Most people do not fully understand their pension. People trust that their hard work and doing the right thing will ultimately cover them in future and that they will be treated fairly.
One of the benefits of having a pension that many people look forward to is taking a tax-free lump sum when they reach their pension age, typically 55 years old. But many Nissan pension scheme members are now finding out that to do so would affect their future pension income.
To give some context – the pension is split up into pots that receive different annual statutory increases: the pre-1997 pot is increased at the discretion of the trustees; the 1997-2005 pot must increase by inflation up to 5%; and the post-2005 pot must increase by inflation up to 2.5%.
In 2011, the trustees of the Nissan pension scheme changed the rules to require lump sums to be paid out of the potentitled to the highest annual increases first – the 1997-2005 pot. If that is exhausted, the next pot to be used is the post-2005 pot. Only then is the pre-1997 allowed to be touched.
The impact of this means that, once a lump sum has been taken, the parts of the pension that are left will receive lower annual increases. This has left pensioners thousands of pounds worse off in retirement and at the mercy of discretional annual increases. However, there have been no discretional increases for the last 23 years, in part due to Nissan not providing the funding required.
You would have thought that a major change such as this would have been directly communicated with Nissan pension scheme members? Incredibly, it was not. Even more incredibly, there is no legal requirement to do so. The only mention of it was in the trustee’s annual report. And even then, it was an obscure line referring to “calculation methodology” changes.
The first time some people found out about this was when they realised their pensions were not increasing as they expected, having already taken a lump sum. Many Nissan pensioners also say they were strongly encouraged to take a lump sum, without the impact of this being explained to them.
How many other defined benefit schemes have been changed in this way, unknown to their members? Why are trustees allowed to get away with not directly communicating changes that have a negative impact on someone’s future pension income with those affected?
Nissan has been a fantastic employer, bringing employment and regeneration to the North East. However, it must remember that its success comes from its loyal workforce and the underhand tactics such as the 2011 changes are no way to treat them.
Nissan employees worked hard, and they expect and deserve a good retirement. Nissan needs to put money into the pensionscheme, just as other organisations have had to put into their schemes, to give pensioners a decent standard of living in retirement.