Rising conflict over private sector pensions

Strikes at Unilever in December 2011 and January 2012 have highlighted the contentious issue of occupational pensions in the UK private sector. Private pension coverage has declined dramatically from a high of 12.2 million in 1967 to 3 million in 2010. Many employers still providing pensions have switched from defined benenfit schemes to less generous defined contribution schemes. This has led to industrial action at several large companies, such as the BBC and the AA.

Decline of private sector pensions

One of the highest-profile current issues in UK industrial relations is widespread trade union opposition to government changes to public sector occupational pension (OP) schemes, including a national one-day strike held on 30 November 2011 (UK1112029I). However, the OP issue is also increasingly contentious in the private sector, where provision is much less extensive and generous than in the public sector.

According to the Occupational Pension Schemes Survey 2010 published by the Office for National Statistics (ONS), total active membership of OP schemes peaked in the UK at 12.2 million people in 1967, dropping to 8.3 million in 2010. Public sector membership rose over this period but private sector active membership, which stood at 8.1 million in 1967, fell sharply to 5.7 million in 2000, 3.3 million in 2009 and 3 million in 2010. A key factor in the decline in private OP provision has been rising costs for employers.

Less generous schemes

Along with the overall decline of private sector OP provision, the nature of schemes provided has changed. Employers have increasingly shifted from more generous defined-benefit (DB) schemes to less costly defined-contribution (DC) schemes. According to the ONS, the number of active members of DB schemes declined from 2.6 million in 2008 to 2.1 million in 2010. Further, many remaining schemes have been closed to new members and there were only one million active members of open DB schemes in 2010.

Benefits under DB schemes were traditionally based on the employee’s final salary. However, many final-salary schemes have been closed (UK1004029I) and, where replaced by new DB schemes, these have been based on career-average earnings or another less generous arrangement. The 2011 Pension trends survey (2.14Mb PDF) published by the Association of Consulting Actuaries (ACA) found that 91% of existing final-salary schemes have been closed to new entrants and, of these, 37% are also now closed to future accruals by existing employees. This trend, and especially closure to future accruals, has accelerated since 2003.

Trade union opposition

Trade unions oppose the closure of pension schemes, and of switches from DB to DC schemes, or from final-salary to other arrangements. While industrial action over the issue was previously virtually unknown, since the early 2000s there have been a number of disputes and sometimes strikes over OP changes, at companies such as Caparo (engineering) (UK0301109F), INEOS (chemicals) (UK0806029I), Fujitsu (IT) (UK0909059I) the AA (breakdown cover), AstraZeneca (pharmaceuticals) and the BBC (broadcasting) (UK1101039I). Although no comprehensive data are available, there is evidence that pensions are becoming an increasing source of labour disputes (UK1109029I).

A current dispute at the Unilever consumer goods group has highlighted many of the issues related to private sector OP schemes. It involves some of the largest-scale private sector industrial action over pensions ever seen in the UK.

Strike at Unilever

Unilever, which has 7,500 employees in the UK, closed its final-salary DB scheme to new entrants in 2008. In April 2011, it announced that it would close the scheme to future accruals by the 5,000 active members and replace it with a career-average DB scheme. Consultations with unions over the changes, which are due to be introduced in July 2012, broke down in October 2011.

Three unions – the Unite and GMB general unions and the Union of Shop, Distributive and Allied Workers ( Usdaw) – have a total of around 2,500 members at Unilever. They claim that the company has broken earlier promises to keep the final-salary scheme open to existing members. The unions argue that the changes will cut many employees’ retirement income by an average of 20%, and up to 40% in some cases. They also state that Unilever is performing well financially and can afford to maintain the current pension scheme.

The unions held a 24-hour strike at Unilever on 9 December 2011, and on 18 January 2012 launched an 11-day series of rolling strikes at specific sites. Unilever had never previously experienced strike action in the UK. The unions claim that management has refused to hold further negotiations.

Unilever has stated:

Making these changes was a tough but necessary choice which reflects the realities of rising life expectancy and increased market volatility. We believe the provision of final-salary pensions is a broken model which is no longer appropriate for Unilever.

It argues that the new scheme is ‘exceptionally competitive’. The company claims that unions ‘had multiple opportunities to help shape’ the final outcome of the changes but ‘decided to walk away from talks’.

Mark Carley, IRRU/SPIRE Associates

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment