Firefighters’ Pension
Scheme - Heads of
Agreement:
“Why it’s
unacceptable”
FBU consultation
February 2012
1
1
Heads of Agreement
• Presented to union 9 February 2012 by CLG
• EC met to consider
• FBU position - It is not a Heads of Agreement because
nothing has been agreed in any way by the union –
best described as a set of proposals from government.
• After consideration EC position- cannot recommend
acceptance of this HOA
2
Reasons
• Unaffordable and unfair contribution rates.
• A totally unrealistic Normal Pension Age (NPA) for
firefighters.
• An unsustainable scheme for the fire service.
3
Unaffordable and unfair
contribution rates
• Average member contributions of 13.2% from April
2015, with some protection for new entrants.
• Ratios 1:1.05 worst in public sector
• This means an increase on the current FPS
contributions and 4.7% on NFPS contributions
• Proposal 1st year (1.3% FPS), (0.6% NFPS ) + Tiering in
both schemes
4
Contributions from April 2012
FPS - wholetime
New rate
Firefighter
12.3%
£367
Crew manager
12.3%
£406
Watch manager
12.4%
£489
Station manager
12.6%
£770
Group manager
12.8%
£1,003
Area manager
13.0%
£1,294
As published by CLG, 9 September 2011
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Extra
contributions
Contributions from April 2012
NFPS
New rate
Retained (10,000
pensionable pay)
9.1%
£132
Wholetime
firefighter
9.1%
£169
Wholetime crew
manager
9.3%
£250
Wholetime watch
manager
9.3%
£280
As published by CLG, 9 September 2011
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Extra
contributions
Impact of contributions and opt
out review
• Government agreed to review the impact of 2012-13
increases/ opt outs before making decisions year 2
and 3
• No terms of reference yet
• Review or post mortem?
• Year 1 increases expected by 8 March
• Still trying to influence Minister
7
A totally unrealistic retirement
age for firefighters
• A Normal Pension Age (NPA) of 60 is a major sticking
point.
• FBU submitted substantial evidence showing it is
unworkable.
• The government has not produced any evidence to
support their plan for firefighters to retire at 60.
• Review of NPA to see if 60 is relevant
• This is a concession from the government because of
the FBU’s evidence.
8
NPA Review
• Initially – only looking at economical, efficient and
effective management of the fire service,
• FBU pressed for inclusion of the changing profile of
the workforce and the occupational demands of, and
fitness standards for, firefighting roles
• No decision yet on ToR – FPC issue
• FBU -First establish the right NPA and then build the
scheme around it.
• FBU -Illogical to make decision on Accrual rates,
revaluation rates and commutation factors before
NPA
9
Retire before 60 penalty
Retirement from age of 57, pension reduced from
scheme’s normal pension age of 60…
Cost to scheme – worsens default accrual rate from
57ths to 58.7ths to pay for it
Retirement from age of 55, pension reduced from
scheme’s deferred pension age of 68…
Govt seem to be recognising that people cannot work
until age 60; creating the impression that people can
retire with a slightly reduced pension from 57
FBU – Get the NPA right then this becomes irrelevant.
10
Examples
Pensions will be reduced by around 5% per year from
either 60 or 68 depending on retirement age
If a member retires at age 57, then a reduction of around
15% will be applied. If the member’s accrued pension at
age 57 was £17,445 a year, then the pension after
reduction would be £14,828. £2,617 a year less
If a member retires at age 56, then a reduction of around
60% will be applied. If the member’s accrued pension at
age 56 was £16,964 a year, then the pension after
reduction would be £6,786. £10,178 a year less
11
An unsustainable scheme for the
fire service
• FBU presented evidence around opt outs and non
joiners
• Supported by FRA evidence
1. High Contributions
2. Worst ratio in public sector
3. Unworkable
= unsustainable scheme
FBU will not sign up to an unsustainable scheme
12
Heads of Agreement
Document in three parts:
• Accrued rights protection guarantee
• Transitional protection/ Tapering
• Main scheme design parameters for a new
Firefighters’ Pension Scheme
13
Accrued rights protection guarantee
CLG: There will be full statutory protection for accrued
rights for all members.
FBU: Government cannot take away what you’ve
already paid for.
• Link to final salary – applied to part 1 pension
• Protection for double accrual –applied to part 1
pension
• Ability to retire at expected current pension age –
access Part 1 pension
• Commutation factors as per 1992 FPS applied to part
1 pension
14
Transitional protection
•
All active scheme members who, as of 1 April 2012,
have 10 years or less to their current Normal Pension
Age will see no change in when they can retire, nor
any decrease in the amount of pension they receive
at their current Normal Pension Age
•
Achieved by remaining in scheme until you retire Contribution rates for this period not available yet
• This is inconsistently applied to FPS -FBU raised with
CLG and minister
15
Transitional protection
There will be a further 4 years of tapered protection for
scheme members.
This is achieved by remaining in scheme until tapering
ends – calculator prepared
This adds more protection and means that the range for
those who could retire at age 50 is extended to those
age 43 years 2 months at April 2012.
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New scheme from 2015
Outstanding issues
•CARE
•Accrual rates
•Revaluation rates
•Commutation
•EIA
•Cap and Floor
•25 year Guarantee
FBU – cannot make a decision on these until NPA issue
resolved
17
Consumer Prices Index (CPI)
Pensions in payment and deferred benefits to increase in
line with Prices Index (currently CPI)
•The Consumer Prices Index (CPI) is a worse measure of
inflation, because it excludes key costs like housing. The
government previously used the Retail Prices Index (RPI),
but changed to CPI last year without negotiation.
•The Hutton report said the switch from RPI to CPI cuts
pension benefits by 15%.
•The FBU and other unions took a court case to reverse
this decision. It is currently pending appeal. 20/21
February 2012
18
Cost ceiling
4. For the purposes of the reform design process for
2015, the Government previously set out the gross cost
ceiling of 27.0% and the net cost ceiling of 13.8%.
•The government delayed the publishing its cost ceiling
until 8 December after taking some account of the
FBU’s arguments.
•However this cost ceiling is unworkable, particularly as
it assumes a Normal Pension Age of 60.
• It still leaves firefighters paying 13.2% of salary – the
highest in the public sector.
19
Executive Council resolution
The Executive Council has now received the proposals
for fire service pensions. We are disappointed that the
significant body of evidence presented by the Fire
Brigades Union during these discussions appears to have
been ignored.
We believe these proposals to be unacceptable in that
they include:
• Unaffordable and unfair contribution rates.
• A totally unrealistic retirement age for firefighters.
• An unsustainable scheme for the fire service.
20
Executive Council resolution
The Executive Council will now consult members through
branches and our committee structure. The Executive
Council recommends that there is a rapid move to
prepare a strike ballot and that further discussion should
finalise the details of this. The Executive Council will
meet again in three weeks, after consulting members, to
consider developments.
We remain committed to maintaining dialogue and hope
that the government will now resolve the matter
through properly engaging on the issues raised during
discussions.
21
Consultation
Members decide – study the proposals
Tell your FBU representatives what you think of the
proposals
The Executive Council will listen to all voices within the
union, before deciding on the next steps
Talks continue – Things may still change
More information: www.fbu.org.uk
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QUESTIONS
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