Monday, June 18, 2012

Ford Workers strike to save pension scheme

Check out the Unite web site for details of the strike today by 2500 "white collar “workers to save their Final Salary scheme from being closed down to new entrants. The strikers are naturally worried that if Ford closes the scheme to new workers joining then it will mean that eventually the company will close the whole scheme to future accrual.

This fear is justified. It is unclear from reports why Ford is doing this apart from a claim that it is "unaffordable".  I assume they mean the deficit. Closing to scheme to new blood is one of the worse things you can do. It will do nothing to get rid of the deficit. It will be more expensive and just make things worse.

The deficit will remain and will have to be paid off eventually. But with the scheme becoming more and more "mature" (fewer and older workers) then the fund will have to be invested in low yielding assets such as cash and bonds and less in equities.  So the investment return in the long run will be less and the company will have to put more money into the scheme.

Ford is also planning to cut the pay of new entrants as well. Not good news for East London. 
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