CIRCULAR 2012HOC0014MW
10 January 2012
TO: ALL MEMBERS (HOME ADDRESSES)
Dear Brother/Sister
The FBU’s pension campaign is reaching an important stage and we will soon be presented with the Government’s detailed proposals. It is important to note that all of the following is still the subject of discussion and therefore may change quickly. Members are asked to follow these developments through bulletins and circulars, which will be issued to all Branches and placed on the FBU website.
Currently, the central concerns of the Union have not been adequately addressed, although talks continue. The Executive Council received a report on the latest position on 5 January and will be reporting back further detail through our Committees.
Cost Ceiling
As previously reported, a cost ceiling was set for the Firefighters’ Pension Schemes on 8 December. See circular 2011HOC0645MW for further details.
Following this, we wrote to the CLG Fire Minister on 9 December outlining our concerns at the methodology used in setting the cost ceiling. We have argued that the cost ceiling must be flawed since it is based on an assumed Normal Pension Age of 60 – despite the fact that neither the Government nor anybody else has provided any evidence that such a Normal Pension Age is achievable. It is our view that if the assumption regarding pension age is wrong, then the cost ceiling must also be wrong.
We wrote again to the CLG Fire Minister on 12 December outlining our concerns at the proposed ‘reference scheme’ which was issued with the cost ceiling. We supplied our own alternative ‘reference’ scheme setting out the Union’s objectives on pensions. We have also raised concerns at the timetable set by the Chief Secretary to the Treasury, Danny Alexander in his statement to Parliament on 20 December in which he set a further arbitrary deadline of 20 January.
In relation to Scotland, Wales and Northern Ireland, the same concerns have been raised with the relevant Ministers, either in writing or through direct contact at meetings. We have suggested that the Ministers in Scotland, Wales and Northern Ireland should raise their concerns directly with CLG and/or with Treasury.
The CLG Fire Minister responded in a letter of 20 December stating:
“I have made it clear that whilst time is of the essence, there is a generous set of benefit elements available to you and other trade unions within the reference scheme format and cost ceiling parameters.”
While the latest deadline for agreement is now 20 January, we have also been informed this is likely to be 18 January, when a meeting of the Firefighters’ Pension Committee is scheduled to be held. It is important to note that this timetable and the deadline of 18 (or 20) January have not been agreed by the FBU. We have made clear that we believe this deadline is unworkable and unacceptable.
Contribution Rates
The consultation on increased contribution rates is now concluded and we await the response from Government. The proposals remain that contributions in the FPS will increase by 3.2% (or more for higher paid employees) over three years; and by 1.5% for members of the NFPS.
It is currently proposed that these increases would be tiered and would be phased in over the three years. We are aware that the Fire Service Employers have suggested an alternative method of phasing in the increases. This would not reduce the total increase demanded from scheme members after the three years. Our response to the public consultation on the proposals to increase contributions is on the FBU website.
Please note that these details may be subject to change and we shall provide further information once the Government responds to the public consultation on this issue.
Scheme Design for Post 2015
In all the public sector schemes there have now been detailed discussions on the implications of the cost ceiling and the possibilities for the proposed new schemes after 2015.
The Government has proposed that the new firefighter scheme would have:
- Normal Pension Age of 60.
- Accrual rate of 1/57.
- Employee contribution rate of 13.2%.
- Employer contribution rate of 13.8%.
- Career average benefits.
- Use of CPI to uprate benefits.
You will note that these proposals mean long-term increases in contribution rates. For example, for current members of the NFPS (i.e. post 2006) the increases would be an additional 4.7% of pay – an increase for Firefighters of £115 per month.
The Union continues to work on the detail of these proposals along with our actuaries. We have made clear to Government that the essential difficulty with the discussions is that the cost ceiling has been set assuming a Normal Pension Age of 60. This in turn creates a whole series of other difficulties in the discussions around scheme design.
Protection Arrangements
Danny Alexander has stated in Parliament that scheme members within ten years of their Normal Pension Age will be protected in relation to retirement age and benefits. It is important to be absolutely clear that CLG officials have still not clarified what this would mean in detail for the Fire Service schemes. As explained in a separate circular, that is why information which has been circulated by CFOA (see circular 2012HOC0011MW) is unhelpful and inaccurate. We are aware that members are very concerned at this aspect of the discussions and it would be irresponsible to issue inaccurate or misleading information.
We continue to press for further details and to seek the best possible arrangements for the maximum number of members.
Local Government Pension Scheme
The FBU has made a submission to the public consultation (for England and Wales) on contribution rates. Our position is to oppose the increases. Our response to the consultation is on the FBU website.
A ‘Heads of Agreement’ has been reached with a number of Local Government Unions. This includes:
- Early introduction of new arrangements – 2014 (i.e. earlier introduction of increased retirement age).
- Delay in contribution increases until 2014.
- Expected to be both a short and long-term solution.
- Career average scheme.
- Flexibility on retirement (55 – 70yrs).
- NPA is 65 or state pension age (whatever is the higher).
- 10 year protection applicable (still establishing full details of what it means).
The Executive Council has a range of concerns around the detail of this Heads of Agreement, especially in relation to retirement age. We continue to press in our discussions for Control members to be granted access to the Fire specific scheme. Consultation is now underway with FBU Control officials on various matters relating to the LGPS.
Conclusion
The FBU has presented a range of very detailed evidence throughout these discussions. In particular we have challenged Government over pension age, high contribution rates and over the pension arrangements for Control staff. We also have a range of other concerns which we continue to press.
It has been acknowledged that we have provided a considerable amount of robust evidence. Indeed, the FBU is the only Fire organisation which has provided any evidence whatsoever in relation to the Government’s pension proposals.
Despite this, the discussions remain constrained as a result of Central Government’s approach and as a result of the cost ceiling. This has been set at a higher rate than elsewhere and with a higher initial accrual rate. However, we have stated very clearly to Government officials and to Ministers that it would be unacceptable and irresponsible to create a pension scheme which could not work.
There remain a range of issues under discussions relating to:
- Contribution rates.
- Protection arrangements.
- Pension proposals for post 2015 including Normal Pension Age.
- Arrangements for Control members.
Currently none of these issues has been adequately or fully addressed. As a result, the Executive Council has agreed that discussion should continue but that Committee meetings should be held to hear detailed reports back from the talks so as to inform the next meeting of the Executive Council. We shall provide further details on all of these issues as quickly as possible.
Best wishes.
Yours fraternally
MATT WRACK
GENERAL SECRETARY
MW/sll
