - 40% - 20% This equates to a 3.2% contribution increase on average for members – a 50% increase Scottish Government consultation Jan – Barnett formula Expected savings: NHS £137-143m. LGPS £140m March – deferred discussion post-election Now Barnett scoring for NHS & Teachers only No financial pressure on LGPS - ‘expected’

24. The move away from a final salary scheme to career average Hutton stated that final salary schemes “disproportionately” favour high flyers He has recommended switching to a career average scheme for public service workers by the end of the next parliament – i.e. 2015 Crucially he has stated that each year’s pensionable pay should increase in line with increases in average earnings up to when you leave or retire

25. What is a career average scheme? This is a scheme that rather than base benefits on the final salary you retire on it calculates them on your average earnings during your scheme membership Such a scheme could potentially benefit members whose annual salary increases are generally less than the index used to increase pensionable pay and who are unlikely to benefit from regular promotions There is no detail yet so UNISON cannot comment on it CARE scheme but it must not be a cost-cutting exercise

26. Making us work longer The UK Government has already brought forward the State Pension Age (SPA) meaning that from November 2018 the SPA will be 65 for both men and women From April 2020 the SPA will be 66 for both men and women. Under current legislation the SPA is due to rise to 67 between 2034-2036 and 68 between 2044-2046 Lord Hutton has stated that with exception of “uniformed services” retirement should increase in line with SPA For those now 34 or younger it would be 68. For those between 34 and 42 it is 67. For those between 42 to around 57 it will be 66.

27. Fair Deal Over? – Making it cheaper to privatise The UK Government has started a consultation on Fair Deal. Changes to Scottish provisions for Scottish Govt. Fair Deal is the agreements that enable TUPE transferred staff from public services to either remain in such a scheme or be provided with a “certified” broadly comparable scheme. Scotland PPP & s52 regs. UK Government will look to scrap because of the relative cost to companies bidding for public service contracts This would leave TUPE transferred staff at the pensions mercy of private contractors

28. Other issues to be aware of A limit on how much employers should pay into the new schemes and increasing the share of that cost that scheme members pay. Scotland cost sharing. Discount rate 3.5% to 3%. PayG schemes cost more Only public sector workers should be in the new schemes..what is a public sector worker? We don’t know yet..no definition provided New and improved governance in all schemes Representation on LGPS investment boards Incentives to merge LGPS funds. CoSLA/IS project Privatisation of scheme administration

29. The Key Issue – Contribution Increase This is a tax to pay back UK government debts that were raised to bail out the banks None of the money will go into the schemes It threatens the whole system – if enough members opt-out It unites all public sector workers in or have access to a scheme It could allow public sector unions to co-ordinate action We need to consult members and prepare for a ballot for industrial action

30. Where can you find everything? Scottish Pension Web Pages http://www.unison-scotland.org.uk/pensions/index.html UK Campaign Web Pages http://www.unison.org.uk/pensions/protectour.asp Advice on Pensions http://www.unison.org.uk/pensions/index.asp