Joint union platform calls for a structural overhaul of pensions legislation

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In October 1998, seven of Luxembourg's main private sector trade unions formed a joint platform and submitted demands for an improved statutory pension scheme. Their proposals are based on a convergence of the private and public sector pension schemes, and they argue for structural improvements to the private sector scheme. The unions' claims have been vigorously opposed by the employers.

The Luxembourg pensions system is divided into two parts, the general basic "common law" scheme which applies to the private sector, and the more favourable public sector scheme. Private sector trade unions have long sought a convergence of the systems, calling for structural improvements to the general scheme, to result in provisions equivalent to the public sector scheme. In October 1997, the government submitted draft legislation that sought to reform private sector pensions. However, the proposals made no reference to structural reforms, and confined their attentions to specific changes and the introduction of a two-tier system of disability pensions (LU9711121F). Meanwhile, a draft law reducing the pensions of civil servants and state employees was passed on 21 July 1998, in the face of fierce resistance from public sector trade unions (LU9808173F).

Seven of the leading trade unions in the private sector organised a platform on 5 October 1998 with a view to submitting joint demands on pensions to the government. The seven unions involved are: the Luxembourg Confederation of Independent Trade Unions (Onofhängege Gewerkschafts-Bond Lëtzebuerg, OGB-L); the Luxembourg Confederation of Christian Trade Unions (Lëtzebuerger Chrëschtleche Gewerkschafts-Bond, LCGB); the non-aligned craftworkers' union, Neutral Gewerkschaft Lëtzebuerg (NGL); the Confederation of Private Sector White-Collar Employees (Confédération des Employés Privés, CEP), the Luxembourg Printing Workers' Federation (Fédération Luxembourgeoise des Travailleurs du Livre, FLTL); the National Federation of Railway and Transport Workers (Fédération Nationale des Cheminots, Travailleurs du Transport, Fonctionnaires et Employés Luxembourgeois, FNCTTFEL); and the Christian Transport Workers' Federation (Fédération Chrétienne du Personnel du Transport, FCPT). The details of the unions' joint demands were notified on 23 October 1998 after many weeks of talks. The unions argue that convergence between the public sector and private sector pension schemes must not be achieved by reducing the value of the former, but by uprating the latter.

The joint platform

The unions say that "uprating pensions is essential and financially viable". In the absence of any agreement on how private sector pensions might be increased, they propose that scheme members be asked to choose between two formulae:

• the solution put forward by OGB-L and NGL involves a linear pensions increase of 7%, with an overall monthly improvement of LUF 971 (for a full pension after 40 years' contributions); or

• by contrast, LCGB proposes keeping the current calculation method, but topping up the pension by means of an additional premium which could allow for a pension equal to up to 75% of average salary during the final 10 years of employment. This additional premium could be gradually adjusted by a small reduction in income as the employee stops work and takes retirement.

As well as increases in the levels of pensions. the joint claim proposes:

• including periods of study and vocational training between the ages of 18 and 21 as years of employment for pension purposes. This could have the effect of giving some employees a pension entitlement at the age of 57;

• early retirement at 55 for people who have been employed in arduous work, such as night work and road transport;

• the possibility of early retirement at 55 for all employees, though with a lower level of benefits; and

• raising the amount of pay subject to pension contributions from five times the amount of the statutory minimum wage - currently LUF 231,375 per month (allowing a maximum pension of LUF 183,920) - to six times the level of the minimum wage - LUF 277,650.

A supplementary list of demands and proposals was due be presented at a meeting with the government on 3 November 1998. All the unions want to keep the current system of funding, and have left it to the government to set up a working group charged with the task "of finding the additional financial resources needed to pay for the requested uprating".

The employers' position

The employers grouped in the "Employers' Liaison Committee" (Comité de liaison patronal) argue that the unions' demands are a serious threat both to the financial stability of the private sector pension insurance scheme and to its long-term survival.

Meeting these demands, the employers claim, would quickly absorb the scheme's accumulated reserves, and would raise the possibility of higher contributions in the medium term. Present and future generations, it is claimed, will certainly not be prepared to accept deductions that could be as high as half their incomes, just to meet the obligations imposed by their elders.

The Committee points out that under the current scheme, pension amounts follow real movements in the economy and in the wages and benefits paid to active workers. If pensions were raised structurally at the present time, it would mean that pensioners would benefit from a unilateral redistribution of resources.

For the employers, the unions' proposal to find other sources of funding and the demand to raise the contribution ceiling is a perfect illustration of their allegedly inconsistent approach; it would trigger an increase in compulsory deductions and a cut in disposable income. Any attempt to bring about a convergence of the private and public sector pension schemes by raising private sector benefits to public sector levels would, it is claimed, be a dangerous approach bordering on irresponsibility. It would also involve raising social charges, thereby jeopardising the competitiveness of the country's enterprises.

The Employers' Liaison Committee believes that any attempt to achieve convergence of the private and public sector schemes would be quite unrealistic. If convergence must be achieved, it should involve further adaptation of public sector pensions, which should be calculated on the basis of average career earnings and not final salary. The Committee also wants the government and the political parties to take a "responsible" position in the face of the unions' "inordinate" demands, and thereby not make the precarious financial situation of the state pension scheme any worse.

Commentary

The government has been very clear about its opposition to structural changes in the pension scheme, but the unions were resolved to have their say on 3 November 1998. With the next general elections scheduled for June 1999, the position of the parties in the current parliamentary majority, which have close links with the two main unions involved in the pensions campaign, does not appear to be cast in stone. (Marc Feyereisen, ITM)