AMNT open meeting Thursday 26 Sept - Fees, Charges (& what we can do about them)

The next open meeting of the AMNT is next Thursday 26 September 2013. All member nominated pension trustees and representatives are invited to join the AMNT and attend. Click on this Eventbrite link.

"Getting the best value for money is the theme of your next AMNT members' meeting. Fees, charges (and what we can do about them), responsible investing and trustee training will all be on the agenda. The open meeting takes place at the Pensions Insurance Corporation 14 Cornhill, London EC3V 3ND on Thursday 26th September.

As you know, all trustees should complete the Pensions Regulator's Trustee Toolkit, and even those who have done so may know that the Regulator regularly updates the training. On the morning of 26 September you are invited to join in our Trustee Toolkit Training session, and this time we will be going through the Regulator's e-learning modules on Pension Liberation Fraud, and "DB scheme, solvent employer: wind-up or buy-out". We are allowing lots of time to talk around these issues during the session.

After lunch we will be discussing responsible investing and some of the corporate factors that may have a negative impact on investment returns to our schemes which we as trustees should be looking at.

We will also be reporting back on the Department for Work and Pensions' consultation on governance in defined benefit schemes and their proposals on improving trusteeship in the DC world.

Our recent newsletter asked whether you might be interested in taking the PMI exams - the Award in Pensions Trusteeship – and several members responded.

On the day we hope to be able to go through some of the previous exam questions to give you a flavour of what it involves.

But many of our trustee members place the highest value on being able to meet up with fellow trustees and talk about common issues and problems, and there'll be plenty of time on the day to chat informally. As always, those who don't need to rush off can stay for a drink and have another opportunity to network".

Most Influential Trustee - Mallowstreet Awards 2013

I am looking very serious but last night's event at the Mallowstreet 2013 Awards (Pension social media site) was actually fun. The event took place at The Globe Theatre, South Bank in London.

There was a great turnout by members of the AMNT.

I was up for two awards - "Most Influential Trustee" and "Top Blogger" of the year.

This is the second year in a row that I was nominated as a trustee.

This year I was selected as "Most Influential Trustee" and this was the judge's comments :-

“With one of the most viewed blogs for 2013 on the Church of England's investment in Wonga, this individual never shies away from sharing provocative view points, personal experience and opinion. He has provided the foundation for some very interesting discussions, he has always done his research, whether you share his views or not there is something about his musings that make you want to have your say as well.”

"provocative view points"? Do they mean me?

Surely not :)

Picture with Judge, Louise Inward and host Vincent Franklin (Rowan the trainer in "The Office")

Congratulations to all nominees and winners for all the awards. Especially to the quiet and unassuming Henry Tapper from First Actuarial, who won two awards.

How we pay for the City (& expensive Red Wine)

I recommend that if you have a funded Pension that you listen to this excellent Radio 4 programme "How You Pay for the City".  

Former fund manager David Pitt- Watson pointed out that excessive charges in the UK compared to  Holland means that the average comparable dutch pension will be 50% more than you would get in the UK.

While the incomparable Mr Colin Meech, UNISON National Officer for Capital Stewardship, thinks that the Local Government Pension Scheme is just being ripped off. He recounted how a colleague who became a fiduciary trustee on a large scheme was shocked to find that the trustee board spent more time being wined (at £100 per bottle!) and dined by fund managers than they spent supervising the scheme. I have heard the same story from that colleague.

It is not just excessive fees by fund managers but also "churn" (excessive buying and selling of stock); stock lending (they lend out your share certificates for a fee), "Custody Banks" (if something is too good to be true...) and "transitional management" (there is a completely shocking story how the Royal Mail Pension fund was cheated and how a judge was told that an untruth was not a lie)

By coincidence we heard similar arguments at the AMNT Summer Conference from Michael Johnson that I posted upon yesterday.

AMNT Summer Newsletter 2013: The Minister, the Researcher, the Polemicist & Red Barry

 Dear Member’s and Friends

The AMNT year so Far

This is our latest email newsletter. 2013 has been an exciting year so far for the AMNT. Our membership has continued to grow. We have made significant contributions to government and regulatory policy on pensions and trusteeship. We have held successful and well attended open meetings and make our presence known by speaking in conferences and writing articles for the pension press.

We have been successful in our fund raising and have now employed an administrator, Kate Bendy, on a part time basis to support the AMNT objectives and our volunteer executive committee.

Pension Minister Steve Webb speaks at AMNT Summer Conference

Picture of our Joint Chair, Janice Turner, with Pension Minister Steve Webb MP, who was the keynote speaker and took part in a Q&A at our Summer Conference, “Where Now The Pension Promise?” on June 26th hosted by Towers Watson.

As well as the minister there was presentation on different pension schemes by members of the AMNT (USS, LGPS & HSBC).

Ewan McGaughey, a researcher from the London School of Economics, described the AMNT as “unique” and “the most important development in Pension Governance in 50 years”! While the ever so quiet and retiring Michael Johnson, research fellow at the Centre for Policy Studies (CPS), gave a well received “Trustees: take no prisoners” speech on “Charging in Pensions”.

All the speeches are now on the AMNT website here

There was also a showing of the new AMNT DC and Auto-enrolment video kindly developed with Barings Asset Manager.

The Anonymous Trustee Question?

Each newsletter we are planning to allow a MNT to post a question on a current issue – if you have an answer for this question then do so on the AMNT LinkedIn site or email mail@amnt.org

“The Final Salary scheme of which I am a Member Trustee has gathered up people from various prior schemes and has endeavoured to match the pension terms that each member had before. So, we have several different ages from which the member may retire without actuarial reduction, many well before their 65th birthday. Trustee consent is required for these early retirements.

This is inevitably quite a large cost to the scheme. We have recently had an actuarial valuation and the sponsoring employer wants the trustees to agree never to consent to these requests for early retirement on these terms, so that this cost may be omitted from the valuation. The trustees have never refused a request for early retirement in the past and indeed have formerly been directed by the sponsoring employer not to do so”.

Has this happened to other pension schemes? What did you do?

Encourage your fellow Member Nominated Trustees (or representatives) to Join the AMNT

Even in this social media world of Facebook, twitter and blogs, by far the best way to recruit someone is still by word of mouth, one to one. So if your fellow MNTs in your scheme are not yet members of the AMNT, please point out the benefits and ask them to join! Check out our revamped website here

Driving down investment charges

An AMNT member wants to do something about investment charges and to see whether we can't drive down charges - or at least reach acceptable standards - for our investments. The concept is that perhaps we may be able to guide members as to what a reasonable charge rate might be for certain asset class investments and not only that but perhaps have more confidence in using more challenging forms of contract - risk reward and so forth.

This is a big subject and it would be very helpful if we could identify a set of AMNT members willing to share some knowledge regarding their experiences on costs and contracts. If you are interested and can help please email mail@amnt.org

£179m of Equitable Life payments owed

The Equitable Life Payment Scheme is asking company pension fund trustees and administrators for their help to make payments of £179 million to their members. Members of the pension scheme that you act for may lose out if you do not take action. 547,000 scheme members are due a payment of 22.4% of their relative financial loss suffered as a result of UK Government maladministration in the regulation of Equitable Life.

As Equitable Life did not hold the addresses for nearly 500,000 company pension scheme members, the Scheme is asking trustees, administrators or authorised representatives of pension schemes that invested in Equitable Life between 1992 and 2000 to share their members’ addresses.

The Payment Scheme has made good progress with most company pension schemes and has received data sharing agreements covering over 400,000 of their members who are due payments of £115 million. This represents 73% of the 547,000 members who are due a payment.

The Payment Scheme is now urging the remaining company pension schemes to return data sharing agreements as soon as possible. Once this is completed, they can provide members’ addresses so the Payment Scheme can write directly to their members to start the payment process.

A list of the company pension schemes that the Payment Scheme has been unable to trace is on the Scheme’s website. Individual members of these schemes can call the Payment Scheme’s policy checker service on 0300 0200 150 to check whether their policies are eligible and find out the next steps to take.

Pension Trustees Circle Seminar

This will take place on Sunday-Monday 29-30 September at The Majestic Hotel, Harrogate. There are currently 2 Pension Trustees Circle (PTC) events in the South East – this will be the first meeting in Northern England. The PTC is for chairs of pension schemes or experienced trustees in pension funds with a minimum of £100m and it is free to attend. In addition, to celebrate the inaugural PTC North meeting and encourage attendance, the organisers are providing free accommodation for approved trustees. if you would like to apply for a place please contact Liz Doughty – liz@spsconferences.com

PMI Qualification in Trusteeship

The AMNT have been researching the possibility of organising training and the exam for the PMI certificate in trusteeship.

We would like to hear from any of our members that would be interested in the training and sitting the exam. If we have enough interest then we will explore setting up the training and the exam. To register your interest please email mail@amnt.org

Dates for the diary – Thursday 26^th September 2013!

Next AMNT open meeting scheduled to be held at Pensions Corporation, London on Thursday September 26th. Further details to follow. We are also planning an event to take place in the House of Commons in November.

Defined Benefit Defence Pack

The latest version of the pack is being updated and we hope to be able to announce a re-launch date soon. In the meanwhile if any AMNT members need advice or support on proposed closures please email DB Working Group Chair, John Gray, (in confidence) at mail@amnt.org

Finally....

Picture (bottom right) of our other Vice Chair of the AMNT, “Red” Barry Parr, on front cover of July 2013 “Pensions Insight” magazine (Shome mishtake, shurely? Ed)

Editor: AMNT Executive member John Gray

Focus on Member Nominated Representation in the LGPS

This is the article I posted on the Pension Social Media site Mallowstreet for a feature they did on trustees. I have been short listed for the annual Mallowstreet Awards for 2013 as "Most Influential Trustee" (2nd year running) and "Top Blogger". 

"I've been a member nominated representative on the Tower Hamlets Local Government Pension Scheme since 1996 (there are no Trustees in the LGPS). I was nominated by my trade union UNISON and have been there ever since. In fact all the original Councillors, Council officers, professional advisers and fund managers have all left apart from me. I am also the admitted body representative.  

There are 101 different LGPS. Collectively they are worth around £130 billion. It is an open defined benefit scheme.  The Tower Hamlets scheme is worth (June) £930 million and has 16,000 members (5,200 active).  There is an investment panel which reports to a Council committee.

The main challenge as a "trustee" is keeping up-to-date with the scheme paperwork and keeping your pension knowledge current. The best part of the role (not really a highlight) is holding your fund managers and advisers to account. Especially with regard to good Governance and other ESG issues. It is surprising how poorly prepared some managers are when they come to present to panel. Even in Beauty Parades you find prospective managers come to see us and they haven't even read our Statement of Investment Principles.

The LGPS is changing dramatically next year with a new set of benefits. Also there are going to be local pensions boards set up in partnership with the trade unions and the employer representatives (elected Councillors). There will be for the first time 50/50 representation on these boards.

I think all member nominated trustees or representatives need more support and independent training. UNISON is planning to offer training and advice to its representatives. The TUC Trustee Network and the Association of Member Nominated Trustees (AMNT) have been really supportive (as of course can be social media sites such as Mallowstreet!).

It can be very difficult as a lay trustee to feel confident enough to challenge your advisers and managers. You need the input of your peers".

Pensions Age article on Rana Plaza Building Collapse.

This is a short article I wrote on behalf of the Associated Member Nominated Trustees (AMNT) for Pensions Age magazine last month (sorry can't find on line link).  See my previous post
on this wholly avoidable mass killing.

"I’m sure that everyone who watched the TV footage of the collapsed Rana Plaza building in Bangladesh would have been shocked and horrified. The death toll is now more than 1100. The reasons for the collapse are unclear but there has been suggestions that alterations to the building were made without official planning permission and allegations of local bribery and corruption.

UK clothing retailer Primark who sold goods produced in this building (which is owned by FTSE 100 Associated British Foods) has offered to help with compensation payments. This is all very good but the question that pension trustees should consider at their next board meeting is this.

Have they done all they can to ensure that the companies they invest and partly own take all reasonable steps to ensure that their supply lines do not profit from potential death traps?

To be clear, the direct responsibility for Rana Plaza lies in the hands of its owners and State authorities. However, as owners of companies that have benefited from the production of cheap clothing we also have a duty.

We need to make sure that our fund managers know that not only do we care about what is done in our name and with our money but we believe it makes long term financial sense that we only do business with companies that can demonstrate they take all their responsibilities seriously".

Local Government Pension Scheme: Past & Future: Reform or Revolution?

Check out this PowerPoint presentation I made on the LGPS to the AMNT open meeting last month.

Auto-enrolment...the AMNT... and the Video

Why it makes complete sense to autoenrole into your Company Pension Scheme.

AMNT at Pensions and Benefits Show (and pros & cons of fiduciary management)

This picture from the Pensions and Benefits show at the Excel Centre in London earlier this month.

The Association of Member Nominated Trustees (AMNT) had a stall during the 2 day event run by AMNT volunteers.

I only managed to pop in briefly during the Wednesday lunchtime to say hello.

Beforehand I went to a presentation on "Fiduciary Management" by MN.

They reported that in June 2007 the average DB pension fund was 124% funded! Now it is only 84%. The Fiduciary Management argument is that they can close this closing gap by pooling investment funds and cut costs and improve performance.

I think there is an argument that scale can achieve this but in the Q&A I questioned why they use the term fiduciary when actually they have no fiduciary duty to pension trustees? Their fiduciary duty is to their owners and shareholders. 

I think that this is a fundamental confusion. On a more positive point I did wonder whether this model could be considered as an option in the consultation currently taking place in the Local Government Pension Scheme? Individual LGPS could remain while they pool fund management?

Pension Minister Steve Webb MP to address AMNT 26 June 2013

Association of Member Nominated Trustees

Pensions Minister Steve Webb MP will be the keynote speaker at our first AMNT Summer Conference which will take place on June 26th 2013, at Towers Watson, 21, Tothill Street, London SW1H 9LL. Some details are still to be finalised, but currently, the day looks like this:

We will begin with registration from 0930, and the main conference starts at 1000.
Steve Webb has agreed to start us off with a keynote speech.

Then Co-Chair Barry Parr will go through the results of our Member Survey.
Bill Trythall (Committee Member) will then talk on "The Universities Superannuation Scheme".

After coffee, Ewan McGaughey will talk on "MNTs in Corporate Governance", then another Member will talk on "A Smaller DC Scheme".

Lunch and networking will be followed by our hosts Towers Watson talking on Current Pension Issues, then John Gray (Committee Member) will present on "London Borough/Local Government Schemes".

Following this, Michael Johnson will speak on "Charging in Pensions".

After a tea break, our Friends will leave us, and we will go into Round Table Debates on Current Pensions Issues with one of our Sponsors leading each table.

A final feedback session will be followed by a closing summary, which is due to finish at 1700.

After the meeting has closed, there will be the usual networking opportunity with drinks provided by our hosts Towers Watson

There are limited places available for this event, so please let us know as soon as possible if you are able to attend. Click on one of the below links and let us know by email, including whether you have any dietary requirements and if you plan to attend for the drinks reception.

Email mail@amnt.org if you wish to send the whole or part of the day at the meeting.

(if you are a member nominated Trustee or representative then join and apply to attend)

Association of Member Nominated Trustees (AMNT) Newsletter May 4th 2013

AMNT Summer Conference –
‘Where Now The Pension Promise?’ June 26th – at
21 Tothill Street, Westminster, SW1H 9LL

We wish to announce our first members’ conference which will be held as above at the premises of Towers Watson one of our sponsors. We hope that this conference will be a little different as we examine the latest in best practise and scheme evolution. It will include presentations from some AMNT Members about their schemes, information from our very own survey of members and thought provoking presentations from some external speakers.

There will also be some round table discussions where we will examine certain issues with our key sponsors. Our members are invited to attend the whole conference free of charge and our industry Friends will also be invited to attend the first parts of the event. There will be good opportunity to network in the breaks.

Mark your diaries now. Full details with agenda and registration details will be issued in a few days time. The outline time for the event is from 10am to 5.00pm.  We would still like to find one or two more interesting case studies from our members own experiences and schemes. If you have something that you think would be interesting for colleagues (and Friends) to hear about your scheme do please contact us now and we will do our best to find a presentation slot. Contact mail@amnt.org initially.

Workplace Pensions Event – Edgbaston – 8-9th May
Have you booked for this event through Engaged Investor or Pensions Insight? Both our co-chairs are on panels at the event:
Barry is part of the panel for ‘Driving DC to the next level’ 13:45 to 14:30 on Day 1
Janice is part of the Trustee Super Panel 15:45 to 16:30 at the end of Day 2
We hope to see many of you there.

Pension and Benefits Show – ExCel Centre – 12-13 June
The very best solutions to pension and employee benefit issues are only discovered when pensions management, benefits management, finance and HR work together. That’s why the NEW Pensions and Benefits Show, on the 12-13 June, will be the ‘must attend’ event of 2013.
Join over 1000 professionals in the Pensions, HR, Benefits and Finance industries, for 50+ conference sessions & workshops, 80+ exhibitors, unrivalled networking opportunities and FREE advice.

NEW FOR 2013 - Free advice and peer-to-peer networking in the P&B Clinic, one-on-one guidance, Partner Insight Lunches, Speed Connections, Ask an Expert Wall and the Boardroom Debate.
The AMNT will have a stand at this event and we invite as many as possible to come and visit us there. Entrance for Trustees is free of charge.
Go to www.pensionsandbenefitsshow.co.uk to find out more.

Are you based in the East Midlands?
Any of our members who are based in the East Midlands are invited to attend meetings of the NAPF East Midlands section. These meetings on topical pension matters are held about five times per year, at premises of members and usually on mid-week afternoons. That said, the very next meeting is a supper to be held at Leicester University on 13th June where the speaker is Phil Stone of the Richard III Society. For more info contact:
Tina.Lane@samworthbrothers.couk
Or Bob.Compton@arcbenefits.co.uk

Pensions Liberation
You are sure to have heard much about this in recent weeks but we didn’t realise it was quite so prevalent until one of our Committee members said that their scheme had 6 suspicious cases under review at the moment. So we have become keen to know how widespread this is and if your scheme has current issues with this we would like to hear more at mail@amnt.org
With this subject in mind our sponsor Sackers has issued a helpful brief:
http://www.sackers.com/documents/publications/alerts/alert_pension_liberation_what_trustees_need_to_know_18_april_2013.html
and there is also the material from the Regulator:
http://www.thepensionsregulator.gov.uk/trustees/pension-liberation-fraud-trustees.aspx

Takeover Code
Are you aware of a new code coming into play from 20th May. Our Sponsor Towers Watson has issued a briefing note:
http://links.mkt304.com/servlet/MailView?ms=NDg4OTQzOQS2&r=NTE2NDkxMjUwOTQS1&j=MTUwNTgwNjM2S0&mt=1&rt=0

Small Pots / Short Service Refunds
And another hot topic. You might find the TW briefing note on this subject helpful also:
http://links.mkt304.com/servlet/MailView?ms=NDg5MDc2OAS2&r=NTE2ODIyNjY0NjUS1&j=MTUwNjE5MzgzS0&mt=1&rt=0

Want to Benchmark Your Scheme?
CEM Benchmarking, one of our Friends provides analyses for about 300 of the largest DB schemes around the world every year – looking in particular at investment costs and their reasonableness in relation to scheme size and asset mix. Last year they presented to an AMNT meeting and were well received.
They are now commencing the analysis of 2012 data and they invite our members to participate (not necessarily just large schemes). They produce two levels of report – a base level is provided free for all participants and a deeper study is provided for those paying a fee. Last year one or two AMNT members did follow up and their schemes made use of the service.
If you have an interest please contact directly:
John Simmonds at JohnS@cembenchmarking.com

Conference – Investment Issues for Maturing Pension Funds 9 July 2013 Le Meridien, Piccadilly
Our Friends SPS have offered us a small number of complimentary places to the above. After looking at the latest thinking on Liability Driven Investment Strategies and Identifying Liability Surrogates, the conference will move on to look at the wider de-risking alternatives including interest rate, longevity hedging and tail risk hedging before reviewing more definitive strategies such as buy-ins, buy-outs and other options.

Sponsors are: AXA Investment Managers, Capula Investment Management, Legal & General Investment Management, Rothesay Life and Russell Investments.

If you would like to attend please contact us initially at mail@amnt.org

A thousand trustees for the LGPS

This is an article I wrote on behalf of the AMNT for Professional Pensions on the future Governance of the Local Government Pension Scheme.

"The Public Sector Pensions Bill is currently on its way back to the House of Commons after being amended by the Lords. One of these amendments, accepted by the government, is that the proposed new Local Government Pension Scheme boards will have 50/50 employer/employee representation.

There are 101 separate council pension funds in the UK. At the moment most of details are still unclear but it is thought that board members will have similar powers and responsibilities as those of trustees in private sector defined benefit schemes.

Most existing LGPS schemes are supervised by elected councillors with often little or none beneficiary representation. If for example it is agreed that these new boards had ten members each, then there is a huge organisational and logistical challenge ahead. It is thought the new governance arrangements are planned to start in April 2014.

While many existing councillors may simply switch from existing committee panels to boards, they will have to be selected, trained and supported in the new arrangements. Employees will in many cases have for the first time the right to representation and full voting rights.

I have been an employee representative on a London LGPS since 1996. At first for many years I was called an "observer" on the pension investment committee. This meant that I had no vote but did have access to papers, attend beauty parades, training and could ask questions to advisors and fund managers. This changed and now I and one other employee representative have two seats and voting rights on the investment panel and a seat but without voting rights on the formal council pension committee.

I would point out that we have never felt the need to actually force a vote at investment panel. Like the vast majority of private sector pension trustee meetings, issues are best dealt with by consensus whenever possible. I don't expect that to change with 50/50 representation.

This is a huge step change for employees and the local government trade union Unison is already planning an ambitious recruitment and training programme for representatives. With a 19.5% total contribution cap it is now very much in the interests of employees and employers to make sure the fund is well run and efficient.

Professional advisers and fund managers will also have change the way they do business with the LGPS. The issue of the merger of LGPS is separate.

Everything will have to change to some degree. I am also an employer trustee on a private DB scheme and it has been a very different experience to that in the LGPS.

It is vital that we get the LGPS governance arrangements right. Not only are four million people in the UK members but it is collectively the biggest funded pension scheme in the UK with around £150bn in assets. Meanwhile some senior members of the government have privately referred to the LGPS as the British sovereign wealth fund and hope it will invest more in housing and infrastructure to kick start the economy.

The AMNT welcomes this development which puts to rest this governance anomaly between public and private funded DB. Can the government now tackle the appalling governance gap in contract-based defined contribution schemes?

John Gray is chairman of the AMNT DB working group"

AMNT Open Meeting March 20th at AXA

Dear Member,

The next AMNT Open Meeting will take place on the afternoon of March 20th at AXA’s London offices, 7 Newgate Street, London, EC1A 7NX. Please do try to come along, though spaces are limited so book your place early to avoid disappointment.

The day will begin at 1100 am with a group training session on one of the latest modules of the Pensions Regulator’s Trustee Toolkit - strategic investment, This follows on from the fund management module we discussed at the last Open Meeting back in December. If you have not already completed these modules, these group discussions are a great way to find your way through.

A buffet lunch will be served at 12.30pm, which members are welcome to attend whether they have been to the morning training session or not.

The main open meeting will take place between 1.30pm and 5.30pm starting with an update of recent AMNT activity, including John Gray’s DB Defence Pack, which is aimed at helping trustees of DB schemes that are faced with closure.

Janice Turner will then go through a recent AMNT submission on smoothing which she has been leading. This will be followed by a presentation by our hosts AXA on how various overseas countries have approached the question of smoothing.

After a break for tea, Colin Meach will give a presentation on recent developments in Public Sector Pensions

Finally, the day will conclude with Robert Inglis, a Project Director from the Financial Reporting Council, explaining Technical Actuarial Standards (TASs), which have been in force for almost three years and getting feedback from the floor.

After the meeting has closed, there will be the usual networking opportunity with drinks provided by our hosts AXA

There are limited places available for this event, so please let us know as soon as possible if you are able to attend. Click on one of the below links and let us know by email, including whether you have any dietary requirements if you plan to attend for the buffet lunch.

- Click here to join the AMNT

 - Click here if you would like to attend for the whole day, including Trustee Toolkit training, lunch, AGM and open meeting.
- Click here if you would like to attend part of the day (please specify which part/s).
- Click here if you are unavailable to attend any session on the day.

 Kind regards,
AMNT Committee

The one spark of possible good news for Pension funds (buried amongst the misery of Osborne's statement)

"Discount rate consultation decision could be a lifeline for DB schemes says the AMNT"

The Association of Member Nominated Trustees (AMNT) has expressed its full backing of the decision of the Department for Work and Pensions to move forward with a consultation on discount rate smoothing, announced in yesterday’s statement by Chancellor George Osborne.

Janice Turner, co-chair of AMNT, said: “This has been one of the key campaigns run by the AMNT throughout the two years of its existence and is what long-suffering DB pension scheme trustees have been desperate to hear. The prolonged recession has left trustees and employers facing unprecedented circumstances with deficits so volatile that countless DB schemes have closed and, in some cases, even toppled their sponsor company into closure.

“It is very pleasing that Steve Webb has been the first Pensions Minister to grasp this particularly painful nettle, where others before would not. It is now important, however, that the process should not be dragged out as a stalling mechanism whilst more open DB schemes close. The AMNT will now be working very hard in the coming months to put forward and argue strongly for a responsible alternative to the current unworkable regulations.

Turner continued: “The result of this consultation could be that billions are wiped away from DB pension scheme deficits leaving companies better able to invest in their own businesses. It could be a lifeline for DB pension schemes and aid the recovery of the British economy. For this reason we hope that those thinking about scheme closure will seriously consider awaiting the results of this consultation before taking any permanent decisions on the future of their scheme.”
-ENDS –

Updated AMNT press release. 

My take on this is that it is estimated that the introduction of smoothing and other measures proposed could improve the funding position of defined benefit pensions schemes by 20-30%.  So it is inconceivable that any pension fund should carry on with any plans for closures until the enquiry is concluded. 

TUC Pension Trustee 12: "Tools For Challenging Scheme Closures"

After the opening speeches at last weeks TUC Pension Trustee Conference 2012, I went to the "Tools for Challenging Scheme Closures" workshop led by Hilary Salt from First Actuarial & Neil Walsh, Pensions officer at Prospect.

This workshop, is of course, right up my street. Decent defined benefit schemes are being closed down completely unnecessarily and being replaced usually with third rate, inadequate alternatives which will result in employees being dependant on the state when they retire and then dying in poverty.

The first tool they described is a "tape measure". How you measure your pension liabilities? At the moment the tape measure used (the yield in Government loans called gilts) is broken. Due to Quantitative easing and the so called "flight to quality" from the weaker Eurozone countries, gilt yields in the UK are not only historically low but even negative. Pension liabilities may have increased during the last 12 months but nothing has really really changed. It is the broken tape measure.

There are a number of things should be considered long before closure :- tiered contribution levels, changes in retirement age, CARE (career average) rather than Final Salary, reducing  accruals, longevity adjustments, caps on salary, inflation measure, contract back into SSP, Cash balance schemes, hybrid DB/DC etc.

Trustees should also consider the "Sledgehammer" approach of winding up schemes if closed.

All schemes are different and trustees must refer to the trust rules and make sure they get truly independent advice. If contributions have to go up then time with any pay rises and consider salary sacrifice.

CARE schemes are not only fairer but if risk is the real driver for the employer to close the scheme rather than cost then they will reduce salary risk. Consider risk sharing such as contribution caps.

In the Q&A I asked about the argument that closing schemes did not get rid of the deficit and that they can make things worse. Hilary said that this can be true and that a closed defined benefit scheme can be as inefficient as defined contribution schemes. They become like annuities invested solely in gilts and cash.

Hilary has recently written an excellent booklet for the TUC on "The Future of Defined Benefit Schemes" here.

While the Association of Member Nominated Trustees (AMNT) will be producing their own guide on what to do if your employer tries to close your scheme on December 11 at our AGM. 

Council pensions, mergers and the infrastructure cacophony

(this is an article I wrote for Professional Pensions which was published yesterday on behalf of the AMNT. An earlier John's Labour Blog version is here).

"Recently Sir Merrick Cockell, Chair of the Local Government Association announced that he personally supported the merger of the 101 different Local Government Pension Schemes (LGPS) into 5 “super schemes” each worth around £30 billion each.

He was being interviewed about a report from The Future Homes Commission on the need for investment in residential property. He argued that to invest in such infrastructure you need massive scale. There are claims that this merger and investment could result in 300,000 more homes being built every year with 15% of pension assets being invested

His comments are likely to be more than a little controversial in the sedate world of Council pension funds.  Merger is controversial. Some funds have consistently argued for merger in the past not only to enable infrastructure investment but to increase returns and slash costs. Others say "rubbish", bigger doesn't mean better and small is often beautiful (and more democratic and responsive).  The fragmentation of pension funds in the private sector is also far worse.

Yet, the governance concern about these proposals is even more significant than a spat over size.

As a LGPS member nominated representative I have been in favour of looking into the merits of merging Council pensions schemes for many years. Also investing in rented residential properties as an asset class with the prospect of long term inflation linked returns has always seemed attractive.

But remember pension funds must be run in the interests of the scheme beneficiaries and not make up for an inadequate state housing policy or the need to stimulate demand in the wider economy.

Have Councils in favour or opposed to merger actually consulted beforehand on this issue with their beneficiaries? Why is the government being let off the hock and not asked for guarantees?

The local government trade unions have quite rightly objected to this plan which was made without any consultation with them.  There is a planned cap on employer contributions to the LGPS so if this infrastructure investment goes belly up then active beneficiaries will be left to pick up the pieces.

15% is a very significant amount of assets to invest in any one class. Nothing in life is risk free. There is an obvious risk of property price crashes or even that future housing benefit cuts could derail plans.  Hundreds of organisations are cited as contributing to the Future Homes report but there is no input from those whose money it is being proposed should be put at risk?

For this still worthy proposal to have any legs there needs to be firstly proper consultation with the representatives of scheme beneficiaries on why this is good for them and then the drawing up of a business plan as water tight as possible".

Update: The Government are now consulting on plans to allow Council Pensions to invest up to 30% of its assets in infrastructure? Up from the existing limit of 15%. Hello, 30%! What is going on here?

AMNT newsletter October 2012 - meeting review; Fair Pensions invitation; Pensions Regulator message

- Download the reports presented at our last meeting
- Invitation from Fair Pensions during Living Wage Week
- Message to you from the Regulator

Dear member,

Last month’s AMNT members’ meeting was a success, with informative presentations and discussions on the thorny issue of investment management fees.

The meeting began with an overview of recent association activity from the co-chairs, Janice Turner and Barry Parr.


Barry explained how our efforts to sign up sponsors has been progressing well, with a couple of companies already signed up and a few more well on the way. We hope to provide you with full details of these when they are confirmed.

 



We then heard from Janice how the AMNT’s campaign to promote smoothing of DB discount rates was going well, with national press coverage and positive feedback from the pensions minister, Steve Webb.

 

There was then a presentation by Hari Mann of the RSA, who has worked with David Pitt-Watson on an influential report looking at the lack of transparency within investment management charges and how this can be damaging to pension savers.

 

The paper can be downloaded by clicking here, and the RSA’s other publications can be accessed by clicking here. Committee member John Gray’s review of Hari’s talk can be found by clicking here.

 

This was followed by a talk by John Simmonds of CEM Benchmarking. The company undertakes research into investment fees paid by pension schemes. His presentation can by found by clicking here.

 

CEM has offered AMNT members the chance to take part in their ongoing research. Schemes that take part will be entitled to a free personalised report. An example of such a report can be found by clicking here.

 



As an example of the type of information CEM would require, an example survey questionnaire can be found by clicking here. For more information on how to take part, contact John Simmonds by emailing johns@cembenchmarking.com.

Invitation from Fair Pensions

AMNT member Catherine Howarth, who is also chief executive of lobby group Fair Pensions, has sent the following invitation to members:

I would like to invite you to an event during Living Wage Week for pension trustees and other investors in FTSE 100 companies. The event, which is kindly hosted by Aviva Investors and in conjunction with the Living Wage Foundation, will mark 18 months since the launch of a collaborative investor initiative to promote Living Wage standards in the UK’s largest private companies.

The event will be an opportunity to hear from FTSE 100s that have become Living Wage employers as well as from a variety of investors who are supportive of the standards. It will be a chance to learn about the practicalities of implementation and about employer accreditation.

In May 2011, a £13bn coalition of institutional investors wrote jointly to the CEOs of the FTSE 100 inviting them to adopt Living Wage standards across their UK operations. Since then a productive dialogue between companies and their investors has developed on this topic, and a growing number of companies has either made progress towards Living Wage standards or has fully adopted and implemented them.

This event on November 5 will be part of Living Wage Week, which will see a range of events held across the country to celebrate the growing profile and uptake of Living Wage standards as a mark of organisational responsibility. The week begins on Monday morning with an announcement by Mayor Boris Johnson of the new London rate.

I very much hope that you will be able to join us. All members of the AMNT would be very welcome and it would be great to talk about whether you could notify people in the network. Please RSVP to Tom Scott (tom.scott@fairpensions.org.uk).

Pensions Regulator record-keeping message

We have also been contacted by the Pensions Regulator, who have written the following message for members:

In 2010, The Pensions Regulator set specific targets regarding ‘common data’ – such as name, address and date of birth – and gave trustees until the end of 2012 to achieve this.
 
The targets required that of these common data items:
 
- 100% should be in place for member data created after the beginning of June 2010
- 95% should be in place for member data created before June 2010.
 
By now, the regulator expects schemes to have taken significant steps to meet these targets. These steps include measuring their scheme data, and having a corrective plan in place where that data is found to be poor. Scheme administrators are ready to work with trustees on this, and failing to take action may lead to a breach of internal control requirements.
 
More information on record-keeping is available on the regulator’s website, including regulatory guidance, online learning resources and a new checklist for trustees.
 
To learn more about how poor data and record-keeping can impact schemes, join regulator staff in a 45-minute webinar at 11am on Tuesday October 16.
 
Regulatory case and policy leaders Victoria Holmes and Louise Hallard will discuss the risks of poor data as well as what action trustees should take now.  Places on the webinar are limited, so register now to reserve your place.
 
You can get on the regulator’s website by clicking here. You can also register for the webinar by clicking here.

Kind regards, AMNT Committee

Dr Hari Mann: RSA Tomorrow's Investor programme

Dr Mann was the first speaker at last weeks meeting of the Association of Member Nominated Trustees (AMNT).

He spoke about the 4 year research programme into investments by the Royal Society Arts/Tomorrow's Investor Programme. He and co-author David Pitt-Watson published this report in July on Collective Pensions. 

His key theme was the high cost of many defined contribution pension schemes and the lack of transparency over charges. He prefers the Danish model where you find clear cost transparency which allows market forces to work effectively and drive down charges. In the UK the pension annual management charge does not include all costs. Some schemes charge up to 5% of contributions.

 

While it is clear that due to cost well designed Collective DC schemes are far better than individual DC. They are still clearly inferior than Defined Benefit schemes and always will, be since the risk in all forms of DC, remains with the employees. Also the return from pension annuities is so miserable that you need to save huge amounts in order to receive a decent income from DC.

 

Surely there is no getting away from it that it is better to retain (and reform when necessary) DB schemes? The real problem with DB is not that it is unaffordable but that of outdated accounting standards and the resulting volatility in valuations?

'Find it, Get it, Get rid of It' Argos staff Pension scheme

 Workers at retail giant Argos have started 4 days of strike action to save their pension scheme from closure.

Unite reports that "1,200 drivers and warehousemen have been on strike this week at the Argos distribution centres at Basildon, Bridgewater, Lutterworth in Leicestershire,
Heywood in Lancashire and Castleford".

They have been striking since Wednesday and the strike ends at 6.00am on Monday (24 September). Argos want to close their defined benefit scheme and replace it with a money
purchase (defined contribution) scheme worth 50% less.

I haven't got all the full details but it seems so far that Argus are claiming they have to close because the scheme is in "deficit".  This excuse is usually rubbish. 

If your employer claims that it has to close its pension scheme then firstly consider the following "Rules" (Excuse me for SHOUTING but it is important).

 

Rule Number One: Closing your pension scheme DOES NOT GET RID OF THE DEFICIT it could MAKE IT WORSE! If you have a deficit then it still remains on the Company books even if you close it to future contributions.

 

If you close the scheme you have no new money coming in and have to sell your best investments to pay existing pensioners. This is crazy. All you do is hand out a blank cheque to your advisers to run a smaller and smaller, ever more expensive liability with little or no chance of any upturn.

 

Rule Number Two: Your so-called pension deficit figure IS NOT REAL, it is measured in "FUNNY MONEY". Pension deficits are worked out according to something called "mark to market" accounting. Which is completely lala.

 

The deficit for many schemes can vary day to day, week to week, month to month, by millions and millions (and even more for bigger schemes) of pounds, regardless of the real strengths of the fund.

 

Not only that but many schemes are valued according to the interest rate of UK government loans called "gilts" (don't ask). Due to the current completely bonkers Alice in Wonderland economy, these gilts return are currently at a 200 year low, yet they are still used to decide whether your pension scheme is in good shape or not! MADNESS.

 

The Government Pension Minster, the Bank of England, the CBI all recognise that this is nonsense and things will have to change, but so far they have done nothing. But why close your scheme forever, when you know that its rules will change soon, for the better!!!

 

Rule Number Three: Unless your employer contributes enough money into a decent pension scheme you and your spouse will retire and DIE IN MISERABLE POVERTY.

 

There are Rules Number Four/Five/Six or even Seven: but they don't really matter. Rule Number Three trumps them all.

 

There is more stuff workers and trustees can use. The AMNT will be publishing a detailed guide to help trustees defend their scheme soon. We will also give personal help and support to any AMNT member trustees facing this problem.

 

Good luck to the Argos strikers fighting to defend their futures.

mallowstreet pension Awards (& Oct 20)

Last night I went to the very successful mallowstreet 2012 Awards bash near London Bridge. Mallowstreet is a pension social media site which I became a member via the AMNT.

I was up for "the most influential trustee award". There is a little bit of flannel being nominated in these sort of awards but its nice flannel.

Chris Wagstaff from Aviva Staff Pension Scheme deservedly took the award but I had a very good evening and on our table we put the pension world to rights around the possible consolidation of funds and investment in affordable housing.

I was tweeting during the evening and everyone's tweets on the hashtag #msawards were shown on screens around the hall. I was asked what my twitter "avatar" (picture on my account) was about? I explained that I had put on it a poster for the TUC "March for a Future that Works" on 20 October (see top of this blog). Stunned silence.

Perhaps I should suggest that mallowstreet organises a City pension contingency to take part in demo on 20 October? They could march behind a Keynesian banner which said "let us spend ourselves into prosperity". They could also chant "what do we want: Infrastructure spending now!"

 

If they did I actually think there would be a good turnout. Go on Dawid...