7 May 2013
TSSA attended a consultation meeting with Balfour Beatty to discuss their proposal to close the above pension scheme to current members of the fund.
The company said the cost of the pension scheme had increased from 11% of pay ten years ago to 23% of pay in 2013, with future benefits costing the employee and employer an extra 5% and 18.2% respectively. Lowering the accrual rate would result in savings of £11 million for the company. It became apparent during the discussions that the 23% figure was an estimate and was not based on a full actuarial valuation, though the company said they were confident this figure was correct.
The trade union suggestion to lower the accrual rate from 1/55ths to 1/100ths was declined. The company accepted this change would save them c11%. However, it did not address risk control that was of major concern to them. This change will affect 2,753 Balfour Beatty employees – including 450 in the Rail Division. They said the existing Defined Benefit Scheme, which was closed in 2002 to new members, will still increase pensions in line with inflation.
They went on to emphasise that all existing Balfour Beatty Defined Benefit Scheme members will be invited to join the Balfour Beatty Defined Contribution Scheme with the ‘pots’ from both schemes added together at retirement. Balfour Beatty estimated 40% would be better off, but of course 60% would not. The company could not tell us which groups of employees fell into which category – better or worse off. The trade unions asked the company to consider increasing its contribution rate to the Defined Contribution scheme and we await a response on this point.
There is also the extremely important employment contractual side of this change to consider. The BB Defined Benefit Scheme is a contractual term specified in employees’ contracts. The company will, therefore, write to individuals offering the new scheme and inviting them to sign a new contract. Those not willing to do so will have their contracts terminated in September and a new one imposed on them, which will give them continuity of service. TSSA is looking at the legality of this and will issue further advice in due course.