Defined Benefit  

Labour party consulting on DB scheme closure

Labour party consulting on DB scheme closure

The Labour party is consulting its staff over closing its defined benefit scheme to new members and future accrual for current active members.

In a letter seen by FTAdviser's sister publication Pensions Expert dated March 30 2022, which was sent by the trustee of the Labour Party Superannuation Society to pensioner and deferred members of the scheme, recipients were told that the party “is proposing to close the society to new members and to stop future accrual”.

“This means that, from dates yet to be confirmed, new staff would not be invited to join the society and active members would stop paying into and building up additional pension in the LPSS,” the letter stated.

Labour is running two 60-day consultations on the matter. The first began on March 29 and concerns the closure of the DB scheme to new members. The second consultation, due to start in May, will cover the closure to future accrual for current active members. 

The letter stated that following the consultations, “the party will consider all representations made by staff and will decide whether to go ahead with its proposals to close the society to new members and to future accrual”.

It assured pensioners that they will continue to receive their pensions as normal, with the party’s proposals leaving the quantity and timeliness of their pension payments unaffected.

It also confirmed that its plan would not change the amount of a deferred pension, nor the time at which a recipient could take their pension.

Tom Peters, a recipient of the letter who worked for the party from 2016 until 2020 across its work and pensions and shadow treasury teams, described the proposals as “a real shame”.

“Labour should really be delivering the best possible policy for their employees as a party who seeks to build a better settlement for workers more generally,” he said.

“The party has pursued a sort of active choice, both to alienate some of its largest funders via the trade union movement, and also to actively reduce the size of its membership, which was another source of its revenue. 

“And unfortunately under this leadership, that has led to them putting themselves in a fairly catastrophic financial position, one which was very, very different to where they were under the previous leadership, where the Labour party actually had fairly significant financial buffers,” Peters continued.

“It seems to me that they’re asking their staff to pay for active decisions made by their own leadership.”

The Labour party has been approached for comment.

In 2020, Labour recorded a £1mn loss in its accounts, compared with a tiny surplus in the prior year.

Income from donations fell from £18.1mn in 2019 to £5.7mn in the following year. Donations had surged in the 2019 election year under the leadership of Jeremy Corbyn from £5.8mn in 2018.

However, membership income rose from £16.5mn in 2019 to £19.3mn in 2020.