Unite urges govt to reconsider ‘outdated’ clawback legislation

The government must phase out the “outdated” clawback practice, instead of legislating to allow schemes to continue the policy, Unite has urged.

Responding to the Department for Work and Pensions (DWP) consultation on integration published last week, Unite claimed the practice was “unfair and discriminatory” and that it does not belong in the 21st century.

Integration, also known as clawback, allows some occupational schemes pay one rate of pension when a member reaches pensionable age, reducing the rate when the member reaches 65. However, from 6 December 2018, the state pension age increased beyond 65 for both men and women, meaning the current clawback system no longer works.

Under new proposals, schemes will be able to apply a reduction to members’ pension payments once the member has reached the relevant new state pension age, without breaching equality requirements.

In a statement, Unite national officer for finance, Dominic Hook, said: “Clawback is an outdated, unfair and discriminatory practice that does not belong in the 21st century. The vast majority of employers recognise this, and a wealthy bank like HSBC and the like could readily afford to remove it.

“Instead of the government looking to legislate to allow schemes to continue to clawback members hard earned pensions, the government should use this as an opportunity to phase out this practice and then bring in legislation to allow members who have already suffered clawback to be fully compensated.”

According to Hook, many major employers have “scaled back, capped or scrapped” the clawback.

However, Royal London director of policy, Steve Webb, believes that integration is “coming back into fashion”, as pension freedoms allow people to think more creatively about having more than one form of pensions income.

Last November, a group of cross-party MPs teamed up with Unite to "demand justice" clawback, arguing that it “disproportionally affects the lowest paid”.

In a statement, the DWP said: “It is for the pension schemes themselves to determine how they operate within the legal framework and communicate that to their scheme members.

“We are maintaining the status quo in order to ensure that the current pension system can continue function.”

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