British employers 'broke pensions promise'

British companies have broken their promise to share the pensions burden with workers, a senior union leader claims today.

TUC general secretary Brendan Barber is telling a conference that the pensions crisis has been “devastating” for workers and has shaken the public’s faith in the system.

He will tell the CBI-organised event that the commitment of employers to good occupational pension schemes has been on the wane for some time.

Employers used surpluses in pension schemes to take contributions holidays and reductions worth £18.15bn (€26.1bn) between 1988 and 2003 and were refunded a further £1.2bn (€1.7bn), according to Mr Barber.

“But, the argument ran, if things became tight, the employer would fulfil their part of the bargain and keep the scheme going. There was an implicit promise that employers would do the right thing.

“This promise has been broken. Rather than shoulder the burden of investment risk as they had promised, many employers decided they wanted to get shot of it once and for all.”

Mr Barber said one in four final salary schemes closed last year, with half of the UK’s bigger employers no longer offering these schemes to new entrants.

“Thousands of employees are being shifted into riskier schemes which may not suit their needs, while at the same time employers are significantly cutting back the amount they contribute.”

Work and Pensions Secretary Alan Johnson will give a keynote address to the conference, which will also hear from Pensions Commission chairman Adair Turner a week after he warned that people face a 30% cut in retirement income.