Submitted by SWFBU on
TO: ALL MEMBERS
Dear Brother/Sister
PENSIONS CAMPAIGN AT CRUCIAL PHASE
Our long campaign to defend firefighter pensions has reached a very serious phase. We have received proposals from CLG which are presented as a final offer and we will need to consider what steps we take next.
N.B. Please note that this circular addresses issues relating to the firefighters pension schemes and not matters relating to members of the Local Government Pension Scheme (LGPS).
It is important that all members consider:
• The approach the Union has taken in conducting this campaign.
• The details of the proposals, including any changes made, and how they relate to the aims the Union has set out.
• The options we have in relation to our next steps.
Our Campaign
Pensions can be a complex issue in any case and pension changes affect different members differently. We are keen that members are as well informed as possible and we are therefore providing detailed information on various aspects of the Government’s proposal. This information will be generally issued to Branches and will also be available on the Union’s website. This includes a comparison between the Government’s original proposals and the latest position (see circular 2013HOC0345SS at Branches or on the website for full details). Further information will also be issued over the next few days.
Our broad aims in the campaign have been:
1. To protect the pension arrangements for each individual member as far as possible.
2. To ensure that there is a good quality and appropriate occupational pension scheme for firefighters for the future.
The Government has attempted to drive divisions between members on the issue, making use of the fact that members are on different schemes, at different stages of their career and that some are covered by ‘protection’.
The only way we can achieve the best possible outcome for all members, regardless of age, length of service or scheme – is by standing together to achieve the aims we have set out. If we allow ourselves to be divided we will all lose out.
Government Proposals
The CLG Fire Minister, Brandon Lewis, wrote to the Union on 19 June 2013 setting out a ‘final offer’. The Executive Council met on 20 June 2013 to discuss the letter and proposals. This letter followed further discussion between the Government (CLG) and the FBU in the period since the Union’s Conference in May 2013.
You will be aware that the FBU submitted a revised trade dispute following Conference which contained seven areas to be addressed for the dispute to be resolved.
The seven areas were:
• Protection arrangements.
• Contribution increases.
• Contribution ratios.
• No Job No Pension (capability dismissal).
• Early retirement options.
• Commutation rates.
• Cost Ceiling.
The Government’s ‘final offer’ does not satisfactorily address these concerns and the Executive Council unanimously decided that they could not recommend agreement of the offer in its current form.
Set out below is an explanation of the offer and how the Government has sought to address the issues within our trade dispute.
• Protection arrangements
There has been no alteration on this area since Conference and therefore the protection arrangements remain as set out in the earlier proposals.
• Contribution increases
Employee contribution rates for the 2015 scheme would be based on the average contribution across all schemes, including the contribution made in the 1992 Firefighters’ Pension Scheme (FPS) and the 2006 New Firefighters’ Pension Scheme (NFPS). This is complicated because the Year 3 contribution rates for the FPS and the NFPS have not yet been decided due to the ongoing opt-out review. The Year 3 proposals will be consulted upon in autumn 2013.
However, using the current proposals for contributions in Year 3, FPS members would pay around 14.2% (plus tiering for higher earners) while in the NFPS, members would pay around 10.4% (plus tiering for higher earners).
The letter suggests that if this increase is fully applied the average employee rate for the 2015 scheme members would average 12.6% in 2015 rising to 12.8% in 2017. There is no indication of what the rate would be for the longer-term.
• Contribution ratios
The contribution ratio is the ratio between the pension contribution made by the employee and that made by the employer.
The Government’s ‘final offer’ attempts to address our claim for improvements in the contribution ratio by explaining that these will be unknown until the completion of the valuation of the current firefighters’ pension schemes which is due later this year.
• No Job No Pension (capability dismissal)
In order to address this issue the Minister has now proposed a “Joint Working Party with the employers” to consider what they believe are “workforce management” issues. If this does not address the concerns we have raised it would still mean that it is likely that members could be sacked on capability and be unable to access their pension at the time of dismissal.
• Early retirement options
The letter sets out the latest proposal on the actuarial reductions should a scheme member choose to retire from age 55.
N.B. The FBU has regularly challenged the use of the word ‘choose’ in this context. We have argued that there may be little choice for members who experience a decline in fitness as they age (especially beyond 55) and way well ‘need’ to retire from the Service.
The earlier proposal meant that should an individual choose to retire from age 55 they would face an actuarial reduction from the Deferred Pension Age (State Pension Age) but that if they remained active in the scheme until age 57 the actuarial reduction would apply from the scheme’s Normal Pension Age of 60 - which improves the position for the member.
The final offer improves this proposal so that if the active member chose to retire at age 55 the actuarial reduction would now be from the Normal Pension Age of 60. This decreases the actuarial reduction to the benefit of the member.
The current actuarial reduction from age 55 would be 21.8% and from 56 would be 17.9%.
N.B. An actuarial reduction is designed to ensure the early access to pension is cost neutral. Therefore the earlier the member retires the greater the actuarial reduction.
The letter highlights that the actuarial reduction in the NFPS is more punitive as it is reduced from the Deferred Pension Age of 65.
The improved actuarial reduction factors have meant however that the accrual rate (rate at which a member builds up pension) has been worsened from 1/58.7th to 1/59.7th to pay for this within the cost ceiling.
• Commutation rates
The Government’s ‘final offer’ does not include any improved proposal on this issue.
• Cost Ceiling
In response to our concerns about the cost ceiling, the Government’s ‘final offer’ is clear. They state that the cost ceiling for the 2015 scheme has already been improved from the initial one. The letter points out that the revised cost ceiling of 27% already takes account of the points made by the FBU about potential increases in ill-health retirement numbers and the drop in those choosing to take the proposed commutation factors.
Conditional
The Minister makes it clear that the ‘final offer’ is conditional on the FBU membership agreeing to its terms. He seeks a response by 12 July 2013. It is also important to note that the Minister had earlier stated that a notification of a ballot would be taken as rejection and the Government would proceed to implement the earlier Government proposals.
Scotland, Wales and Northern Ireland
The discussion on pensions is further complicated by the fact that the Ministers in Scotland, Wales and Northern Ireland have powers which might lead to different pension arrangements. There are currently no such proposals but the Executive Council agreed that individual discussions should take place with each of the Government’s to explore whether progress could be made. Further information will be issued should any significant developments emerge.
Retained Firefighters and the ‘Modified’ Scheme
The proposed ‘modified’ scheme for RDS members is still subject to unexplained delays and is still not issued. We continue to press on this matter with CLG and with Fire Ministers in Wales, Scotland and Northern Ireland. We shall issue further information on this matter shortly.
Our Options and Next Steps
• The Executive Council discussed the letter and its potential effect in detail and agreed a Resolution which has been circulated to Branches.
• The Executive Council recognised that there are some improvements outlined in the letter but that they did not adequately address the concerns set out in the trade dispute.
• The Executive Council agreed that the final decision will rest with members and that the ‘final offer’ should be put to members for consultation.
• The Executive Council was clear that they could not recommend that members agree these proposals.
• The Executive Council agreed to reconvene during the week commencing 8 July to consider the outcome of the consultation.
• In the meantime the Union will continue to seek improvements to the position. This will include discussion in Scotland, Wales and Northern Ireland.
The Executive Council Resolution contains two clear recommendations for members to consider:
1. The Executive Council recommends that the proposals from CLG should not be agreed.
2. Following consultation, if the situation remains unacceptable, the Executive Council will act on the authority outlined in the Emergency Resolution on Pensions.
This includes a move to a strike ballot. The Union has done everything possible to avoid this but we have reached a stage where members will need to consider this step if we are to continue to seek improvements to the current position.
The Executive Council acknowledges the patience and determination of members and asks that all members participate in the debate and discussion on this issue.
Best wishes.
Yours fraternally
MATT WRACK
GENERAL SECRETARY
