BT to close DB pension to all

[daveh]

See
http://www.investegate.co.uk/article.as ... 1546I&fe=1

BT ANNOUNCES CLOSURE OF ITS DEFINED BENEFIT PENSION SCHEME


· Future pension benefits for active BT Pension Scheme members to move to an enhanced defined contribution scheme

· BT agrees with Communication Workers Union to establish a 'hybrid' pension scheme, combining elements of both defined benefit and defined contribution schemes

· Changes ensure fair, flexible and affordable pensions for all BT employees

It was previously announced that it was closing to managers, this announcement now extends it to all staff (team members as BT calls them).

[Arborbridge]

Very sensible, but it should have happened about 15 years ago.
My own company had the foresight to do it in the early 90's, but then we didn't have unions to wrestle with (only our own feelings!). Those still in the DB scheme have been really fortunate - good for them, but at the risk of the company's future, which never made sense to me.

Arb.

[Bouleversee]

As did my husband's, Arb, and he ended up with a personal pension in drawdown with Equitable Life, converted to an annuity after the debacle

You can't blame the unions or the uni. lecturers for wanting to hang on to their generous benefits but there is no reason why some people should be spared the effort and risk that the majority now have to endure. I don't have a pension, only an ISA, and a large chunk of it has been with BT for very many years and hasn't performed well for quite a number of these so I am pleased about this development. About time.

[Arborbridge]

You can't blame the unions or the uni. lecturers for wanting to hang on to their generous benefits but there is no reason why some people should be spared the effort and risk that the majority now have to endure.

Yes, it's a struggle between two sides with perfectly good arguments for both parties. But it does no one good in the long run if the company collapses under the weight.

In the case of my company, it seemed difficult to reconcile the amount of money being poured into it for people who had left the company many years ago but were still ghosts in the scheme. They semed to have disproportionate effect compared with the people who stayed with us and still contributing to our efforts.

Anyhow, that's all past now!

[westmoreland]

pity there has never really been discussion of some sort of compromise arrangement where say 25-50% of the pension is defined benefit, and the rest paid into a standard money purchase. most workers understand these schemes are unsustainable but there's no reason it can't be part guaranteed.

[Arborbridge]

pity there has never really been discussion of some sort of compromise arrangement where say 25-50% of the pension is defined benefit, and the rest paid into a standard money purchase. most workers understand these schemes are unsustainable but there's no reason it can't be part guaranteed.

You'd probably find a host of difficulties with that idea which would keep lawyers busy for another few years

[Arborbridge]

Anyhow, that's all past now!

Actually, it isn't entirely in the past, as my mention below of legal diffulties reminds me. Many years later, it turned out that the original change from final salary was not altered properly in the pension rules. This an oversight by a Director who has long since retired and came about because he paid insufficient attention to legal advice.
Even though all employee accepted the change and were duly notified and remain happy with what happened, this slip up - equivalent to a very small one clause change - has cost the company a six figure sum in contributions plus lawyers fee up to counsel level- and it's a very small company of fifteen people.
They are still working away to pay for this error dating back a decade or two and sadly, I doubt the cost will even be noticed by the extra benefit in their pensions since some of it will accrue to employees who left the company years ago.

So, pensions can be a nightmare if they go wrong.

[Alaric]

You'd probably find a host of difficulties with that idea which would keep lawyers busy for another few years

It shouldn't be that difficult, governments willing, to run a scheme offering 1/240th of salary for each year of service plus a contributions based scheme alongside

It still runs into the problem that to guarantee the benefits requires investing at a return of between 1% and 2% and as you rightly observe can leave the Company still paying for employees who left decades earlier. Perhaps you also have to make the leaving service benefit a compulsory transfer value.

[Lootman]

It still runs into the problem that to guarantee the benefits requires investing at a return of between 1% and 2% and as you rightly observe can leave the Company still paying for employees who left decades earlier. Perhaps you also have to make the leaving service benefit a compulsory transfer value.

Well, maybe benefits should not be "guaranteed" given that nothing else in life is assured?

And maybe employees should just make their own provisions in return for being paid a little extra, and in return the employer takes itself out of the welfare business?

[Arborbridge]

Well, maybe benefits should not be "guaranteed" given that nothing else in life is assured?

And maybe employees should just make their own provisions in return for being paid a little extra, and in return the employer takes itself out of the welfare business?

How 19thC of you
The pension contribution is part of a person's pay structure, part of their total salary - and it wouldn't be "a little" extra but worth quite a lottle. So aren't you therefore, in practice, advocating a significant pay cut? And would this apply equally to owners and Directors of those businesses?

Arb.

[Lootman]

The pension contribution is part of a person's pay structure, part of their total salary - and it wouldn't be "a little" extra but worth quite a lottle. So aren't you therefore, in practice, advocating a significant pay cut? And would this apply equally to owners and Directors of those businesses?

I feel sure that some workers feel that way, for rather obvious and self-serving reasons. We mostly see that in the public sector and maybe, in a sense, BT workers still have that mindset.

But as an "owner" of such businesses I do not really want to be in the welfare business, and feel that employees should accept economic reality. That said, if they are willing to be fired in significant numbers so that the older employees can preserve some of their precious pensions, then maybe that is their choice?

[Bouleversee]

Well, maybe benefits should not be "guaranteed" given that nothing else in life is assured?

And maybe employees should just make their own provisions in return for being paid a little extra, and in return the employer takes itself out of the welfare business?

How 19thC of you
The pension contribution is part of a person's pay structure, part of their total salary - and it wouldn't be "a little" extra but worth quite a lottle. So aren't you therefore, in practice, advocating a significant pay cut? And would this apply equally to owners and Directors of those businesses?

Arb.

Not every company offered a pension scheme; I worked for several which didn't and even if you did join one, if you changed jobs you had to jack it in as they weren't portable in my day, or you had to be there for at least 2 years before you could join and that would be when I'd be switching jobs. Even now, we have legions of self-employed who haven't got pensions, usually because they can't afford them or are just too busy trying to make a profit to have time to think about them. Lord knows what will happen when that lot reach retirement age.

[Alaric]

Even now, we have legions of self-employed who haven't got pensions, usually because they can't afford them or are just too busy trying to make a profit to have time to think about them. Lord knows what will happen when that lot reach retirement age.

If they've accumulated personal wealth, they are probably OK. Personal Pensions are just a government sponsored tax incentive to doing that.

[AleisterCrowley]

The pension contribution is part of a person's pay structure, part of their total salary - and it wouldn't be "a little" extra but worth quite a lottle. So aren't you therefore, in practice, advocating a significant pay cut? And would this apply equally to owners and Directors of those businesses?

I feel sure that some workers feel that way, for rather obvious and self-serving reasons. We mostly see that in the public sector and maybe, in a sense, BT workers still have that mindset.

But as an "owner" of such businesses I do not really want to be in the welfare business, and feel that employees should accept economic reality. That said, if they are willing to be fired in significant numbers so that the older employees can preserve some of their precious pensions, then maybe that is their choice?

A pension IS part of the total salary package- people will have taken the pension into account when deciding what jobs to go into etc
A pension is absolutely NOT 'welfare '
I feel sure that some workers feel that way, for rather obvious and self-serving reasons
Is maximising your total future income for yourself and your dependents 'self serving' ? - I guess it is in the literal sense, but have you not done the same??
I've noticed most senior managers seem to do 'quite alright' in pension terms, even when they've been total screw-ups, destroying value in the businesses they've run. Poor old 'Sir' Fred Goodwin, struggling along on his £500k ...

[Lootman]

A pension IS part of the total salary package- people will have taken the pension into account when deciding what jobs to go into etc. A pension is absolutely NOT 'welfare '

As a shareholder, I'd prefer to pay someone what they are worth and leave their retirement security to themselves.

In the UK nobody makes healthcare an employer responsibility. So why pensions?

[AleisterCrowley]

We'll you'd have to pay them more, as some pensions are a significant part of the total package

[Lootman]

We'll you'd have to pay them more, as some pensions are a significant part of the total package

I'd be happy to pay a retiree the annual value of the company's pension contributions, and then let the worker take on the risk of their retirement. It is the open-ended obligation that is the problem

And don't even get me started on the massive black hole of the public sector pension liability.

[Arborbridge]

We'll you'd have to pay them more, as some pensions are a significant part of the total package

I'd be happy to pay a retiree the annual value of the company's pension contributions, and then let the worker take on the risk of their retirement. It is the open-ended obligation that is the problem

That's precisely what has happened in recent years with the sad demise of final salary schemes. The burden and risk has been shifted from the employer to the employee, so you have your wish granted. But in my view this is ethically wrong: my belief is that risks in society should be carried by those with the biggest shoulders: this is certainly not poorly paid (or even well paid) individuals, but companies and governments. It is in the long term interests of the latter two parties to reward people fairly in their working lives and in retirement.
It's extraordinary that employers and owners have this dreadful feeling of entitlement (for example to be "compensated" for turning up at the office) yet resent any push back towards fair play by employees: and I speak as an employer of many years practice.
I'd prefer a collegaite approach to problems for mutual benefit, not the self serving naked greed of many employers we see in our top companies where the remuneration ratio from top to bottom is completely our of hand, totally unjustified and hell bent on social disaster.

And you won't be surprised I agree with everything Alerister Crowley wrote below.

The passing of decent employers offering decent pensions is another facet of the race to the bottom which we discussed a few days ago, concerning the debasement of society. In the earlier case it was our desire always to buy the cheapest products without appreciating that this leads to erosion of the quality of all our lives. It is indeed a wretched epoch we are in when employers who offer decent retirement for loyal service (such as Marks, BT, Boots and the other earlier pioneers) can no longer function competitively. It is one more unacceptable face of capitalism, in my view.

There's no point in continuing with this conversation which is in any case now severely OT since we will never agree: we are, sadly, too far apart.

Arb.

[nk104]

Of course it isn’t ‘totally lost’. It means there will be no future accrual in the pension scheme.

If you don’t understand the protections for defined benefit pension accrual then I suggest you find out. The company still has to pay the pension as accrued under the rules.

[LadyGagarin]

Way back I worked for BT for a while. Believe I was in their B scheme and that that pension would become payable when I reach age 60. Does this mean that pension is now lost? Seem to remember reading that it transitioned from being government backed to not being so. Now if totally lost !!!! No incentive for anyone to pay into any pension scheme, not even a apparent government assured one.

The linked article states "Benefits accrued in the BTPS for service prior to 1 June 2018 remain preserved" so no, you won't totally lose the benefit of your contributions - it seems to be saying it is just any future contributions that will go into the new scheme.