Open Letter to George Osbourn re Pensions Uprating and CPI

Dear Chancellor

I am writing regarding the continuing speculation about changes to the uprating of pensions and state benefits.

I am concerned about the possibility that the Treasury may increase benefits and pensions by less than the full 5.2% annual increase in CPI inflation; a move which would have a significant impact on my income and my ability to meet the rising costs of living.

I urge you to consider that trying to balance the books by punishing further some of the poorest in our society through a lower than inflation rise in pensions and benefits would be both unfair, unacceptable and downright immoral, considering that you and your Government have already changed the method of calculation for the up-rating of pensions and benefits from RPI to CPI which disadvantaged those of the population that are in receipt of pensions and/or benefits.

It now clearly appears that, you are not content with making one cut into the income of the people I have mentioned but, are intent on delivering a double-whammy by moving the goalposts once again.

One question – why don’t you apply the same criteria to the banks, bank managers and the bonuses of the financiers in the City of London – that I have already contributed towards bailing out of the quagmire they landed this country in ?

RPI v CPI Indexation of Pensions

Prospect is (with others)  initiating a judicial review of the government’s announcement that from now on the Consumer Prices index (CPI) would be used as the measure for up-rating many pensions, replacing the Retail Prices Index (RPI).

Prospect has produced a short YouTube video about this, which is embedded here.

European Commission Ruling on BT Pensions

The European Commission has ruled that the Crown Guarantee underpinning BT pensions is, to a very limited extent, contrary to European competition rules. This finding is very limited – it finds only that this gives BT a slight commercial advantage over its competitors as the Crown Guarantee limits BT’s obligation to pay a full levy to the UK Pension Protection Fund. BT will now have to pay PPF Levy payments in full. 

The Commission has also confirmed that since the Crown Guarantee itself brings no other advantage to BT and the guarantee benefits BT employees rather than the company itself, that the guarantee is not in breach of EC competition rules. The Crown Guarantee will therefore continue. 

This story is being reported in today’s press, and Connect will update you of any developments.

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Pensions Awareness – towards a happy and secure old age

It’s not just about retirement

As people live longer, and the law against age discrimination makes it possible for older workers to stay in employment, the experts predict that more and more people will be continuing in paid work for longer. But this doesn’t mean that pensions are less important – on the contrary.

To start with, the decision to work beyond the age we normally associate with retirement should be in the hands of the individual person, and that can only happen if people have real financial alternatives. In addition, and partly related to the kind of work involved, advancing age can present health issues which prevent people from working, or make it preferable to work fewer hours – in these circumstances, people need enough financial security to be able to step back from work at a time and in a way which suits them.

Occupational pensions – still a good deal

Many companies where Connect members work have their own pension schemes, which are funded by the employee and the employer jointly. Anyone who started work at a company with a pension scheme before 1987 will have been enrolled into the scheme automatically and will probably have continued in some pension plan, even if they have moved company. But since then, pension scheme membership has been optional, and so much publicity has been given to pension schemes in difficulty in recent years that there’s a real danger of younger people opting out and therefore losing the potential advantages of being in their employers’ pension schemes.

Employees who join occupational pension schemes typically benefit not only from the additional funding put in by the employer, but also from avoiding or sharing the costs of fund management and investment advice and from the advantages of scale which come from being part of a larger total investment fund.

Campaigning for better pensions

Connect has been at the forefront of campaigning for better state pension arrangements in the UK, and for occupational schemes which will generate pension incomes which allow people to have a good standard of living in later life. A number of Connect members also give their time voluntarily to be trustees of their own pension schemes, to safeguard their colleagues against the problems which have arisen in those schemes which make the news.

One critical point where Connect believes there should be improvement is in many defined contribution (DC) schemes, where minimum contributions are set too low to have any realistic prospect of yielding a good pension and where employer contributions are typically much lower than in more traditional pension schemes. Connect is arguing for changes which would give people in DC schemes more certainty and security about the pension they will eventually receive. Connect is also campaigning to make it easier for younger workers to get into pensions, through imaginative measures such as flexing pension contributions over time and off-setting pension costs with deferral of student debt repayments.

You can see Connect’s latest submissions to the government’s continuing review of pensions at http://www.connectuk.org/connect_public/default.asp?id=1226. Where Connect has negotiating rights, the union is also pressing companies to ensure sufficient funding of employees’ pension arrangements.

Weblinks:

http://www.pensionsadvisoryservice@connectuk.org <http://www.pensionsadvisoryservice@connectuk.org/>

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/PensionsAndRetirement/index.htm <http://www.direct.gov.uk/en/MoneyTaxAndBenefits/PensionsAndRetirement/index.htm>

http://www.worksmart.org.uk/pensionsdoctor <http://www.worksmart.org.uk/pensionsdoctor>  (brief registration required)

Don’t forget to tell us if your contact details change or if you change where you work: http://www.connectuk.org/update

Asking members to join helps us have a greater impact. People can join online any time at http://www.connectuk.org/join

Taxation of Newstart payments for those who left BT and went straight into retirement

Taxation of Newstart payments for those who left BT and went straight into retirement

If you left BT under the Newstart scheme in the period March 2001 to December 2007 and were taxed in full on your Newstart leaver payment, then you should find the following information to your benefit.

HMRC (HM Revenue & Customs) has reviewed its approach to the taxation of leaver payments in respect of those who took Newstart and then went straight into retirement. The approach that has been applied since 2001 is that the Newstart leaver payments of those leaving BT and going straight into retirement have been taxed in full (whereas those who do not go into retirement straight away have the first £30,000 of their leaver payment paid tax-free). If this situation applies to you, this review therefore means that you may be able to reclaim the tax paid on the first £30,000 of your Newstart leaver payment.

BT has been informed of HMRC’s decision to review its approach and BT has identified from its own records all those BT Pensioners who have been taxed in full on their Newstart leaver payments. It has passed these details on to HMRC. BT is writing to all those affected, advising them of the change of approach and informing them that HMRC will be contacting them directly by the end of April 2008. In the meantime, individuals in this situation need take no further action until the receipt of the letter from HMRC.

We understand that HMRC may pay a ‘repayment supplement’ to individuals in respect of interest on the sums refunded. We are also aware that individuals seeking a reclaim of tax from HMRC usually must do so within five years of the end of the tax year relating to the sums being reclaimed; as far as we are concerned, HMRC’s new approach affects all those leaving on Newstart terms and going straight into retirement since 2001 and that no-one therefore should be refused a rebate on the grounds that they are out of time. Refunds of tax in this situation would appear also to encompass those who have died in retirement and whose estate should thus benefit from any refund which is available.

Connect notes from BT’s letter that BT is not able to provide any further information. Connect is in the same position and cannot supply any further details. Furthermore, we regard that taxation is between the individual and HMRC, and is not something on which Connect can provide advice or representation. The taxation of BT pensions is handled by:

HMRC North Wales Area Compliance
Plas Gororau
Ellice Way
Wrexham Technology Park
WREHAM
LL13 7YY

Individuals should therefore deal directly with the HMRC tax office in Wrexham in this respect. If you are in this situation and have not heard from HMRC by the beginning of May, you should contact HMRC directly.

We should reiterate that the only people affected by this change of approach are those who have left BT on Newstart and who went straight into retirement (i.e. those who drew their BTPS pension immediately on leaving BT). The vast majority of Newstart leavers will not have drawn their pensions immediately; they will thus have received the first £30,000 of their Newstart leaver payment tax-free and will not be entitled to any further refund.

Finally, Connect would like to pay tribute to the work of the group of BT Pensioners who, by their dogged pursuit of this issue over the past 6 years, have brought about this review of HMRC’s approach to the taxation of Newstart leaver payments.