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n o i t i d e l a i c e p s

PENSION CHANGES AND 2-YEAR PAY DEAL Full report on negotiations with Santander and the agreements reached.

Background During the last few months Senior Management of the Bank have been in consultation with Advance on ways to secure the future sustainability of Santander UK’s Defined Benefit (“DB”) Pension Schemes for all entities in the company including Geoban and SGF. Advance would have preferred it if no changes had to take place to the DB Scheme. Unfortunately, as we all know, DB schemes are, sadly, very rare. Some banks have already changed, closed or frozen their DB Schemes. This includes Lloyds, HSBC and Barclays. In today’s ever-changing world of work, trades unions have limited choices with regard to pensions as they are not contractual (i.e. they are not covered under terms and conditions of employment). Unions can either walk away which allows management to impose changes or they can negotiate a better outcome than that which was originally on the table. In the case of some employees in all walks of life, there is no union to defend pension benefits at all. As with any change, it doesn’t always affect all members, so

Pensions are a must for everyone

there is a fine balance when negotiating a way forward. This was the situation that Advance was in when engaging in these talks. Santander UK employs approximately 24,000 people and 5,000 are in a DB Scheme. We are fully aware that many of our members have given many years of service. Owing to Advance’s tough negotiating stance, we have substantially improved on the company’s first proposal. It is important for our members who are

Telephone: 01442 891 122

affected by the changes to the DB Scheme to understand the rationale presented by the Bank to the unions. Agreement has been reached on the necessary changes that the Bank wants to introduce. These will begin in March 2015. As part of the negotiations to reduce the impact of these changes, we have also agreed a two-year pay deal that all Advance members will benefit from.


This applies to everyone, regardless of their business area or whether they pay into a pension scheme or not.

Pensions & pay Management explained that the Bank’s DB Pension Schemes are in significant deficit meaning that there is still a shortfall in money needed to pay members’ benefits despite the measures introduced in recent years (including the ‘Titan’ pension changes in 2009). Over £1bn has been contributed by the Bank to reduce the size of the deficit in recent years. However, the latest actuarial valuation suggests that the deficit is now at least £1.5bn and could actually be as much as £2bn. Throughout the many days of negotiation, Advance’s objective was to keep the DB schemes open for the 5,000 active members. However, the Bank said that this could only be achieved if the union agreed to the changes necessary to ensure the future sustainability of the DB Scheme. Advance’s negotiating team were very aware that many other banks had already closed their schemes and, indeed, during our talks Lloyds announced that it was introducing a freeze on pensionable pay. Advance were very clear that any changes should apply to all levels within the bank, irrespective of grade: management confirmed that it would. Our negotiations have been very difficult and complex and Advance instructed a specialist pensions actuary to review the Bank’s proposals. On the basis of advice from our actuary Advance, with a heavy heart, had no alternative but to accept the best proposal that we could negotiate, which we had moved considerably from their first offer. This is a cap on increases in pensionable pay of 1% per annum for DB scheme members from 1st March 2015. This is the only way that the deficit could be addressed and for the DB scheme to remain open to its 5,000 members.


ADVANCE magazine  January 2014

Advance wanted to negotiate a package of measures to reduce the impact on DB members, with a particular focus on lower paid staff. We were successful in our negotiations. Key elements of our agreement include: • maintaining a DB benefit for future service for all 5,000 DB members, • enabling all future salary increases to be pensionable through the introduction of a new ‘Top-Up’ Santander Retirement Plan (“SRP”) arrangement to recognise the difference between actual and pensionable salary once this cap is introduced, • a one-off contribution to DB members’ new SRP accounts in June 2014 of £2,000 or 5% of salary, whichever is greater and • Advance wanted a commitment to no further changes to the DB Scheme – however, management could not commit to this. Finally, we secured a clear commitment about the future of DB schemes until at least 2019.

Key elements of the pension changes From the 1st March 2015, increases to pensionable pay will be capped at 1% per annum. This will apply after the 2015 pay review to ensure DB members benefit from two further pay rises before the 1% annual cap takes effect (see Pay Deal information further on in this publication). The new Top-Up SRP scheme to enable all increases in pay to be pensionable after this date will launch on 1st June 2014 and all DB members will be auto-enrolled. Advance negotiated for the Bank to make a one-off starter contribution to all DB members’ new SRP accounts on 1st June 2014 of £2,000 or 5% of salary, whichever is greater. For S1 members this starter contribution is typically worth 11.2%.

Other improvements that Advance has secured include: • Amending the terms of the exAbbey sections of Santander UK Group Pension Scheme so that same sex spouses are treated in the same way as opposite sex spouses. The same sex spouse of a DB member (employee, deferred, or pensioner) therefore who dies will receive the same pension as an opposite sex spouse. This change will be effective from 1st June 2014. • Introduction of a new ill-health provision in the Santander Retirement Plan from 1st March 2015 (further details to follow). • On the basis that these changes are agreed by DB members, the Bank will confirm that no further detrimental changes to the pension benefits to members of the DB Scheme which would take effect before 1st March 2019. DB members will receive further details from the Bank at their home address of what the proposals means for them and this will begin a formal 60-day consultation period that will run until 17th March 2014. After this date the Bank will review the feedback received with Advance and will then confirm its final position.

The 2014 & 2015 pay deal Advance has negotiated a 2-year pay deal that boosts pensionable pay and provides certainty for DB members ahead of the changes coming into effect in 2015. Furthermore, this 2-year deal applies to all Advance members across all Santander UK businesses whether they are in any pension scheme or not. The 2-year pay deal for 2014 and 2015 will provide “across the board” awards of 2.8% for the majority of Advance members with a minimum payment of £500 (pro-rated for part-time staff) in both 2014 and again in 2015.

Evening helpline Contact Linda every Wednesday 8.30 – 10pm 07850 742340

Reflecting the exceptional circumstances of this 2-year pay deal, the award for CP/SP and OP/EP endof-year ratings will be combined and will not be dependent on position in salary range. In addition, all pay awards in 2014 and 2015 will be consolidated, irrespective of position in or above range. The awards will be fixed for S1 to S3 staff and there will be some limited discretion (as last year) for roles at S4 & S5. The award for Band S1 to S3 colleagues in both 2014 and 2015 will be 2.8% for a CP/SP rating and 2.9% for an OP/EP rating, regardless of their current position. (See table within this article). Advance has also negotiated a new cash payment for S1 and S2 staff so they can take advantage of “You Choose” flexible benefits. S1 members will receive £300 a year paid in monthly instalments and S2 members will get £250. You can choose to take this benefit in a number of different ways, including as a cash payment (subject to tax and National Insurance contributions), access to a range of health and wellbeing products (including medical cover) or as a contribution towards a share scheme. The new “You Choose” cash payment will apply to any former Alliance & Leicester staff graded as “Consultant 1” in Isban, ex-Alliance & Leicester Band 2 colleagues in Produban and to all colleagues in G1 and G2 in Geoban. This new payment is worth 1.7% and 0.8% for S1 and S2 members on average rates of pay. This means that together with the 2014 pay award of 2.8%, most S1s will have an increase in pay this year of 4.5% - significantly above inflation forecasts and the level we expect other banks’ to settle at. Members will know that Advance has been at the forefront of the campaign for employers to pay the Living Wage and that last year the Bank agreed to align its minimum salary with the National Living Wage. Our 2-year

pay deal continues this approach and, importantly, we have now secured agreement that the London Living Wage will apply to staff working in inner London (02 Pay Area). This means that from 1st March 2014 the minimum hourly rates increase to £7.65 (a minimum annual salary of £13,923 for a full time employee) and £8.80 respectively for existing and new staff. We are delighted that management have listened to our rationale and have acted on it. Salary ranges will be increased by 2.25% in both 2014 and 2015. The 2014 and 2015 pay deal is worth 2.8% each year for the majority of Advance members and applies to all UK employees in Bands S1 – S5 or equivalent.

Members in Bands S1 – S3

On an exceptional basis for this 2-year pay deal only, reference to position in salary range will not apply and the awards for CP/SP and OP/EP will be combined. This approach helps to address Advance’s concern over the increase at mid-year of CP ratings, though this is only part of the solution. Bands S1 to S3 will receive a fixed percentage increase on 1st March 2014 and 1st March 2015 based on their year-end performance rating of 2.8% for CP/SP and 2.9% for OP/EP.







will be pro-rated for part-timers. Therefore, no members with a CP rating or higher should receive less than £500 per year.

Members in Bands S4 & S5

S4 and S5 senior managers will receive a minimum of 50% of the appropriate “across the board” award based on their year-end performance rating with management discretion to move upwards. Therefore, the minimum award will be 1.4% for CP/SP and 1.45% for OP/EP. Line managers will have an additional pot to increase these awards in line with the guidelines agreed with Advance.

Awards consolidated The pay awards in 2014 and 2015 will be consolidated into salary, regardless of position in or above the pay range.

Minimum salary & living wage To confirm, the Bank’s national minimum salary from 1st March 2014 will be increased to £7.65 per hour (£13,923) as a minimum to match the National Living Wage and will apply to all new and existing staff regardless of performance. For staff in the Bank’s Inner London Pay Area (02 Pay Area) the minimum salary from 1st March 2014 will be £8.80 per hour (£16,016) as a minimum to match the London Living Wage and will apply to all new and existing staff regardless of performance.

Pay awards will not be dependent on where your salary currently is, i.e. if you are at 80% - 120% this salary increase will be consolidated.

The National Living Wage and the London Living Wage is automatically reviewed every November. Any increases to these minimums will be applied March 2015 Pay awards.

Minimum payments

Salary ranges

A minimum payment of £500 will apply in each year. These payments

Salary ranges will be increased in both 2014 and 2015 by 2.25%.

January 2014  ADVANCE magazine



IMPORTANT INFORMATION IP to CP performance award

The pay awards in 2014 and 2015 will not apply to staff with an IP rating. However, Advance believes that people should be motivated to improve. There are many reasons why individuals are awarded an IP rating which could include personal issues. Therefore, we believe that it is important to motivate and develop individuals so that by June 2014 their rating would improve. For this reason, we have again negotiated that if such an individual’s performance

improves at mid-year, they will receive an award in September for the remaining 6 months of the year equivalent to that of a CP/SP rating. Any award paid to individuals in these circumstances in September 2014 will have this amount included in their definition of pensionable pay. Contact one of Advance’s senior team (numbers below) if you have been given an IP rating for confidential advice.

Non-salary linked allowances

These will be increased by 2.25% with effect from 1st March 2014 and 2.25% from 1st March 2015. Car allowances remain unchanged.

Long service awards

Following representations from Advance, the Bank has introduced a further recognition level at 25 years service of £250. The 25 year award will be backdated to 1st January 2013. A different longterm service award applies to Geoban.

Conclusion These negotiations have been complex and very challenging but Advance believes the pensions measures we have secured are innovative and ensure that the DB pension schemes will remain open. The 2-year pay deal provides significant benefits for all members especially lower paid members. This has been a very difficult set of negotiations. For the 5,000 people who will be affected by this change, we wanted to improve on Santander’s initial offering, not just for our members with DB Schemes, but for all of our members who are being squeezed by the continual increase in the day-to-day cost of living. We are pleased that we have negotiated the London Living Wage for our members in London. During our discussions, we wanted assurances from management that these changes to the DB scheme will affect everybody fairly, regardless of their position in the bank. These assurances were provided.


ADVANCE magazine January 2014

‘THE 2-YEAR PAY DEAL PROVIDES SIGNIFICANT BENEFITS FOR ALL MEMBERS ESPECIALLY LOWER PAID MEMBERS’ Advance is well aware that this is a difficult change and will not please everyone. We are fully prepared to discuss any concerns that you may have. Should you wish to discuss any issue, please contact Linda Rolph or one of her senior team on the following numbers after 5.00pm: Linda Rolph 07850 742 340 Rose O’Neill 07793 307 333 Gerry Moloney 07917 578 979 Jim Leonard 07764 977 808 Roberta Barbour 07764 977 807 Advance’s first priority has not changed. We will continue to improve your working life. We remain your voice at work.


Manufacturing area Advance are now in a position to invite people to stand for election for our new area, Manufacturing. We need to fill a vacancy for a National Executive Committee position and Area Representative posts. Anybody who works in the Manufacturing area can apply. Manufacturing includes Retail Multi-Channel Contact Centres, Complaints and Fraud. Forms will be available from Monday, 6 January and must be received at the Advance office by Friday, 24 January. If you are interested, please contact Gerry or Abbie on 01442 891122.

Advance 2014 Jan  

Pay deal mag

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