All Members Circular - Pensions: Answers to Penny Mordaunt Letter

The Fire Minister Penny Mordaunt has written another open letter (28 October) to firefighters. The letter contains a number of misleading and faulty statements. We have therefore provided detailed answers to all points the minister has raised. 

 

PM: I have this morning issued a Written Ministerial Statement to update the House of Commons on the pension reforms and laid the pension regulations in Parliament. I have been clear all along that my goal is to deliver the best deal possible for firefighters. As a new, incoming Fire Minister I have wanted to satisfy myself that the reformed pension scheme is both fair and sustainable and to have worked through your concerns myself. Pensions are complex, and the issues that have been raised by all parties have been considered methodically. Until recently it has not proved possible to give a final outline of the pension scheme, I can now set these out for you. 

 

FBU: The minister has written previously to firefighters in England outlining that her goal is to deliver the ‘best deal possible for firefighters’. She took up the post in July, but the proposal is exactly the same as the one that was put forward by her predecessor Brandon Lewis.

 

PM: I am pleased to be able to confirm that we will proceed with the enhanced early retirement terms for those who retire from age 55, not just from age 57. What this means in practice is that a member of the 2015 scheme who retires at age 55 would see a reduction of around 21.8% to their pension. 

 

FBU: The FBU submitted a pre-action letter challenging the previous proposal, which had a reduction of 47.1% for a firefighter retiring at age 55. The 21.8% was removed by Brandon Lewis as a punishment when firefighters in England and Wales took strike action in November 2013. We are confident that our potential challenge on age discrimination grounds forced DCLG to reintroduce the 21.8%. It is worth noting 21.8% is still a huge reduction and we believe the way it is worked out is unlawful. We are preparing to submit a legal challenge on this issue.

 

PM: In comparison, the same member would see a reduction of over 40.5% to their pension if taken at age 55 in the 2006 scheme. The same early retirement terms will apply to the Firefighters’ Pension Scheme 2015 as will apply to the reformed police pension scheme. To have had a lower reduction at age 55 would have been at the expense of those who wished to work longer. 

 

FBU: Considering that the early retirement factors which DCLG are now providing also reduce the accrual rate, to pay for them already means penalising those who work longer. The FBU suggestion does cut the reduction at age 55 by almost a half to around 12.8%. The Government Actuary’s Department has confirmed this is affordable within the cost ceiling. The real point is that the majority of firefighters will not be able to maintain their fitness until age 60, so they would be better served by having a better pension scheme at age 55. Our belief that the majority of firefighters will not be able to maintain fitness until 60 is supported by the government’s own Williams’ review, which shows that 66% of firefighters age 55-60 are already below the recommended safe fitness levels required for the job.

 

PM: We need to balance the ability to draw a pension earlier, with the fair reward for those who work longer. I can confirm that the accrual rate (i.e. the rate at which you build up your pension) will also be at a faster rate than the 2006 scheme and calculated on a career average arrangement. This means that you build up your pension quicker, and this is fairer to lower paid firefighters. I considered, extensively, the alternative early retirement arrangements which the Fire Brigades Union were requesting but in the end rejected them for the following reasons. It is true that the Union’s preferred arrangement was better for existing members of the 1992 scheme who transfer to the 2015 scheme, but it meant that 2006 scheme members and new joiners would pay for it by earning less pension per year. 

 

FBU: If a member of the 2006 scheme transferred into the 2015 scheme and retired at age 55 the actuarial reduction on the 2015 part under our suggestion would also be around 12.8%, rather than the 21.8% that DCLG are proposing. 

 

PM: Existing 2006 scheme members would have seen much larger reductions to their existing pension if they retired before age 60 and therefore were less likely to take advantage of the early retirement terms. 

 

FBU: We have suggested a simple remedy to this by allowing NFPS members the option of transferring all their NFPS pension into the 2015 scheme, therefore benefiting from a lower actuarial reduction for all their pensionable service. A simple club transfer would remedy this. The government has not taken this up.

 

PM: These members would have been faced with having to work longer to get the same pension under the Unions’ requested early retirement terms. I know one area of concern of firefighters is what would happen if they cannot continue as a firefighter due to a permanent medical condition. 

 

FBU: This demonstrates an alarming lack of understanding of the issues on the part of DCLG and the Minister. The issue is not about a firefighter with a medical condition. We are satisfied that these will be dealt with under the ill-health provisions. DCLG are confusing the issues. We are concerned with those without a permanent medical condition who simply cannot maintain their fitness due to aging. These people will not qualify for an ill-health retirement and still face an uncertain future with the real threat of dismissal.

 

PM: This was an important consideration and a firefighter who suffers ill-health will receive a larger ill-health pension under the final scheme than the Fire Brigades Union’s preferred scheme. The scheme which we put in place should be for the benefit of all firefighters, not just the few. There is a balance to be made between early retirement terms and the rate at which pension is built up. I am convinced that the final position reflects the best balance across the workforce, particularly those who may retire on ill-health grounds. I wanted to update you on the fitness regulation which had been proposed by the Fire Brigades Union. I agree that providing such assurances were important, however it became quite clear that I do not have the legislative power to impose terms of employment on fire and rescue authorities through the pension regulations. 

 

FBU: DCLG are happy to hide behind an apparent lack of power to impose sanctions on the employer to protect firefighters from dismissal, but they are just as happy to support and endorse an imposition of an unworkable NPA of 60 - without a single scrap of evidence to show it is appropriate. 

 

PM: This could be possible if the scheme only included one employer but in England there are 46 separate employers. Importantly a person who leaves on the grounds of fitness will already have been considered for an ill-health pension, and a medical advisor will have determined that there is no permanent physiological or mental reason preventing the firefighter undertaking their role.

 

FBU: A firefighter who simply loses fitness due to age is not protected by the ill-health provision and faces the real threat of dismissal.

 

PM: Where there is a permanent medical reason then they will be ill-health retired with an unreduced pension. I further concluded that a regulation in the event of loss of fitness would not guarantee an unreduced pension, as the employer is still required to determine whether a firefighter meets the criteria for the payment of a pension. 

 

FBU: Our legal advisors have clarified that this is the only way to get the guarantee we need. We held a case conference where DCLG solicitors had an opportunity to counter our belief in the presence of our solicitor and they said nothing. We have already secured this guarantee in Scotland using this method.

 

PM: There is, however, another way to do this. I decided a more practical, proportionate and fairer approach is to set out a series of principles for supporting firefighters in their day to day work as they get older. I have today issued a consultation on putting these fitness principles into the statutory Fire and Rescue National Framework for England. This will require fire and rescue authorities to put in place local fitness policies and procedures to support firefighters to maintain their fitness. If a firefighter loses their fitness through no fault of their own, it will also require the authority to consider initiating the process for an unreduced pension. 

 

FBU: Look at the wording carefully. First, the National Framework is a guidance document and DCLG have already said that they cannot impose conditions on employers - hence this is only guidance. Second, it says that ‘if a firefighter loses their fitness through no fault of their own, it will also require the authority to consider initiating the process for an unreduced pension’. A fire authority can under this directive say ‘we have considered it, we can’t afford it and we are not going to do it’. This is not a guarantee at all.

 

PM: This delivers the same effect as the regulation as an authority will need to demonstrate that it has fairly considered whether an individual should receive an unreduced pension. 

 

FBU: It does not. The national employers have been quite clear they want to retain the discretion to dismiss firefighters when they are not fit enough to perform their role. It is simply not a guarantee. 

 

PM: Furthermore, the principles in the National Framework ensure that firefighters will be supported through their careers to maintain their fitness, enabling them to work until their Normal Pension Age and beyond it they so wish. For some this may be challenging, in particular for women firefighters. Retaining women firefighters in the service is vital and they, and others, need both the reassurances that support and operational roles will be available to them as they age in the service.

 

FBU: We have raised the issue of women being disproportionately affected by the changes - a point that was also picked up by the Williams’ review. DCLG offers no solution apart from saying there will be other roles made available. We had a similar promise in 2006 when the NFPS with an NPA of 60 was imposed. We were told that as the service moved from intervention to prevention other roles would be available for firefighters to take up. This was inaccurate then and it is inaccurate now, as most non-operational roles have been reclassified as green book roles, attracting a lower salary to reduce employer costs. 

 

PM: Further work will be undertaken through the fitness working group, chaired by Peter Holland, the Chief Fire and Rescue Adviser to underpin these high level principles with practical advice. We will review the operation of the local fitness policies and processes to ensure that they are being properly implemented. I have also reduced the cost to authorities of early retiring firefighters on an unreduced pension, making it a more cost effective option should they wish to do this. 

 

FBU: The FBU suggestion is for a further reduction. Taking the reduction down from 21.8% to around 12.8% is an even more cost effective option for authorities. 

 

PM: One other benefit of the scheme is that you can take partial retirement (sometimes known as flexible retirement). You can, when you reach 55, continue to work and draw your pension at the same time. 

 

FBU: This is misleading. If you want to access your FPS or NFPS pension, you have to actually retire. The only scheme that you can partially retire and draw down your pension as suggested is the 2015 scheme, so unless you have all your pensionable service in the 2015 scheme this is not as portrayed here. In fact if you have a part 1 (FPS or NFPS)) and part 2 pension (2015), retiring at 55 means that you will still have a reduced 2015 benefit (21.8%) or have to wait for it to be accessed unreduced at state pension age.

 

PM: This is an attractive option for those who do not want to work full-time, but seek to remain in some employment for financial or other reasons. During your period of partial retirement you can continue to earn more pension, for the period when you choose to fully retire.

 

FBU: This is only for those who have their entire pension service in the 2015 scheme.

 

PM: As promised, I have reviewed the position of firefighters who transferred pension from the Armed Forces Pension Scheme into the firefighters’ pension schemes. Fire and rescue authorities overwhelmingly agreed that these members were not being disproportionately affected by the introduction of the 2015 Scheme. Any transferred in pension will absolutely continue to count towards the pension a member can take under the 1992 scheme rules. 

 

Further details can be found in my letter of today’s date on Armed Forces transfers. Finally, I wanted to explain where I got to on the transitional protections. I have considered the protections adopted for firefighters against the Government’s wider policy on transitional protections for the pension reforms. I am content that the protections adopted fully comply with Government policy by using a scheme’s Normal Pension Age as the reference point, even where individuals can retire earlier than the Normal Pension Age. I can also confirm that a greater proportion of firefighters are protected than any other large public service pension scheme.

 

FBU: The FBU has campaigned for increased protection since the proposals were first suggested. The current proposals do not protect those nearest to retirement, because they are simply based upon age and do not take into account length of service as other schemes (for example, as the police schemes do). This length of service protection has been proposed in Scotland.

 

PM: Those of you who do transfer to the 2015 scheme will see a reduction in your employee contribution rate of 2 percentage points in 2015- 16.

 

FBU: This is little consolation for firefighters who are being forcibly moved into a much worse pension scheme. It is also worth remembering that the employers are getting a much better deal. FPS members are being forced into the 2015 scheme and are seeing their employer to employee contribution ratio slashed to an almost 1:1 ratio - the worst in the public sector. MPs claim that a 60:40 employer to employee ratio is fair. The MPs pension scheme involves approximately 63% from the employer (i.e. the taxpayer) and 37% employee. The firefighters’ scheme, which they claim is really generous, is much worse at almost 50:50.

 

NFPS members will actually see their contributions rise again for the fourth year in succession, from 8.5% in 2011 to around 12.2% in 2015 - a rise of almost 4%, with more on the way. This increase is not mentioned anywhere in this letter.

 

PM: I know that although you may be against the principle of the reforms, the majority of you understand the reasons for them. You understand that it is not sustainable for a firefighter retiring at age 50 today to draw a pension for 37 years in retirement after a career of 30 years. The numbers simply do not add up. 

 

FBU: What does not add up is expecting firefighters to continue firefighting until age 60. DCLG claim that some things are unsustainable, but miss a key point that the proposed scheme is unworkable.

 

PM: Over the three years of discussions there have been many changes to the terms of the pension scheme design, and the Government has given a guarantee that no more changes will be necessary for 25 years simply because we are now addressing the longevity and final salary risks in this new scheme design. Firefighters will also be able to sit on local pension boards, taking a direct interest in how their pension is run locally.

 

FBU: In reality, the only real board making all the decisions is the national scheme advisory board. DCLG has already indicated that the secretary of state will appoint the ‘members representatives’ to this board. That is not real democracy in action. The FBU is opposing this.

 

PM: I know that some of you are considering your membership of the scheme and, whilst the Department cannot give financial advice, you should be aware that pensions are widely considered to be the best way of saving for your retirement. However, we do recognise that individuals will have complex personal scenarios and we are exploring the common issues with the Service, with the intention of providing further guidance shortly for those seeking further information. I am convinced that the final scheme design provides the best, balanced deal for all firefighters. 

 

FBU: We have already demonstrated that it does not. The new scheme is unworkable for the majority.

 

PM: The regulations have been signed by two Treasury commissioners and myself, have now been laid in Parliament, and will become the law. 

 

FBU: The government is clearly ignoring our concerns.

 

PM: I commend this reformed scheme to you. It is a good and sustainable scheme, which will enable you to continue to benefit from a fair pension when you reach the end of your fire and rescue service career. The Government has made substantial changes to the pension scheme since discussions began in 2011 to arrive at the best deal available for firefighters. The final substantial change is the proposal to put the fitness arrangements on a statutory footing. I am resolved that there is no further gains to be made and I am therefore laying the regulations today.

 

FBU: The government are refusing to listen and negotiate further. 

 

Yours fraternally,

 

 

MATT WRACK

General Secretary