Unions want to ‘start the pension talks’

UNIONS have called for an urgent meeting with States officials so that ‘negotiations can begin’ on pensions.

UNIONS have called for an urgent meeting with States officials so that ‘negotiations can begin’ on pensions.

The Association of States Employees Organisations, which includes 12 independent unions, issued a statement yesterday claiming the States-created joint working group on pensions had ‘no authority’ to announce suggested changes to the controversial final salary scheme.

‘The changes were announced by representatives of a joint working group which has no authority to make the changes. This merely signals the start of the process, not the end,’ Prospect negotiations officer Kevin McAlonan said.

Rodney Benjamin, pictured, was appointed as independent chairman and yesterday found it hard to understand how the Association of States Employee Organisations could question its validity.

Comments for: "Unions want to ‘start the pension talks’"

Noel

If it is going to cause all that confusion again. Like some people not being able to tell the difference between unions agreeing with proposals and agreeing proposals.

Then don't negotiate

In Control

wow here we go again, considering this has been an ongoing "negotiation" it seems strange none of us workers knew anything about it till it broke cover, hardly keeping the people it involves in the loop

GM

In Control

Take it up with Ed Freestone - he was supposed to be representing you!

Peeps

Err - isn't that the point quite a few posters are making GM? - The CS have a 'working group' that is supposed to be representing them, but this is the first they have been told about the outcome of the negotiations.

How many more people are going to believe the mis-represented reporting the the Press?

The working group has NO authority to 'agree' anything. They have negotiated as far as they can with the employer, and now it will be put to the staff who will overwhelmingly reject it.

If the employer attempts to force the changes through, there will be industrial action - simples!

It really isn't that hard to understand is it???

Press reporting that the changes will come in on 1st Jan is misleading as nothing has been officially agreed (on the basis that it hasn't gone to a vote), and the States know what will happen if they push the issue as above.

It is far more likely that they would get agreement from the CS if they merely close the current pension scheme to new entrants in favour of the CARE scheme from then on.

To all those who suggest that we cannot afford FSPS, perhaps the long term sustainability is unaffordable, but to say it isn't to those currently in the scheme just isn't true.

GM

Peeps

I don't know what has gone on re Ed Freestone and his lack of communication or feedback, but its clear that the working party believed that he was speaking to them while liaising with the unions between meetings.

Industrial action to try to preserve the status quo will not achieve anything. If the States cannot rid themselves of this financial millstone which will drag Guernsey under, then their only alternative will be to make drastic cuts to the public sector workforce in lieu. Those who lose their jobs will not then have an employer making any contributions to whatever pension scheme exists!

I don't agree with your final paragraph. The current scheme has a £300m-plus deficit based on projected liabilities re all current members which will have to be eventually funded even if the scheme is now closed to new members. Who's going to pay for that? It is already unaffordable.

Thisisguernsey

The full story in the Guernsey Press concludes with this line:

'A question and answer document emailed to pension members this week confirmed the changes are due to come into effect from 1 January 2014, subject to States approval later this year.’

Peeps

GM

We will have to both disagree on our respective paragraphs then! I'm sure we both know that figures can be manipulated and analysed differently to prove any point of view you wish - I'm sure time will tell what the outcome of this one will be!

TIG

Never let the truth get in the way of a good story eh? Ending the story in the press does not make it any more reliable! The document you are referring to 'confirms' no such thing - it merely adds more details regarding the PROPOSED changes to the system which may not even end up going to the States if it all kicks off as suggested!

Spartacus

GM

I don't think Ed Freestone was supposed to be representing anyone. He was a member of a joint working group set up by the public sector remuneration committee and tasked to review the pensions and make recommendations only. This is not the outcome of negotiations at all, this is just the recommendations and negotiations will now start.

The official press release on the gov.gg website said:

The Joint Working Group agreed the proposals at their meeting on Monday 10 December and these proposals will now be considered by the member organisations and the States of Guernsey as the employer.

http://www.gov.gg/article/104870/Proposed-changes-to-public-sector-pensions

GM

Really? That's not a widely held view re Ed Freestone's role.

Fermain

If, as the unions suggest, this is only the start then the State's position should move to a DC scheme for all in future, which is the private sector benchmark.

The two sides can then spend a few months negotiating back to the same balanced compromise that the working group has already identified.

Shame on the unions for wasting everyone's time.

Spartacus

Fermain

The experts advising the scheme have advised against a DC scheme.

Rodney Benjamin commented publicly that DC schemes are not the panacea they are made out to be and that "chickens would come home to roost" for those who have switched to DC in the private sector.

GM

Spartacus

Has Rodney Benjamin actually advised against DC schemes, or is he merely pointing out that they aren't perfect? The bulk of the population have DC schemes. Is it not more a case of which is the lesser of the evils? There may well be some disadvantages to DC schemes, but the affordability issue to the employer is eradicated. The CARE scheme is clearly a halfway house.

I think it is rather stretching it to interpret Rodney's comments in the way that you are.

Spartacus

GM

I don't think I have stretched the interpretation of chickens coming home to roost. That saying describes a mistake which incurs adverse consequences at a later date.

Defined benefit schemes are perfect because they do what they are supposed to do - provide security for employees in old age.

DC schemes do not do this. That may suit the private sector, as responsibility has largely been shifted away from companies who do not care what happens to their employees when retired. The government clearly has a much greater degree of responsibility.

The CARE scheme is a halfway house and in some ways is fairer than final salary but it is still a cut and existing members would need to agree to change. Why would they agree?

New candidates will not find the CARE scheme as attractive and this could compromise Guernsey's recruitment and retention abilities even further. This concern was highlighted in the terms of reference.

GM

Spartacus

I beg to differ. You are merely guessing about what Rodney Benjamin was alluding to, and about the exact context.

Defined benefit schemes only provide security in old age if the scheme doesn't go bust before the members reach old age. Many companies in the UK went bust precisely because of the liabilities which they had incurred on their schemes - they were insolvent and could no longer trade.

DC schemes require the members to take some responsibility for their old age. They need to appoint qualified pension advisors to advise them. If it looks like their scheme will leave them short of what they need or want in their old age, then the same financial advisors can advise them on savings during the rest of their working lives to address that projected shortfall. They may need to live more frugally now to boost their retirement income. That's what everyone else has to do!

No -the members don't have to agree to a change. They are perfectly free to gamble that their jobs won't be amongst the many which would have to be cut in order to make the scheme affordable in its current guise. How many? 15%? 20%? 25%? More? What are their job prospects in the current gloomy Guernsey outlook in the private sector? What income would they be earning then, let alone what future pension contributions would be made on their behalf? I'll leave you to work that one out.

Market forces will dictate whether new candidates find the job attractive or not with a CARE scheme. In case you hadn't noticed, there are very few job vacancies around. Many are being laid off. It is going to get worse over the next 2 or 3 years, with no obvious new employment opportunities in the private sector. People will apply for whatever jobs are available. The type of pension scheme available to them will be some way down the list of priorities. Earning a current living will become the priority.

Sorry - that is not meant to be alarmist, but I'm afraid its the reality of Guernsey from 2013 to probably 2018. We are in very tough times, and the sooner that everybody grasps this, the better.

Spartacus

GM

What do you think Rodney Benjamin meant by it? I can't imagine any other way of interpreting it so you will need to be more specific if you wish to clarify your point.

Correct me if I'm wrong but adequate pension regulations are in place which are designed to protect the members of schemes. Some UK schemes could not afford to meet the requirements of those regulations which dictate that the schemes must be adequately funded and that is why they wound themselves up. That does not apply to the public sector as we have discussed before.

Regarding your comments on financial advisors, that's not my experience of how they work at all. You are also assuming that people can afford to save. The medical officer of health highlighted that there are 10,000 people in Guernsey who do not have access to health equity. How and why would someone who cannot afford to go to the doctor put aside hundreds a month towards retirement? It makes no sense at all.

Rodney Benjamin indicated that the members would have to agree to pension changes to affect an amicable solution and I believe him.

Are you suggesting that the States are operating with excessive staff levels and that cuts to the pension benefits will allow the states to continue operating on that wasteful basis? If there is spare fat in the public sector surely this should be cut regardless.

GM

Spartacus

I have no idea what Rodney actually meant, and neither do you. But its you who is placing great weight on it, which is very presumptious.

UK company law deems it a criminal offence to trade when knowingly insolvent. It results in the directors being personally liable for an insolvent company's debts, hence they cease trading. The receipt of an actuarial valuation which shows the company to be insolvent is the end. Yes, in the UK there are compensation schemes, but these only kick in after the company has gone bust.

You have clearly not been dealing with right professional advisors then.

Sorry but you are way off mark. What percentage of those 10,000 to whom you refer are public sector workers? I can't see too many rank and time civil servants being within that 10,000. People's priorities need to change. Do they still go on holiday? How much do they spend in alcohol and cigarettes? Are those more important than saving for retirement? As I said earlier, we are not a nanny state.

I agree with your last paragraph. The wastage from the public sector must be cut regardless. My point is that it will need to be cut by a lot more if the pension changes get blocked. It will be the overall net size of the public sector payroll, including pension contributions, which will get measured.

Spartacus

GM

We are not talking about just rank and file civil servants, we are talking about teachers, nurses, all public sector workers.

There is a wider issue in relation to the demographic timebomb which goes beyond the public sector pension debate.

Re UK insolvency, the point is the companies have to ensure the schemes are properly funded and the requirements are onerous. Guernsey is not a UK company but if it was it would not be insolvent and the pension scheme is very well funded.

Clearly staffing levels is a separate issue which is based on the requirements for delivery of the services deemed essential. Cutting remuneration does not justify surplus staffing.

GM

Spartacus

My point entirely. Why should the States of Guernsey bail out a teacher in old age who has failed to accumulate any savings during his/her career and can't live off their final salary pension? Why should that becomes the state's responsibility? I accept the point entirely re lower earners, but.....

But the States of Guernsey is only "not insolvent" because its a government, not a company. That doesn't mean that a scheme is affordable just because the employer seemingly has deep pockets. That government also has a duty towards all of its population, not just to its public sectors workers. It needs to be able to fund an education service and a health service for a start. Should those be allowed to suffer just so that middle-ranking civil servants can get an excessive pension scheme in their old age? Sorry, but that cannot be the States of Guernsey's priority, and it provides no incentive whatsoever for those public sector workers to take any responsibility for their own retirements.

Re your last paragraph, two separate issues but inextricably linked.

Spartacus

GM

I don't understand what point you are trying to make, a teacher who retires on the current final salary pension will not need bailing out by anyone that's my point. That is what they signed up to and what they have been saving towards through their contributions. You want that to change so that the teacher would incur the risk that he/she may need bailing out. Are you now arguing against your own position?

We will have to agree to disagree on the solvency of Guernsey. I believe it is financially solvent by any measure it just needs to organise its finances better to fill the zero ten black hole and this will be done.

I believe the education and health services can be maintained and indeed enhanced in years to come. You are suggesting the public sector pension joepardises these services but I have seen no evidence whatsoever from any official source to substantiate that claim.

GM

Spartacus

It was you who referred to teachers, suggesting that they would be incapable of saving to supplement their pension under the proposed CARE scheme.

The States of Guernsey is indeed solvent today, but it won't be in 20-30 years time if the current scheme continues as is, as the liabilities will keep growing at a far faster rate than the assets are likely to grow on an annualised basis.

The island cannot afford to go into a much larger annual deficit each year by making much bigger annual contributions to help eradicate the current £300m shortfall. To do so means eating even further into the capital reserve fund, which would be depleted and then what?

Spartacus

GM

Look, if you would rather have teachers and other states workers on higher salaries to make up for the cut to their pension that is another matter. This would give them the opportunity to save to make up the shortfall in their pension needs but the States would then have no control if they chose to spend that money on other things. Making a cut to their pensions and expecting them to then find extra hundreds a month in savings without any extra salary is unrealistic.

I am pleased that you agree with me that Guernsey is solvent. There is no evidence that liabilities will outgrow economic growth and growth of the assets. The actuaries are employed to advise on this and have made no such predictions.

GM

Spartacus

You seem to be ignoring a key and very obvious option. Of course the States don't have to give cash to public sector workers and see them fail to put it towards their retirement. They can simply make a contribution to a defined contributions scheme on the employee's behalf. You know, like the rest of us have. That will prevent the storing up of massive future liabilities for the taxpayer. Easy.

I have never said or suggested that Guernsey is currently insolvent. I have always said that I am extremely worried about Guernsey becoming insolvent in the future because of the scheme's liabilities. That has not changed one iota.

Once again you assume too much about the investment expertise of actuaries and the scope of their role.

Spartacus

GM

Again I don't understand the point you are trying to make. The CARE scheme would mean employees receive a lot less pension, the contribution rate will then be slashed because the value of the projected liabilities will be much lower. So that would be a direct cut to salary expenditure.

It is also proposed they will pay more into the scheme themselves so will have less disposable income available to save. They will also bear all the risks of the scheme and expect to live longer so will need to save more in order to protect themselves against old age poverty. The proposed solution to this problem gives them LESS money now and in retirement. How does that represent a solution?

I'm sorry but I do not value your dismissive attitude towards the expertise of the actuaries. Your ideas are unsubstantiated conjecture, theirs is a professional expert opinion.

It is funny that you are willing to share all these opinions claiming to be knowledgeable, however when the evidence crops up that the problem you are concerned about is being addressed suddenly you are claiming to know nothing.

GM

Spartacus

It's dead simple.

End contributions to the current scheme. Create a new defined contributions scheme.

Employer pays an annual sum equal to a percentage of salary(amount to be negotiated/agreed) into the new scheme. That discharges the employer's pension obligations.

Employee makes additional contributions of any level he/she wishes to the scheme, within tax office limits. That provides the employee with as much flexibility as possible re personal contributions -nothing is mandatory.

No long tail deferred liability builds for the employer. That particular problem is solved.

Employees obtain a cash value calculated on an actuarial basis for his/her accrued defined benefits within the existing scheme, and that cash sum is transferred out of the existing £900m fund to the new scheme for the individual's pension pot.

All people who are still working would have to do this. Those who are no longer working would remain in the current scheme and would continue to receive their defined benefits.

Clear enough?

Spartacus

GM

You have described a typical DC scheme. That is NOT what is being recommended.

I don't think you know what a long tail liability is either.

GM

Spartacus

Get with the programme!

I know perfectly well that I've described a defined contributions scheme and that it's not what's been proposed. It was in response to YOUR comment that under the CARE scheme there would still need to be an additional cash sum payable to employees, and also that they could still be left short on retirement. I had already repeatedly said that it's not the government's job to run a nanny state in making sure that they made extra savings towards their retirement.

Of course I know what a long tail liability is!

Looks like you are reverting to type after a few days of almost normal behaviour.

Spartacus

GM

Why explain a DC scheme in response to my concerns about the proposed CARE scheme? Makes no sense.

I know you don't want a nanny state but you have not identified a solution to the problem pensioners will be left with which is that they will be living longer and so will need more money. You seem content to sail into a future where old age poverty will be a serious problem.

GM

Spartacus

I've already explained it. What don't you understand?

We will ALL be living longer. We will ALL be pensioners. We ALL need to save more for our retirement. Some will be unable to do so and will need to be taken care of by the state. But I don't believe that the state should have to bail out those who COULD save extra for their retirement but who choose to spend their potential savings today on other things. They have the opportunity to do something about it. Those that have no opportunity to something about it will become a burden on the state.

Noel

I re iterate the above even simpler

No agreement has been reached

GM I don't agree with your figures Sorry but the figures look like they have been manipulated, and released in drips and drabs and as a whole at best unreliable.

I don't want States members to make a decision on flawed figures, but I don't want an expensive independent investigation either.

I wonder what the handling costs for the pension are? and would this go up for a more complex scheme?

I also wonder how much and what the pension pot is invested in. (No risk in the portfolio I assume)

Is it being invested on island projects or what? Remember the employees have no say as it is not our pot.

What formulas are being applied to the pots sustainability and is there any others that could or should be?

If employees are being asked to take on any liability for the pot, what say will we have in the running.

Buy into a going concern with unclear or undefined liabilities as a sleeping partner. “Waiter cheque please”

GM

Noel

The figures are what they are, and yes, there has clearly been some public suppression (or let's say "playing down") of the true liabilities figure, which is what I was so committed to expose them for what they are.

The breakdown of the investments was published in either the latest actuarial valuation or the States audited accounts (sorry I am away from my information on this). However, they are not invested quite as conservatively as one might expect a pension scheme to normally be, seemingly because of a wish to take extra investment risks in order to chase higher returns to recoup losses made around in around 2010. There is no exposure to "local projects".

The trustees of the scheme are responsible for the investment strategy, and they take advice from the actuaries and from other investment advisors. Whether or not they listen to that advice, who knows. Realistically the members are not going to get any say in how it is managed. The trustees' obligation in carrying out their role is to act in the best interests of the beneficiaries at all times.

Interested

I was told that the states will pay more if the nvestments don't perform as anticipated so as far as the employee is concerned it doesn't matter what it is invested.

GM

Interested

Exactly...the taxpayer is currently on the hook, and the taxpayer is not keen to see taxes go up just to pay for the shortfall.

Noel

I agree the figures are what they are but I have never met figures that could not be massaged.

I’m pleased you have answered some of my questions but I think we will have to agree to disagree on whether or not the pension is sufficiently funded.

GM

Noel

Indeed we will!

Taz

does anyone have the figures for how many manual workers, nurses, teachers, etc there are and what the spread of salaries is?

L'eree Lad

What a pity that this thread has been hijacked by the GM v Spartacus playground spat.

To be in this 'back at square one' position after a well constituted working party review process is a complete debacle.

Nobody comes out of this with much credit but tops marks for incompetence must surely go to the union reps who "didn't realise what was happening"...

Good grief - in a nutshell this exemplifies everything that is wrong with the public sector. They could not organise a p*ss up in a brewery and expect the hard-working Guern to pick up the tab for their unrealistic pension expectations.

Well I have news for them - the public has no sympathy, we have our own problems to worry about and they need to get real before the reality of FTP transforms them all out of a job.

GM

L'eree Lad

It might seem like a "playground spat" to you, but its something that will bury Guernsey if not addressed!

Dot Comma

Seems like a playground spat to me too. The 'burying' of Guernsey is just, like all of your incessant conjecture, your opinion and only an opinion.

For someone who is very keen to blow his own trumpet GM, you don't play a very good tune!