Holy Smoke

30th August, 2013

  • The Church of Scotland has recently become embroiled in an ungodly row over proposed changes to its’ pension scheme. The scheme had previously been non-contributory for members, with the Church contributing 21% of member’s salaries in contributions. However, a deficit of around £30m has prompted a radical rethink. The reasons behind the Church’s increasing deficit are all together more earthly in nature; increasing longevity and volatility in financial markets. This is a situation which we’re sure many employers and trustees will recognise.  

    To address the problems being faced by the scheme, the Church has proposed a substantial change in the structure of contributions. The proposal affects staff working in the Church’s Edinburgh HQ dealing with administration, property management, law, IT and human resources. So, more a case of white collar, than black and white collar workers in this case.

    The Church proposes that staff who wish to remain ‘non-contributory’ will now receive 11.5% of salary in employer contributions, increasing to a maximum of 14% should the member opt to contribute at least 2.5%. Should members wish to maintain the current 21% overall contribution level, this will clearly equate to a substantial hit to their take home salaries.

    While the Church states that the consultation process has been conducted over the past year, and involved both staff and the union Unite throughout, something has clearly gone wrong at some stage. The Church is accused of taking a heavy handed ‘fire and brimstone’ approach with the latest epistle issued to members containing a stark choice; agree to the revised arrangements by 30 August 2013, or receive confirmation that their current contract would be terminated and the revised terms and conditions implemented from 31 December 2013. There is no indication that any staff members would actually lose their jobs as a result of these changes, however the uncertainty created is hardly the ideal Christmas gift from a benign employer.  

    The Church maintains that they have complied with statutory requirements and employment law throughout. With direct access to the ultimate ‘Higher Power’ advisor, you would imagine the Church would have been better placed than most to undertake this exercise in a more enlightened fashion. It does demonstrate that despite the best of intentions, these situations can be fraught with difficulty if not handled correctly – regardless of Who is providing your guidance.

    Our experience in these situations is that honesty really is the best policy, and that ‘tone’ matters. Many schemes are carrying large deficits, and many trustees and sponsoring employers have been praying for salvation through positive investment returns. However, miraculous investment performance can be a bit thin on the ground. If the situation demands a substantial shift from the current arrangements, it’s vital that Trustees and Sponsoring Employers are open and honest with members about the reasons driving their proposals. Clear communication, whether through staff presentations, e-mails or by letter, setting out an honest appraisal of the schemes’ position and the possible options available can really help to diffuse much of the potential for misunderstanding and conflict.

    Members value their pension benefits, and, Employers know the value of pensions as part of their strategy for attracting and retaining staff, and as part of their wider ‘paternal’ duty to their employees. By explaining a scheme’s situation clearly and concisely to members, and taking a more inclusive approach from the outset, many of the difficulties involved in these exercises can be managed without the need for stand-offs and confrontation. I’m sure we can all say Amen to that.

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