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"How safe is your pension?" broadcasts on Channel 4, Sat May 8th, 6pm
Pensions Letter - Download - Right click on the link and select "Save Target As" to store the file to your computer.
Pensions Letter - Online version - Or click on this link to see an online version of the letter which you can copy and paste.
"Final salary schemes are often described as the 'Rolls Royce' of pensions," says Liam Halligan. "They’re supposed to be the most secure schemes around. They’re supposed to pay you an annual income during retirement, based on a fixed proportion of your wages. But for some people that’s not how it’s working out."
Around 350 British final salary schemes have now been wound up, leaving more than 60,000 workers, who were told their schemes were guaranteed, with severely depleted pensions, or in some cases nothing at all. Many of them have contributed for decades and were forced to join their final salary scheme as a condition of employment.
Yet written advice given to the public by numerous government agencies, including the Department for Work and Pensions and the Financial Services Authority, says that final salary pensions are "guaranteed". The human costs of this misleading advice is heart-breaking.
Take the case of Willie Riggans, who has made 26 years of contributions into the final salary scheme at the Scottish Steel forgery where he works. He was told to expect a £7,000 annual pension and a £30,000 retirement lump sum.
"Now they’ll be no lump sum and I’ll be lucky to get a pension of £1,000 per year," says 62-year-old Willie. "At first you don’t believe it. It takes a while to sink in. You don’t sleep – you go to bed thinking about it and wake up thinking about it. My money has been stolen and that’s never out of my mind."
Then there’s 33-year-old Heidi Urwin from Buckinghamshire, who joined the Glory Mills paper factory from school. "I didn’t know one end of a final salary scheme from another," she says. "But everyone told me to join up, my parents, my new colleagues. ‘Final salary scheme’, they said. ‘The best you can get’".
Heidi thrived, rising to become the only female manager in the firm’s 400-year history. But then Glory Mills was taken over by a German company, the factory was demolished, the pension scheme wound up and the land sold off to developers. The German parent company still makes healthy profits today. But Heidi and her staff have still lost their pensions.
"I feel cheated, betrayed," she says. "I paid into that scheme for 11 years, setting myself up for the future. Now, having had children, I’m taking time out from work. That 11 years, at full-time earnings, was to be the bulk of my pension".
The political pressure is building. Over 200 MPs, including half of all Labour backbenchers, have signed a Parliamentary motion calling for the 60,000 workers to be compensated. Tony Blair now seems aware of the dangers, which is why he told the Commons in late April that he is "actively considering" paying compensation.
But the central problem is that the nine million of us currently contributing don’t actually own our final salary pensions. Our money is vulnerable not only if our company goes bust or is taken over, but even if the bosses simply decide they want to break pension promises just to save money.
"The government has tried to stop this happening," says Halligan. "But it’s still possible today."
Ministers now accept there is a serious problem. The centre-piece of the new Pensions Bill, currently working its way through Parliament, is a new Pension Protection Fund. Impressive on paper, it is supposed to pay us 90 per cent of our money if our final salary scheme is wound up.
"But there’s an enormous loop-hole in the bill," says Halligan. "The Secretary of State can reduce these payments at any time – so it’s not a protection fund at all." His view is backed up by expert testimony from the heart of the pensions industry.
With the British Pension Protection Fund due to be launched in 2005, "30 Minutes" investigates the American equivalent, on which the British version will be based. "The government often cites America’s protection fund as its inspiration", says Halligan "What ministers don’t mention is that the US scheme is close to collapse, more than $11billion in the red, having had a $10 billion surplus only two years ago."
So if you can’t trust your company or the government to protect you, what can you do? According to leading pensions lawyer, Stephen Alexander, the problem is that pension promises are not part of your employment contract, so they can’t be enforced in the courts if the promise is broken.
Stephen Alexander has drawn up a legal letter, which employees can send to the people who are running their pension funds. It asks for assurances that the fund has enough money in it to pay the employees pension and that that won’t change whatever happens in the future.
If the company agrees to sign the letter and return it, your case for compensation if anything does go wrong in the future will be significantly increased.
If they refuse to sign it, it’s time to start asking even tougher questions.
"How safe is your pension?" broadcasts on Channel 4, Sat May 8th, 6pm
Pensions Letter - Download - Right click on the link and select "Save Target As" to store the file to your computer.
Pensions Letter - Online version - Or click on this link to see an online version of the letter which you can copy and paste.
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