Commonwealth War Graves Commission: Pension Fund — House of Commons, 2016-02-29
Topic: Labor
Christopher Charles Stephens (Scottish National Party, Centre-left): I thank my hon. Friend for that intervention, and I shall come on to say more about the position of the scheme The news of the closure of the final salary scheme has come as a terrible shock to long-serving staff, with more than 50% of those affected within 10 years of normal retirement age, leaving little time to readjust. For some, that has meant completely changing retirement plans as they can no longer afford to retire or as key assumptions such as being able to pay off a mortgage are no longer the case. Staff feel betrayed that what was promised to them for years is suddenly being snatched away Let us consider the financial position. In the commission’s statement of accounts of March 2014, the key numbers show a surplus of £1.4 million on income of £67 million, with balance sheet reserves up from £4.3 million to £7.2 million and net current assets up from £1.5 million to £2.2 million. The balance sheet shows an improvement in reserves of £2.9 million, due largely to the improvement of £2.6 million in the pension deficit from £8.3 million to £5.7 million. In its 2015 accounts, the position had changed. The balance sheet showed a deficit of £6.1 million, having been in surplus by £6.7 million in March 2014. The reason was a sharp increase in the deficit shown in the pension scheme, a deterioration of £13 million in the year, taking the deficit to £18.6 million. The background is the effect of the recent three-yearly valuation, which reflected a collapse in the forecast interest rates for the pension fund investments My first question to the Minister is: what investments resulted in this change from 2014 to 2015? Despite the commission announcing its intention to close the pension scheme in December 2014, formal consultation with the three trade unions representing staff at the commission—PCS, Prospect and Unite—did not start until June 2015. During the consultation period, the trade unions took a reasoned and helpful approach, proposing numerous alternatives in an attempt to find a solution that both recognised the financial position of the commission and mitigated the most detrimental effects on staff. However, the commission rejected all the proposals, remaining resolute on closing the final salary scheme and moving to a defined contribution scheme Proposals were numerous and wide reaching and included increasing member contributions to enable the scheme to stay open. The initial proposal put forward by the trade union side, a proposal that directly addressed the commission’s concerns about the pension scheme deficit and about future risk in the scheme, was as follows. First, it proposed a cap on pensionable earnings for future service with effect from 1 April 2016, which would immediately address the pension scheme deficit by enabling a downward revision of the actuarial costs of the scheme. Secondly, it proposed to increase member contributions from 1.5% to 5%, phased in over the next two years. Thirdly, it suggested that the decision on the closure of the scheme should be postponed for three years, linked to a further valuation of the scheme during 2018. That would enable a considered and measured review of the scheme’s funding, taking account of the previous two proposed measures, both of which would have a positive impact on past service deficit and future service costs. These proposals were rejected almost immediately, with no costing done by the commission, leading the trade unions to believe that the consultation was hollow and the commission was intent on closing the final salary scheme regardless The final proposal from the trade unions was the option of CWGC UK-based staff transferring to the civil service Alpha pension scheme, as provided for under the Cabinet Office’s new fair deal. We are aware that many scheduled bodies including English Heritage, the Churches Conservation Trust, the Royal Botanic Gardens, the Imperial War Museum and the British Council have been permitted to join the new civil service pension scheme.