Jack Jones – TUC pensions officer
A large part of the British workforce have trade unions working for them to provide them with decent conditions at work, pay for work and benefits when work ends and retirement begins.
We had in unionised companies a DB culture which meant that if you were a union person you most likely got a pension based on your final or average salary. But employers rejected the terms on which they provided defined benefit pensions, they were not prepared to underwrite promises at a price that they would not afford.
The replacement was a DC savings system where union members got an agreed payment paid into a pot which was called a pension but which (after 2014) was wealth management first and pension only if the member chose an annuity.
David Pitt-Watson
David Pitt-Watson , a Labour economist and campaigner for better pensions, took up the campaign to offer members of unions and indeed the millions not represented by unions. He argued for a middle way, CDC, which provided better pensions for members than could be bought out of the DC pot. Pound for pound, he explained that money into CDC produced 60% more pension than a DC plan. Since DB was gone in the private sector, he had the sense to promote CDC as the way forward for those saving into workplace DC workplace savings plans.
The unions leaders found it hard to accept that DB had gone and many who I speak to feel that CDC is a second best version of the DB guarantees they held close to their hearts. But the simplicity of CDC is a simple enhancement on what members get round now which does not create additional cost to employers.
Indeed it is possible to see employers benefiting much more from CDC than they do from workplace savings. There are many employers who are still committed to paying deferred pay to their workforce when they leave work and CDC satisfies that aim.
It is now time for unions to step to the front of the campaign for CDC. The Pensions Minister advertises the whole of life CDC plan as providing up to 60% more pension than the equivalent contributions into a DC savings plan. Why would an employer not want to offer a 60% pay rise to retiring staff if it cost them no more than their current workplace pension contributions? Why walk away from that?
I speak to some union representatives who see themselves having no place in the pension debt, they argue that the design of non-DB pensions is a job for consultants and that they are excluded from private sector pensions. I disagree.
People who work in unionised workplaces need the unions to stand up for them. If employers do not hear from the unions about the advantage of better pay in retirement, they will do nothing and the CDC opportunity will pass away.
So I hope that the TUC , led by its pension officer Jack Jones, will work with the soon to be “Lord”David Pitt-Watson to make multi-employer CDC happen in 2027.
That means a process that starts now, giving employers a year to decide on and implement change in workplace pensions.
That change will cost employers very little relative to the benefits CDC will bring over DC. There is general consensus among actuaries and lawyers that a CDC plan provides better outcomes for members of CDC than DC plans.
Clearly there is reluctance amongst organisations profiting from DC plans to adapt to a collective approach but this can be done. I am not arguing here the case for any one approach to CDC, any one provider over another (that is a discussion for the lawyers and consultants).
I am arguing the case for CDC to be moved up the agendas the unions have with their employers and that starts with the pension officers beyond Jack Jones working together.
I hope that David Pitt-Watson will lead from the front , as he has done for many years, I hope that Bryn Davies will use his influence, another member of the upper house and I hope that the individual unions will step up and take CDC to their hearts.
