While the Tories had pledged to end the triple lock guarantee protecting pension funds in the UK, for example, Labour promised to protect this at all costs. This was a key factor in helping Labour to secure so many votes in Wales, particularly with the pension funds of more than 4,000 former-Hoover workers in the principality at risk following the demise of the manufacturing brand.
Hoover’s Deal and What it Means for Citizens
After months of uncertainty and discussion, a deal has finally been struck for Hoover to shift the company’s pension scheme into a protection fund. As a result of this, the company will contribute £60 million into the new fund, while members will at least be able to recoup some of their wealth as they plan for or begin to enjoy their retirement.
The deal is not without its controversy, however, primarily because it could see members who are younger than the retirement age receive a 10% cut in their pension pots. This accounts for a staggering 4,000 workers in Wales, more than half of the 7,500 members are part of the failed Hoover scheme.
The individuals affected worked at the famous Merthyr Tydfil washing machine plant over the course of 60 years, and while production ceased in 2009 it has continued to operate as a scaled-down warehouse.
Despite the fact that current workers will be forced to absorb losses and potentially adapt their retirement plans, however, experts have claimed that shifting funds into a pension protection fund was the only viable decision to take. This is because there was “clear and extensive” evidence that Hoover would fall into insolvency without solving its pensions crisis, leaving members with absolutely no funds and struggling to make ends meet in an increasingly challenging economic climate.
The Bottom Line: What Will This Mean for Workers?
Given that Hoover’s pension scheme has a deficit of around £250 million prior to negotiations, the decision to transfer funds seems as though it was taken with members’ best interests at heart. Still, those facing a fund reduction of 10% or more are inclined to feel hard done by, while questioning the ability of employers and government infrastructure to safeguard pensions in a post-Brexit climate.
As a result of this, it is crucial that Welsh citizens (and those in similarly industrial regions of the UK) take practical and proactive steps towards safeguarding their own financial futures. This may mean seeking out ways of optimizing earnings, but given the lack of real wage growth, it may be more prudent to partner with financial planning experts such as Tilney.
This allows citizens to take control of their own fiscal destiny, as they gain access to leading financial experts and identify the best vehicles for building long-term wealth. This would also be the ideal way to leverage the sense of hope that was created by Labour’s election campaign, which ignited Wales and its citizens.