Firefighters’ Pension Scheme - Heads of Agreement: “Why it’s unacceptable”

1. Firefighters’ Pension Scheme - Heads of Agreement: “Why it’s unacceptable” FBU consultation February 2012

2. Heads of Agreement • Presented to union 9 February 2012 by CLG • EC met to consider • FBU position - It is not a Heads of Agreement because nothing has been agreed in any way by the union – best described as a set of proposals from government. • After consideration EC position- cannot recommend acceptance of this HOA

3. Reasons • Unaffordable and unfair contribution rates. • A totally unrealistic Normal Pension Age (NPA) for firefighters. • An unsustainable scheme for the fire service.

4. Unaffordable and unfair contribution rates • Average member contributions of 13.2% from April 2015, with some protection for new entrants. • Ratios 1:1.05 worst in public sector • This means an increase on the current FPS contributions and 4.7% on NFPS contributions • Proposal 1st year (1.3% FPS), (0.6% NFPS ) + Tiering in both schemes

5. Contributions from April 2012 As published by CLG, 9 September 2011

6. Contributions from April 2012 As published by CLG, 9 September 2011

7. Impact of contributions and opt out review • Government agreed to review the impact of 2012-13 increases/ opt outs before making decisions year 2 and 3 • No terms of reference yet • Review or post mortem? • Year 1 increases expected by 8 March • Still trying to influence Minister

8. A totally unrealistic retirement age for firefighters A Normal Pension Age (NPA) of 60 is a major sticking point. FBU submitted substantial evidence showing it is unworkable. The government has not produced any evidence to support their plan for firefighters to retire at 60. Review of NPA to see if 60 is relevant This is a concession from the government because of the FBU’s evidence.

9. NPA Review • Initially – only looking at economical, efficient and effective management of the fire service, • FBU pressed for inclusion of the changing profile of the workforce and the occupational demands of, and fitness standards for, firefighting roles • No decision yet on ToR – FPC issue • FBU -First establish the right NPA and then build the scheme around it. • FBU -Illogical to make decision on Accrual rates, revaluation rates and commutation factors before NPA

10. Retire before 60 penalty Retirement from age of 57, pension reduced from scheme’s normal pension age of 60… Cost to scheme – worsens default accrual rate from 57ths to 58.7ths to pay for it Retirement from age of 55, pension reduced from scheme’s deferred pension age of 68… Govt seem to be recognising that people cannot work until age 60; creating the impression that people can retire with a slightly reduced pension from 57 FBU – Get the NPA right then this becomes irrelevant.

11. Examples Pensions will be reduced by around 5% per year from either 60 or 68 depending on retirement age If a member retires at age 57, then a reduction of around 15% will be applied. If the member’s accrued pension at age 57 was £17,445 a year, then the pension after reduction would be £14,828. £2,617 a year less If a member retires at age 56, then a reduction of around 60% will be applied. If the member’s accrued pension at age 56 was £16,964 a year, then the pension after reduction would be £6,786. £10,178 a year less

12. An unsustainable scheme for the fire service • FBU presented evidence around opt outs and non joiners • Supported by FRA evidence • High Contributions • Worst ratio in public sector • Unworkable = unsustainable scheme FBU will not sign up to an unsustainable scheme

13. Heads of Agreement Document in three parts: • Accrued rights protection guarantee • Transitional protection/ Tapering • Main scheme design parameters for a new Firefighters’ Pension Scheme

14. Accrued rights protection guarantee CLG: There will be full statutory protection for accrued rights for all members. FBU: Government cannot take away what you’ve already paid for. • Link to final salary – applied to part 1 pension • Protection for double accrual –applied to part 1 pension • Ability to retire at expected current pension age – access Part 1 pension • Commutation factors as per 1992 FPS applied to part 1 pension

15. Transitional protection • All active scheme members who, as of 1 April 2012, have 10 years or less to their current Normal Pension Age will see no change in when they can retire, nor any decrease in the amount of pension they receive at their current Normal Pension Age • Achieved by remaining in scheme until you retire -Contribution rates for this period not available yet • This is inconsistently applied to FPS -FBU raised with CLG and minister

16. Transitional protection There will be a further 4 years of tapered protection for scheme members. This is achieved by remaining in scheme until tapering ends – calculator prepared This adds more protection and means that the range for those who could retire at age 50 is extended to those age 43 years 2 months at April 2012.

17. New scheme from 2015 Outstanding issues • CARE • Accrual rates • Revaluation rates • Commutation • EIA • Cap and Floor • 25 year Guarantee FBU – cannot make a decision on these until NPA issue resolved

18. Consumer Prices Index (CPI) Pensions in payment and deferred benefits to increase in line with Prices Index (currently CPI) • The Consumer Prices Index (CPI) is a worse measure of inflation, because it excludes key costs like housing. The government previously used the Retail Prices Index (RPI), but changed to CPI last year without negotiation. • The Hutton report said the switch from RPI to CPI cuts pension benefits by 15%. • The FBU and other unions took a court case to reverse this decision. It is currently pending appeal. 20/21 February 2012

19. Cost ceiling • 4. For the purposes of the reform design process for 2015, the Government previously set out the gross cost ceiling of 27.0% and the net cost ceiling of 13.8%. • The government delayed the publishing its cost ceiling until 8 December after taking some account of the FBU’s arguments. • However this cost ceiling is unworkable, particularly as it assumes a Normal Pension Age of 60. • It still leaves firefighters paying 13.2% of salary – the highest in the public sector.

20. Executive Council resolution The Executive Council has now received the proposals for fire service pensions. We are disappointed that the significant body of evidence presented by the Fire Brigades Union during these discussions appears to have been ignored. We believe these proposals to be unacceptable in that they include: • Unaffordable and unfair contribution rates. • A totally unrealistic retirement age for firefighters. • An unsustainable scheme for the fire service.

21. Executive Council resolution The Executive Council will now consult members through branches and our committee structure. The Executive Council recommends that there is a rapid move to prepare a strike ballot and that further discussion should finalise the details of this. The Executive Council will meet again in three weeks, after consulting members, to consider developments. We remain committed to maintaining dialogue and hope that the government will now resolve the matter through properly engaging on the issues raised during discussions.

22. Consultation Members decide – study the proposals Tell your FBU representatives what you think of the proposals The Executive Council will listen to all voices within the union, before deciding on the next steps Talks continue – Things may still change More information: www.fbu.org.uk

23. QUESTIONS