The government’s green paper on the security and sustainability of defined benefit pension schemes shows there is no coherent, long-term policy for tackling the challenges facing occupational pensions provision, Prospect union warned today. Comment from Prospect union deputy general secretary Dai Hudd.

The paper also fails to deal with the underlying problems for defined benefit schemes – the method used for calculating deficits. These are based on bonds and gilts and can often lead to overestimates of the actual deficits, resulting in knee-jerk decisions and increased pressure on businesses. Prospect union deputy general secretary Dai Hudd called for a reassessment of the methods used to assess schemes’ liabilities to more properly reflect the long-term nature of the financial commitments pensions schemes need to make. Although recent changes made by the Pensions Regulator are welcome, they have not gone far enough.

Speaking on behalf of 140,000 professionals, managers and specialists across the private and public sectors, Hudd said: “There is no new thinking in this green paper. We challenge the simplistic notion that changing the indexation of some pensions currently in payment from RPI to CPI will improve the medium to long-term funding of schemes or future occupational pensions provision. “These employers are likely to see this as a neat way of reducing their costs and are unlikely to redirect any savings into future pensions provision. At a time when large employers pay £5 in dividends to shareholders for every £1 paid in to the occupational pension scheme, we have little confidence that any changes will create sustainable improvements in the funding of such schemes.”

Hudd also said that the green paper’s proposal to reverse the principle enshrined in law that accrued pension rights are protected will be fiercely opposed. The important principle that only members can consent to changes should not be diluted. The green paper says that recently-introduced defined contribution schemes are “more affordable”. But evidence shows that employer contributions to these schemes have been falling. “Government, employers and trade unions need to work together to create a pensions system that is fair, flexible, secure and sustainable,” Hudd concluded.