As we have previously reported, while many of our members remain in Defined Benefit (DB) pension schemes, which provide members with a certain level of income at retirement, the majority of our members contribute to Defined Contribution (DC) arrangements which offer no such promise.
RMT policy is to keep DB pension schemes open to current and future
Welcome to the latest edition of the Maritime Pensions Campaign newsletter. With the UK electing a Labour Government in 2024, it was hoped by many that, over the next five years, occupational pensions will be something the new Government will be focussing on to improve the retirement expectations of all workers. At the time of writing, we are yet to see any moves in the direction of improvements but RMT will continue to campaign on pensions for our members employed within the Maritime sector.
members but, as we have seen over a number of years, employers have taken the opportunity to close these schemes despite there now being record surpluses in many of these types of arrangements.
This is not to suggest that, without a promise, DC arrangements can’t provide members with a reasonable income at retirement, but unless adequate contributions are paid into
these types of arrangements members can often expect an insufficient income when they retire.
As we will highlight later in the newsletter the current 3% minimum contribution rate employers are obligated to make under automatic enrolment legislation is simply insufficient to provide a reasonable income in retirement.
It was being reported before the October 2024 budget that the Chancellor, Rachel Reeves, was considering increasing the minimum contribution employers must pay into employee’s pension accounts but this just didn’t happen.
The UK has one of the worse pension systems in the developed world and to highlight this point, employers in Australia are required by law to pay workers 11% of their salary as a pension contribution. There are many reasons why the Australian Government has set a minimum level of employer contributions, but one reason is to try and remove the need for workers to rely on the state when they retire. The UK pension system is so far behind the Australian example.
We would hope that, going forward, the UK government will take action to eliminate pension poverty which is
running at over 90% when it comes to workers not saving enough for their retirement according to the Pensions Policy Institute. Clearly, action is needed to eradicate workers either working until they can work no longer or relying on the state.
All workers should have the right to a fair and reasonable standard of living in retirement. The need to improve inferior workplace pension schemes will remain an area of focus whilst continuing to develop pension awareness and retirement planning amongst our membership is a continual area of development.
Darren Procter, National Secretary
If you have a pension issue, we need to hear from you! Please get in touch with RMT Pensions Officer, Paul Norris at p.norris@rmt.org.uk or on 020 7529 8806. All emails and calls will be treated in confidence.
What
is the difference between a DC scheme and a DB scheme?
A Defined Benefit (DB) scheme is based on a worker’s salary and pensionable service to give them a promise of a certain level of income at their retirement.
A Defined Contribution (DC) scheme is based on the level of contributions your employer and you contribute into your occupation pension arrangements, and the investment returns during the lead up to retirement. Therefore, the level of contributions and investment returns dictate the level of pension you will receive at retirement.
Calling all Dock Workers, Divers, Offshore Workers and Inland Waterway Workers... we want to hear from you!
Tell us about your workplace pension… does your employer provide understandable information about your occupational pension, if any? Do you need to know more about your potential retirement benefits?
At the time of writing, the Government’s implementation of the McCloud unlawful age discrimination remedy continues.
As previously reported in 2015, the UK Government made detrimental changes to Public Sector workers’ future pension provision by changing their retirement benefits from final salary to Career Average Revalued Earnings (CARE). While the introduction of a CARE pension scheme was not unlawful itself, the Government made the mistake of offering longer serving members the choice of either staying in the relevant Public Sector final salary arrangement or switching to CARE.
However, the decision to allow some longer serving members the choice of which scheme to choose was seen as age discriminatory. Giving longer serving members the choice was seen as describing someone’s age in respect that they are closer to retirement.
Following the 2015 Court of Appeal case, known as the McCloud Court Case, the Government was instructed to offer all members regardless of age or pensionable service the choice to choose which pension scheme to choose i.e. Final Salary or CARE.
The McCloud remedy became effective on 1st October 2023, and our
Union members employed at the Royal Fleet Auxiliary (RFA), who are members of the Principle Civil Service Pension Scheme (PCSPS), and our members employed by Orkney Ferries, who are members of the Local Government Pension Scheme (LGPS), are also affected by this judgement.
One of the questions we have been asked, in respect of the PCSPS, is what if an RFA member retired on the grounds of ill-health during the remedy period, or would have done so?
The reason for this question is that when PCSPS Alpha CARE Pension Scheme was introduced, and members were forced into this scheme, members would have applied for ill health benefits under the new Alpha rules. While Alpha might provide them with an ill-health pension, it also might not provide them with a pension at all because the Alpha ill-health criteria may not have been met.
However, had a member remained in the “legacy” PCSPS final salary arrangement they might have qualified even though the Alpha criteria was not met. Had the member had the choice, which they didn’t before the McCloud
remedy of which PCSPS arrangement to join, this may have resulted in the illhealth pension being calculated in a different way.
What we can advise you is that, as part of the McCloud remedy, all ill-health retirement decisions will be revisited automatically. In most cases, members will not need a new medical assessment if the member met the Alpha lower tier criteria anyway.
In more difficult cases the PCSPS Medical Adviser will be asked to reassess the decision made about (a) whether the member qualified for illhealth retirement under their legacy scheme rules and (b) whether they would have been awarded a higher or ill-health pension. The reassessment will be based on the medical evidence available when the original decision was made – any subsequent developments in their health, and any new medical reports will be excluded.
It is worth noting that in some circumstances an Alpha ill health pension may be better than a legacy scheme ill-health pension. The higher pension will be paid once the review has been carried out.
The big problem with ill-health cases is timing. There will be members who have left the RFA and are receiving a pension which may be too small or indeed have no pension at all. These cases will be re- examined, but that might not happen until March 2025. If a member has been underpaid, they will be paid arrears with interest
As a result of the benefit changes made to the PCSPS, members may
have made decisions that they would not otherwise have made, such as opting out of the scheme altogether.
Members in this position can ask PCSPC administration to reverse the decision (retrospectively). However,
these members will have to provide some sort of evidence that it is the 2015 reforms which prompted their decision to leave the scheme. If you are a member
If you are a member of a Defined Contribution (DC) pension scheme you have the option to make additional contributions above what you and your employer pay into your pension scheme. These extra contributions are known as Additional Voluntary Contributions (AVC) and will be invested in the same way as your own and employer’s contributions.
AVC’s also receive tax relief in the same way as your normal pension
contributions, so for every £1 you receive tax relief of 20% or if you are a higher tax payer 40%.
AVC’s are invested in a range of investment vehicles with different levels of risk. When you reach retirement your combined DC and AVC pension pot will be used to calculate your retirement options.
Please note DC and AVC contributions are not treated at retirement or invested separately it
is one pot of money. If you are interested in contributing into AVC‘s you should speak to your employer or pension administrator for further information.
Remember, members in most types of pension schemes, whether that be DC or Defined Benefit, can make AVC payments to increase their retirement expectations.
It has been another very busy year for the Merchant Navy Ratings Pension Fund (MNRPF). The Trustees have overseen a series of enhancements designed to making it easier for our members to stay connected and more engaged with their pension.
As Trustees, we have recognised that members of the Fund want to access and manage their pensions online. To meet this demand, we are working to introduce a significant digital transformation so members can easily manage their pension and stay up to date with the Fund’s news.
2024 saw the launch of the new member website, which has already attracted over 4,000 visitors. The website is designed to be more engaging than its predecessor, with easier navigation along with improved accessibility. The website serves as a central hub for Fund news and updates. Our aim is to ensure members don’t miss vital information about the Fund and their pensions.
To coincide with the new website we have also introduced Guiide, a new retirement planning tool. The Trustees recognise that the choices members face about their retirement are some of the most important decisions they will make. Guiide makes it easier for members to make informed decisions. It also enables members to input details about their MNRPF pension alongside their wider finances and Guiide will provide a personalised look at their future retirement income helping members to make more informed choices.
pension quotations. The Trustees want to empower members with self-service options while maintaining traditional support channels for those who prefer them.
While all this work is ongoing, the Fund’s Ill Health Early Retirement (IHER) benefits project (Project Greenwich) continues to make significant headway. Good progress is being made and the Trustees have been working to ensure affected members receive the correct benefits.
Members can now also access OneView, the Fund’s new portal that makes it easier for you to manage your pension directly. This upgrade allows members to manage their pension administration, including updating personal details and requesting
In 2025, the Trustees plan to conduct a member survey to measure the impact of these improvements and identify areas for further development. This forms part of a broader review of the Fund’s communication strategy, ensuring it stays current with regulatory changes and Pension Fund best practices.
The Trustees commitment is to improve the member experience. A lot of work has and will continue to be done to improve the flow of information to you, the members, of the MNRPF.
Lionel Sampson, RMT nominated MNRPF Independent Trustee Director
As we have highlighted in previous editions of the Maritime Pensions Campaign newsletter, several maritime employers offer more than one pension scheme with different levels of employer contributions and life cover.
Employers are obligated to automatically enroll eligible workers into a workplace pension scheme. Eligible workers are those who are:
n classed as a ‘worker’
n are aged between 22 and State Pension age
n earn at least £10,000 per year
n and usually (ordinarily’) work in the UK
Some Maritime employers offer employees a choice of pension arrangements with higher employer contributions but tend to auto-enroll
eligible workers into the scheme with the default minimum level of
contributions. The default minimum level of contributions under legislation are:
Employers will also offer life cover at different levels for different pension arrangements. Life cover is normally
paid as a one-off lump sum which is normally related to a member’s salary. In the event of the member passing away during their employment their nominated beneficiary is paid a lump sum payment of one time or a multiple of their salary. A death in service pension is sometimes available to an employee’s spouse or partner.
Life cover is a ‘bolt on’ to the pension scheme and is generally paid directly by the employer and not through pension contributions. However, like employer contribution levels, life cover can vary but in general those schemes with the higher contribution rates will offer the greater life cover.
IT IS IMPORTANT that you check that you are in the more beneficial pension scheme. DO NOT LEAVE IT TO CHANCE that you are receiving the highest employer contribution or greater life cover to protect your family.
The Pension Regulator reported in 2024 that there are now less than 5% of Defined Benefit (DB), final salary, pension schemes open to new entrants in the private sector. This means that potentially 95% of private sector workers are contributing to Defined Contribution (DC) pension arrangements.
Research carried out by the Pension Policy Institute suggests that over 90% of DC savers are facing an inadequate retirement as they simply are not saving enough into their pension during the lead up to retirement.
As a rule of thumb, if total contributions of 16% per annum were paid into a DC arrangement over a 40-year period then the individual might expect to get around 50% of their salary as an annual income.
Clearly 16% will be unaffordable for many workers without the assistance of their employer contributing a lot more into their pension pot. But what if you or and your employer was to contribute an extra 1% or 2% into your account… would this make much difference to what you receive at retirement?
Based on information we have collected from the Government website Unbiased, an increase of
contributions of 1% or 2% could increase a member’s potential pension as follows:
Assumptions: Current pensionable earnings £30,000 Current age of member 30 Members preferred retirement age
Key:
n An income drawdown is when you take lump sums payments every year from your built-up pension savings (pot) while keeping the rest invested.
n The pension pot increases (investment returns) by a modest 4% pa during the members working life and 4% pa whilst they drawdown.
n Pension pot expected to last from age 62 until age 88.
n www.unbiased.co.uk/tools/pension-calculator
As you will see from the above examples, members’ retirement incomes are increased by £1,500 pa for every extra 1% of contributions.
RMT are committed to improving our members’ retirement outcomes and whilst we encourage all our members to look at their personal pension situations, we are fully aware that many employers in the maritime sector are not doing enough to help their employees when it comes to pensions.
RMT wish to make it clear that we are not trying to give members financial advice, the above examples are simply illustrations. If members want advice they should seek professional advice from a registered independent financial advisor.
n3
If your employer offers more than one Defined Contribution (DC) occupational pension scheme CHECK that you are receiving the highest level of employer contribution.
n3 You should also CHECK that the DC pension scheme’s Annual Management Charge (AMC) is giving you value for money. AMCs vary but generally they will be below 0.75% pa. Even a small percentage can increase or reduce your DC pension pot, so CHECK and if your considering changing arrangement contact the scheme administrator or contact RMT for assistance.
n3 Is your family protected in the event of your death? CHECK that you are receiving highest level of life cover as some
n3
employers will offer more than one level of cover depending on the pension arrangement you are contributing to.
Have you completed an Expression of Wish Form? An Expression of Wish Form is a document which states where who would like any death in service payment paid to. As death in service payments are discretionary the trustees of any pension scheme will need evidence that your wishes are being carried out in the event of your death, so CHECK you have completed a form and CHECK that it’s up to date.
As part of being a member of RMT we have a dedicated Pension Officer who can advise you on most things to do with your retirement benefits and assist you where necessary. In recent months we have assisted members and representatives with matters such as:
• Late payment of contributions
• Incorrect pensionable service
• Understanding State Pension Forecasts
• Delays in pension scheme transfers being made
Please be advised that RMT does not give financial advice. Do you need help with a pension problem or understanding your pension?
• Applications for Ill Health Benefits
For more information on the Maritime Pensions Campaign and to view past newsletters, please click here ... http://bit.ly/3rL8cad
• Understanding scheme rules in respect of dependant benefits.
These are just a few of the issues RMT deal with on a regular basis, so if you need help please get in contact with RMT Pensions Officer Paul norris on 020 7529 8806 or at p.norris@rmt.org.uk
RMT continues to campaign industrially and politically for improvements to Maritime pensions along with pay and terms and conditions of employment. Please encourage any colleagues, not currently member’s of RMT, to join by sharing this QR code with them.
