New union proposal on ITV pensions
ITV wants to save cash behind the scenes by cutting pension bills
BECTU, Amicus, and NUJ, have tabled concessions over pension scheme changes in a bid to resolve a looming dispute.
ITV has been in discussion with the unions over cuts in pension benefits for staff, aimed at saving £10 million a year on the company's payments into the scheme.
The proposals, rejected by unions, included an increase in employee contributions to 7% of salary, retirement at 63 instead, and a reduction in the rate at which pension entitlement builds up each year (accrual rate).
ITV also proposed that pensions would be based on the average salary that staff earn during their career, rather than their final salary at the point of retirement.
In a counter-proposal tabled this week, the unions have said that, provided the company withdrew the plan for career-average pensions, they would be willing to accept increase in retirement ages and staff contributions to the scheme, along with a reduced accrual rate.
Official are now waiting for ITV to respond, most likely on February 10, when a formal consultation over the company's original proposals will close.
Managers are under pressure from the unions, with strike action likely if no agreement is reached on the pension changes.
Staff in ITV, many of whom have made decades of payments into the pension scheme, have gone through several rounds of redundancies in recent years, and had to accept a pay rise below inflation in January 2007.
ITV's pension scheme has a deficit in assets compared to liabilities of £205 million, despite injections of extra cash from the company.
The formal proposal from the unions to ITV is found below, as is BECTU's letters to members in the company.
Letter to ITV's Director of HR
29 January 2007
Dear Philippa Hurd
Further to the meeting the joint unions held with Sue Slee and other management colleagues on 16 January regarding proposed changes to the ITV pension scheme, we have today held a meeting of ITV unions. All representatives at that meeting emphasised their concerns about what is perceived as a further reduction in employees' benefits. Bearing in mind the redundancies which have taken place continuously in recent years, and a below inflation pay increase on 1 January, it was difficult to get members to agree that they should pay additional contributions to the final salary pension scheme but receive worse benefits than they are currently getting.
However, after an extremely long discussion I am writing to you with a proposal on behalf of the ITV unions. This proposal is by far the best I will be able to deliver and I hope that the company will be able to accept this as a way forward in addressing your ongoing concerns with the pension scheme.
At our meeting on 16 January your management colleagues stated that the company wished to reduce its employer contributions by approximately £10m per year. In order to do this they proposed four changes:
- that the employees' contributions would go up from 5% to 7%
- that the retirement age would be harmonised at 63
- that the accrual rate would be 60ths from the current 50ths
- that the scheme would move to career average
I indicated at this meeting that we would not be prepared to recommend any solution which involved career average and this remains our position. I am equally aware that a further triennial review is due in 2008 and even though I am confident that there will be issues from that review which we will jointly need to address, as part of this proposal I would like an assurance that the issue of career average will not be one of those issues to be discussed, and therefore at the earliest career average should not re-appear as an item for discussion before the 2011 triennial review.
When we discussed the proposals at the meeting on 16 January Sue Slee and the management team made the point that under all the options the joint unions were looking at there was no detriment to members of the Carlton/Central schemes. I believe that the proposal outlined below addresses this issue:
Joint unions proposal
- we accept that the accrual rates from April 2007 will be 60ths
- we accept that the retirement age will be 63
- we would agree reluctantly that the employees' contribution would go up by an additional 3% ie to 8%. However, we would like this 3% to be phased in at 1% a year.
As you know members of the Carlton/Central scheme already pay 7%.
In return for the three items mentioned above the management's proposal on career average would be withdrawn and as stated earlier would not be re-tabled before the 2011 triennial review.
By my calculations the above proposal contributes in excess of £7m to the £10m the company was aiming to achieve. I believe that to most employers this would be seen as an exceptionally good contribution on behalf of the employees. The joint unions would be happy to meet with you to discuss these proposals if you felt this was worthwhile. However, I need to reiterate that this is our best propposal and if the company persists with the proposal of career average the joint unions' officials are mandated to take whatever action is necessary in order to oppose such a move.
I look forward to hearing from you at your earliest convenience.
Gerry Morrissey
Letter to BECTU members in ITV
Dear BECTU Member
ITV Final Salary Scheme
We write to you further to the consultations started by the company on the future funding of the ITV final salary pension scheme. BECTU, together with colleagues in Amicus and the NUJ, have had two meetings with the company to discuss their proposals. The most recent of these took place on 16 January 2007.
The company is seeking to save approximately £10 million per year on its future contributions to the scheme out of a current annual spend of £22 million; as at the end of December 2006, 1805 members across the company are participating (ie paying) members of the scheme out of a total ITV staff of more than 5500. Some 600 staff are members of the defined contribution scheme (DC) and are not affected by the current consultations.
Scarcely a day goes buy when the media is not covering developments in company final salary pension schemes. Pension holidays in the 80s and 90s, poor stock market performance, government policy and the fact that we are living longer - meaning that final salary pensions in payment have to be paid out for longer - have together caused the current difficulties. The company's bid to save money on its future funding of the scheme, is separate from its obligations to correct the scheme deficit; in 2006 the company identified funds of more than £205 million to go towards addressing the deficit.
In order to achieve its targeted cut in annual employer's contributions the company wants to:
- Increase employee contributions to 7%
- Cut the accrual rate from 1/50th to 1/60th of salary for each year of scheme membership
- Set a new pension age of 63
- Pay pensions based on career average earnings rather than final salary.
Nb: members in the Carlton section of the scheme currently pay 7% employee contributions, already accrue pension on the basis of 60ths and have a retirement age of 65.
In light of the significant value and benefits associated with the continued operation of the final salary scheme, the joint unions have arrived at a position where they would recommend to members acceptance of the proposed changes to employee contributions, the accrual rate and the pension age. Whilst this means that scheme members will be paying more for a reduced provision in respect of their future accrued benefits, we believe that this would be a reasonable step to take given the overall importance of the final salary scheme. It is also clear to us that if we do not compromise, management will offer you a choice of all the proposed changes, including an increase in employee contributions, or alternatively offer you the opportunity to retain current benefits with a price tag of 19% employee contributions. The latter position would represent no choice at all, as few, if any of the scheme members, would be able to afford such a increase in employee contributions. We therefore take the view that our compromise proposal is the best way forward.
We have advised the company of the counter-proposal endorsed by delegates to ITV Unions last week. Please see the enclosed letter to Group HR Director Philippa Hird which sets out our position in full. What the joint unions are opposed to is any introduction of career average revalued earnings (CARE) as a means of calculating future pension entitlement; our proposal is conditional on the management's withdrawal of this aspect of their proposal. "CARE" would substantially reduce the value of staff pensions and in effect change the whole basis of the final salary scheme. By signalling to the company that we are as joint unions prepared to make this recommendation to our members, we are indicating a willingness to accept that the employer will cut its costs by £6 - 7 million a year. We believe that this is a reasonable position to take in all the circumstances.
Company consultation on the proposed changes ends on 10 February 2007. At that point the company will confirm to BECTU, and to its colleagues in the joint unions, whether our compromise proposal is acceptable. A further meeting may be held. If there is no agreement at that stage, and particularly if management insist on moving away from final salary payments to career averaging, then it is the intention of the joint unions to ballot their members for industrial action.
In the meantime we urge you to pursue the company pensions department for any questions you may have which remain unanswered, to attend any pensions clinics yet to take place and to contact us with any queries you have regarding the position adopted by BECTU. For ease, please email any queries to [email protected].
We will contact you again when we are clear on management's response to our proposal.
Yours sincerely
Gerry Morrissey
Assistant General Secretary
Sharon Elliott
Supervisory Official