This is  from "The Guardian"  29th June 2010.


Lucy Adams, the personnel boss at the BBC, and Bectu's union officials face a historic moment in the life of the corporation – divide the workforce, as most other big corporations have done, usually with union compliance, or keep everyone on the same terms and conditions. The proposal today recommending staff joining the Beeb should enter a cheap pension plan that will pay only a fraction of the existing final salary scheme follows the crowd mentality in corporate life that often looks for the easy way out. But it is the wrong answer.

The BBC says it has no choice now that the deficit in the final salary scheme has jumped to £2bn. No doubt, that figure reflects the dire position of the fund, though pension accounting is notoriously volatile and can throw up the most bizarre results. No doubt, also, the BBC management and trustees feel obliged to act and act quickly. The pension regulator is probably on their backs, insisting that "something must be done" to reduce costs. Ministers, sharpening their knives on the sidelines, may have signalled that a pension scheme with a monster deficit must be dealt with before talks on funding can make any progress.

These pressures are real, but should be resisted by the corporation and the union. The route out of the problem is the "Tesco solution", not the chipping and slicing of benefits in the underhand way the BBC proposes. Back in 2003, when it was obvious to everyone in the pensions world that final salary schemes were ridiculously expensive, Tesco approached its union, Usdaw, to strike a deal. Life expectancy was rocketing. The stock market had crashed for the second time in three years. Make-believe estimates of investment returns were downgraded. Move to a career average scheme said Tesco and the business will resist shareholder demands for a wholesale switch to a cheaper scheme reliant on stock market gains.

Career average schemes maintain the guarantee of a fixed pension provided by the employer, but are based on an average salary calculated over a staff member's whole working life. The main losers are usually men who stick with a company for 40 years with no breaks for kids and finish their careers in management. The low-paid years are ignored under a final salary scheme, which pays a retirement income pegged to the worker's last pay cheque. Checkout staff, who start and finish their careers on the same salary plus whatever wage rises they receive, lose very little under a career average scheme.

Usdaw was derided as a weak union throwing away a vital benefit. But who is having the last laugh? All Tesco staff are still in the scheme, when almost every other employer has destroyed all their employees' pension guarantees. Staff at the major banks, insurers, pharmaceutical companies, mobile phone companies and manufacturers have closed their schemes. Staff in these businesses would kill for a career average scheme.

Today, there are a couple of million people still paying into final salary schemes while the rest of the 29 million-strong workforce either have a stock market pension or nothing at all. How did we get to this position?

Self-interest played a part. The people who sat round the negotiating table were, in the main, directors in the final salary scheme and trade union officials under pressure from existing staff – and the 50-plus year-old shop stewards – to protect their benefits. It meant a deal emerged that protected current union members, who could remain in the final salary scheme, but which cast aside new staff. They became second-class citizens.

Sitting at their desks, they could turn to a colleague doing the same work, but being paid 30% more than them. That's the difference in the cost of a final salary versus a stock market scheme. Over a working life, it is a colossal difference and is reflected in retirement incomes of 66% of final salary, as opposed to 20% to 30%, depending on how well investments have performed.

I don't know if Alan Yentob is a member of the BBC pension scheme (many of the best paid in the corporation have their own pensions), but he and his ilk should join with the lower-paid staff and put forward, through their union, a solution that keeps everyone in the same scheme with the same proportional reward.

That will mean sacrifices from the better-paid, so it is unlikely. And given the fact that the BBC has approached the problem by restricting benefits under the final salary scheme with a cap on inflation at 1%, which is designed to disguise the chipping and slicing cuts, trust is likely to be low on the union side. Nevertheless, unity should be the watchword.

Major corporations are only now waking up to the implications of dividing their staff based on pension benefits and the bitterness it creates. The BBC and Bectu owe it to BBC staff to take a different path.



Source:-
http://www.guardian.co.uk/commentisfree/2010/jun/29/bbc-bectu-pension-scheme

By Phillip Inman