tutor2u | Industrial Relations dispute at Mini over pension schemes

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Industrial Relations dispute at Mini over pension schemes

Penny Brooks

4th April 2017

How much of a risk are the employees of BMW taking at the Mini plant at Cowley, Oxford? They have voted overwhelmingly to go on strike over BMW's plans to close the final salary pension scheme that many of them belong to, and switch their pension benefits into a different scheme.

Final salary schemes provide workers with a pension which is calculatged as a proportion of the salary that they are earning when they retire, although most of the contributions that they and their employer have made to the pension scheme throughout their working life have been a percentage of the salary they were earnng at the time that the contribution was paid - which is likely to be lower than the final salary. As employers face higher and higher pension liabilities, with their workers living longer and enjoying a longer retirement, many are moving to a calculation based on something like the average salary earned over the employment.

BMW's plans affect workers at the Rolls-Royce factory at Goodwood in West Sussex and those making engines at Hams Hall near Birmingham, as well as the Mini factory in Oxford. Their union, Unite, says the proposal could see some UK workers lose up to £160,000 in retirement income, so it is easy to see the cause of their concern about it.

However,BMW was also recently in the news becaiuse they are in the process of deciding whether to make the new electric Mini in the UK or elsewhere in the EU, in order to be sure of tariff free access to the Single Market. As they are making the decision on where to make the car this year, there will still be much uncertainty over the deal the UK can reach with the EU over access to the Single Market - and if they do not reach a deal, they may have to fall back on international rules set by the World Trade Organisation which mean tariffs on finished cars of up to 10%.

If that is to be the case, BMW can only afford to make cars in the UK if the workforce here is extremely productive, with competitively low costs of input per unit of output - and to quote Carlos Taveres of PSA when they bought Vauxhall recently, "Everywhere around Europe people are looking to be protected. The only true protection is performance."

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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