By Michael Leahy General Secretary, ISTC trade union

Final salary pension schemes... have been one of the great success stories for providing security in retirement for British working people Michael Leahy

The pensions Green Paper is the response to the growing pensions crisis facing millions of working Britons today.

This crisis appears to have surprised many politicians, as well as the vast majority of political commentators.

It has certainly not surprised me or other trade unionists.

Unwritten contract

Final salary pension schemes - which provide a percentage of an employee's final salary each year, depending on their length of service - have been one of the great success stories for providing security in retirement for British working people since the Second World War.

Although often instigated by trade unions, these schemes have been part of an unwritten contract between employers and their employees.

Designed to perform over the long-term, these schemes have been jointly funded by employees - who have paid their contributions year in and year out - and by employers.

In the case of the latter, many of them made no matching contribution to that of the employees when the stock market performed well enough to allow the scheme to be well-funded.

Unsurprisingly, most employees in such schemes have viewed their pension fund as "deferred pay", which they could to draw in retirement.

Our members at Caparo took strike action and were able to save their pension scheme, but the fundamental problems remain

Encouraged by successive governments to make extra pension provision over and above the state pension, they believed that they could look forward in confidence to their retirement.

However in recent years more and more employers have begun to renege on their pension obligations to their employees, often egged on by City analysts.

Pension strike

Earlier this year, ISTC members at the Caparo steel group were faced with the prospect of the closure their well-funded final salary scheme.

The ISTC held successful talks with the company

They were gob-smacked to find out that their employer could unilaterally decide to close down the pension scheme and individual workers would not have the guaranteed pension upon retirement that they had expected.

However, because trade unions do not have a legal right to be consulted about pension schemes - even if this happens in reality - there is nothing to stop an employer closing a pension scheme in a way in which they would not be allowed to cut pay, for instance.

Our members at Caparo took strike action and were able to save their pension scheme, but the fundamental problems remain. Chilling

ISTC members' views are clear - they believe that their union should have the right to negotiate pensions on their behalf, in the same way that they negotiate pay and other terms and conditions.

They want pension schemes to have equal numbers of employer and employee nominated trustees so that an employer cannot use an in-built majority on a board of trustees which is not in members' interests.

But perhaps the most-chilling example of how a hard-working employee can have their retirement prospects ruined through no fault of their own is what happens when an employer collapses and a pension scheme is found to be under-funded.

This is what happened to 1,000 ISTC members at the ASW steel plants in Cardiff and Sheerness earlier this year.

There needs to be radical change in pension law: for instance we want the introduction of an insurance scheme - a central discontinuance fund - for final salary pension schemes facing wind-up

Following the decision of the independent trustee to wind up their pension schemes our members discovered that they were classed as "unsecured creditors" and were unlikely to receive any money from the sale of the assets of the company to top up their fund.

Even worse, they discovered that the first obligation of the Trustee was to secure the future pensions of current pensioners and only then would their needs be addressed.

Thus, an employee who has saved for their pension for more than 30 years, and who is nearing 60 years of age, faces the prospect of losing much of the pension that they have saved for, and has no opportunity to build up an alternative pension.

Responsibilities

It is because of scandalous cases like this that the ISTC has spoken up on pensions, and why the Labour government has responded.

It is clear that there needs to be radical change in pension law: for instance we want the introduction of an insurance scheme - a central discontinuance fund - for final salary pension schemes facing wind up. Britain is one of the most prosperous nations in the world.

The ISTC is determined that the employees who have helped to create this prosperity share in it during their retirement, just as we look after them during their employment.

We are looking for a new partnership with government and employers on pensions to achieve this.

But recent evidence suggests that employers need more than encouragement to live up to their pension responsibilities.