Too poor to retire? Work until you drop under the Tories

Great video from TUC Touchstone showing Senior policy officer Richard Excell  explaining the state we are in - "September’s employment figures showed the number of people in employment rising. However, I’ve recorded this video to show that this increase is entirely due to rising numbers of people over retirement age in employment, many of whom cannot afford to retire. At the same time, average wages are falling in real terms, and living standards are falling".

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".

Roll of Retail Shame: River Island, Matalan, Bench, Bank Fashion, Peacocks, Jane Norman, Republic and Mexx.

I've just sent an email via the TUC Going to Work website to the shameful 8 UK retailers who have refused to sign the international "Accord on Fire and Building Safety in Bangladesh".

I am sure that most people will remember the Rana Plaza building collaspe in April when over 1200 workers were crushed to death.

"The Accord commits companies to fund an independent safety inspection body that will involve workers in the process, through their unions, and to make long term deals with suppliers, offering more secure employment and training for workers. As such it represents a big deal for Bangladeshi workers".

The website has some clever software by which you can email the Shameful 8 and ask them to sign the Accord. There is a standard message you can send but you can also personalise it which may prove more effective. This is what I sent :-

"Dear Sir/Madam

I am a Councillor in the London Borough of Newham and I have also worked in Tower Hamlets for the past 20 years. Both boroughs have large Bangladesh communities.

I am horrified that your company has not signed the UNI accord and you are exploiting workers in Bangladesh and putting them at risk by making your clothes in potential death traps.

I understand that you are a private company but I will be contacting the Pension funds of Newham and Tower Hamlets Council to see if they have any investments in your company. The reputational damage and risk to your brand by not signing the Accord is huge.

I hope you reconsider your immoral and economically damaging decision".

Please click here to send your own message and encourage the sharing of this information. Also next time you go shopping just think about these brands and remember the rows of dead and disfigured bodies you saw on TV after the collapse. If your friends or family wear clothes from those stores who refuse to sign up to the Accord just remind them of the true cost of cheap fashion.... River Island, Matalan, Bench, Bank Fashion, Peacocks, Jane Norman, Republic and Mexx.

The President of the Bangladeshi National Garment workers Federation Amirul Haque Amin is speaking tomorrow at the start of the TUC Congress.

Why most Company Personal Pensions schemes are so rubbish

If you want to know why Defined Contributions (DC) Pension Schemes are usually so rubbish compared to Defined Benefit (DB) then this Office for National Statistics (ONS) chart will give you a clue.

Not only are all non trust based UK DC schemes lacking in governance they all have uncertain outcomes,  are often expensive and most will simply not deliver for their  members.

Many of whom will have to work until they drop or retire into and then die in poverty.

While Defined Benefits schemes are nearly always better for employees than any alternatives, the main reason they are so is employer contribution levels. Average DB employer contribution is 14.2% (not at all an unrealistic level in my view) while in a DC it is an inadequate 6.6%.

I would guess that under auto-enrolment (a good thing but employer contribution only has to be 3%) will bring the average DC contribution level even further down. The current rock bottom annuity rates are making things even worse.

An old rule of thumb in pensions is that you need to be putting in at least 15-20% of your wages (employee and employer contributions combined) for 40 years to aim for a pension of 50% and a lump sum.

UNISON LGPS Seminar "Governance, Economics and Performance"

There are still places available (you have to be UNISON LGPS member and I assume apply to your branch/region/scheme for any travel/accommodation costs)

National Seminar: Local Government Pension Scheme (LGPS)

Governance, Economics and Performance

Monday 30^th September 2013 - 10.30am to 3.30pm

UNISON Centre – 130 Euston Road, London

The union’s Capital Stewardship Programme is holding a seminar for all regions and branches on the governance and economics of the LGPS. There are major reforms being proposed by the government for the management and organisation of the LGPS funds in England and Wales.

These can be found here on the UNISON web site http://www.unison.org.uk/at-work/local-government/key-issues/pension-power/resources/

The union has began a major organising campaign to discuss how best regions and branches can respond to these reforms.

Subjects for presentation include

• Public Services Pension Act and the LGPS
• How are the LGPS funds currently governed and UNISON proposals for change
• UNISON plan to meet the organising challenge of governance reform
• Economic performance of the LGPS funds
• Costs, structure and mergers – a panel debate – external speakers offer their views
• Responsible investment – in and outside the LGPS – a panel discussion

Email for registration form m.roper@unison.co.uk

Best wishes

Colin Meech, National Officer, Capital Stewardship Programme

More nonsense about Pension fund deficits

Last week Inside Housing contacted me about the latest report warning members of the Social Housing Pension Scheme (SHPS) that it's deficit (put simply the difference between assets held by the scheme and its "liabilities") has grown again.

The investments in the SHPS have actually been doing pretty well. While it is practically impossible to get information about SHPS from its web site,  the parent body "The Pension Trust" saw net investment income grow by over £400 million last year. This positive information is hardly ever reported.

Instead the emphasis is always on the "deficit". Which I keep repeating is calculated in an outdated and increasingly meaningless manner.  Now, this argument is not as complicated as it seems. Bear with me a little on this.

The "deficit" is calculated by reference to the yield (return) of government bonds called gilts. Due to fears over the survival of the Euro and government bonds in some parts of Europe and the so-called Quantitative Easing programme (the mass buying up of gilts by the Bank of England aka "QE"). Gilt yields are at a 200 year historic low. The lower the yield the higher the deficit. The pensions fundamentals haven't suddenly changed. It's just the way they calculate the deficit.This also leads to wild volatility in pension deficits which can double or half in a matter of weeks.

So even if your investments are doing okay and there has been no sudden change in any other material factors such as life expectancy, due to changes in gilts your scheme is somehow in "trouble" and you have to raise contributions, close the scheme or reduce benefits?

This isn't just the SHPS, it is practically all defined benefit (DB) pension schemes that suffer from these "Alice in Wonderland" calculations.

Picture above of typical DB trustee meeting when discussing latest "deficit" projections.

A Minimum Wage, A Living Wage or Fair Pay for All?

The introduction of the National Minimum Wage was one of the great successes of the last Labour Government and trade unions such as UNISON who had pushed long and hard for it.

So successful that we now take it a little for granted and forget the huge opposition from the Tories who claimed that it would lead to business failures and mass unemployment.

While a national minimum wage of £6.19 per hour is far, far better than no minimum, it is simply not enough to live on. It is poverty pay. The vast majority of workers on minimum wage will also need to have their wages topped up by the State in housing benefit or family tax credit.  

The idea of a "Living wage" is the amount needed to "let workers lead a decent life". It is currently £7.45ph (and £8.55 ph in London).  Accountancy firm KPMG recently estimated that 20% of workers (5 million) are paid less than a Living wage.

Labour Leader Ed Miliband is in favour of making the Living wage compulsory in the public sector and in their procurement practices. He also believes in naming and shaming other companies that don't pay a living wage.

If this happened it would be a fantastic news for the low paid and also the British tax payers since we will not have to subsidise many poverty pay employers. It would also result in a welcome boast in demand for the British economy.

Yet, at the risk of being churlish, is even a "Living Wage" - not enough?

If you are on a Living wage but become sick and have no income protection you will immediately fall back into poverty. If you retire and have no company pension you will also fall back into poverty in old age. If you are on a Living wage but are on a Zero hour (or Bank) contract and have no employment protection, how can you live a "decent life" with no security? Ed Miliband is also  in favour of restricting Zero Hour Contracts. It has been estimated that there could be as many as one million workers on such contracts. 

What about those traditional low pay sectors which can actually afford to pay more than just a living wage and also pay decent sick pay and a pension?

So what about the concept of "Fair Pay". This is a recognised goal of the International Labour Organisation (ILO). Your pay should not be just about your wage but also about sick pay, holidays, overtime, pensions and employment protection.   There are some private companies competing for public sector contracts who would quite happily pay £7.45 per hour if they did not have to pay for decent sickness protection and pensions.

On the other hand today I met up with my lovely niece, her partner and their young family.  She works as a care assistant in a privately run mental health project. She loves her job but is on the minimum wage and on a zero hour contract. She does not receive holiday pay (which I need to check) and also cannot get family tax credit because she is on a zero hours contract.  She only gets statutory sickness benefits and no pension. Due to her income she is likely not to be eligible to be auto-enrolled into a pension. 

If she was to get a Living wage and an extra £1.26 per hour it would transform her family finances but since she does not know from day to day what hours she will work and has no security of employment, it would still be practically impossible for her to make plans for her future. 

The answer to such poverty pay and conditions is that the next Labour Government must be as brave and as radical on this and other issues as its predecessor in 1945.  While in the long run the best protector of decent pay and conditions are the trade unions. Post 2015 Labour should impose Fair Pay for All.  A living wage, living sickness benefits, living pension and employment security for all. While at the same time introduce binding sectoral bargaining agreements between unions and employers for those sectors which can afford to pay more than a Living wage.

While this will save the Government money by reducing the state subsidy on poverty employers and increasing demand in the economy, it will lets not fool ourselves, cost more, especially in the public sector. This is a price worth paying and will need to be paid for by increases in progressive tax rates on those who can afford to pay more. 

I think to win the next General Election and get rid of the Tories we need to be honest with the public and also offer a genuine alternative. I asked my niece today if she voted in the last General Election. She admitted she didn't. I also asked if she thought the next Labour Government would ensure she would get a Living wage and security in employment would she vote for them? She said Yes. Her current MP is a Tory with a majority of just over 3000.

Hat tip picture to Pay Up Sainsburys.

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

Why the Archbishop is wrong over pension investing in Wonga

I think that the Archbishop of Canterbury is a decent, honourable man and I certainly support his campaign for the Church of England to help credit unions compete and drive Wonga out of the payday loan business.

It was obviously embarrassing for him to find out a day after the launch of his campaign that his £5.5 billion Church pension fund had a small investment in Wonga but I think he was wrong to call for its disinvestment.  Wonga has a despicable business model based on ripping off its vulnerable customer base but hey, "welcome to capitalism", this is what happens when you get poor corporate governance of a company coupled with wholly inadequate state regulation.

Engagement by responsible investors with the companies they own is key. If the Church of England pension fund just sells up and leaves every company it has a problem with then this will just undermine other responsible owners who may be trying to change it for the better.

According to this BBC report the Church Pension fund can already invest in companies that benefit from "3% of their income from pornography, 10% from military products and services, or 25% from other industries such as gambling, alcohol and high interest rate lenders". 

What the Church pension fund should be doing (and to be fair it does good work on this already) is working with other responsible investors in trying to challenge and change their business practices.

Engagement does have its limits. Last Wednesday evening I went to a social event run by the pension website Mallowstreet. I had a discussion with people present who support engagement but believe that fund managers should be allowed to invest in any publicly quoted company that complies with the law. I disagree. There must be the exception that proves the rule. What do you do with a company or market that engagement has just totally failed? Engagement must have some bite and as a last resort - disinvestment must be a final option. I think of South Africa in the 1980's and the worldwide Tobacco industry now.

The £35 Billion of Pension Tax Relief being Ripped off by the Rich?

The British State quite rightly gives significant tax relief to subsidise pension provision. So why is it that recent research shows that the richest 1% of our society get 17% of all tax relief while the majority of basic rate tax payers only get less than a 1/3rd?

Why do the low paid have to contribute more to their pensions than the high paid? The person who cleans the Chief Executive's office has to pay more out of their income for their pension than their highly paid boss. In an era when there was decent guaranteed pensions this might have been a price worth paying but now it is simply a rip off of the poor for the rich.  The £34 billion of pension tax relief should be shared fairly.

BTW Why don't the right wing groups such as the Tax Evaders Alliance kick off about this? Is it because many of their funder's benefit from this tax rip off?

"Commenting on new pension tax relief research...by the Pensions Policy Institute (PPI), TUC General Secretary Frances O'Grady said:

'Tax relief is an important way to encourage pension saving but the benefits are currently far too skewed towards the very wealthy.

'It cannot be right that basic rate taxpayers make the majority of all pension contributions but receive less than a third of the total tax relief budget. Additional rate taxpayers, who earn at least £150,000 and represent the top one per cent of earners, receive 17 per cent of all tax relief.

'The PPI report also highlights a serious flaw in the current tax relief system, with many people receiving relief at the higher or additional rate, but then becoming basic rate taxpayers in retirement.

'Hundreds of thousands of wealthy pensioners are likely to be benefiting from this anomaly, having effectively avoided income tax on a portion of their earnings during their working life.

'With the cost of pensions tax relief set to rise to £35bn a year, the case for a simpler, fairer system is stronger than ever.'

The report analyses a number of proposals to reform pensions tax relief, including the introduction of a flat rate for tax relief and a cash limit on lump sums in retirement that are eligible for tax relief.

Frances O'Grady added: 'The TUC fully backs the proposal to set a flat rate of tax relief at 30 per cent. This would transfer some of the benefits from the very wealthy to lower and middle income earners without any additional cost to the Exchequer.

'Tax relief on lump sum payments is even more skewed towards the super rich, with the two per cent of lump sums worth over £150,000 accounting for almost a third of all expenditure.

'The government must consider a cash limit on lump sum tax relief. A limit of £36,000 would halve the cost of tax relief without affecting the vast majority of pension savers.'

Key facts from the PPI report:
More than half of all pension contributions are made by basic rate taxpayers, who receive less than a third of pension tax relief.
Higher rate taxpayers contribute only 37 per cent of all pension contributions yet receive the majority of tax relief.
Additional rate taxpayers contribute 9 per cent and receive 17 per cent.

- The PPI research can be downloaded from www.pensionspolicyinstitute.org.uk - The TUC has part-sponsored the PPI research, along with Age UK, Partnership and The Institute and Faculty of Actuaries

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".

UNISON Labour Link Forum 2013 - "Decent Pensions for All"

I was unable to go to this years' UNISON National Labour Link forum since it clashed with my local Councillor selection hustings (I was reselected as a candidate for West Ham ward in 2014).  Which is a great shame and the first one I have missed in years.

Top Greater London Regional Labour Link elected rep, Linda Bentley, moved our London region motion "Decent Pensions for All" which was passed overwhelmingly by the Forum.  Below is her speech.

"Forum, private and not for profit employers providing public services up and down the country are getting rid of their guaranteed defined benefit pensions schemes - and replacing them often with grossly inferior and insecure pensions.

Sodexo, The Pension Trust, G4S, the Social Housing Pension fund and even the national charity Barnardos

While other employers are planning huge hikes in pension contributions for our members if they want their schemes to remain open. This will in many cases lead to the schemes being unaffordable to members - who will just leave. - Which of course means that these schemes as well will simply close.

Forum, we must oppose these closures not only because we want our members to retire in dignity and not die in poverty. But Forum, our members are being conned out of their pensions by the financial services industry.

They say guaranteed pensions are too expensive? This is nonsense. The way they price pensions is outdated and simply wrong. They price so called pensions deficits by reference to the price of government bonds called gilts. Due to the current economic crisis these gilts are at a 200 year low. But why is this 200 year low price is still used to justify closures?

Forum, modern guaranteed defined pensions are as affordable now as they have ever been. For example the cost to employers of the Local Government Pension Scheme is fixed at 13% of wages. That is not unaffordable.

One other thing forum. Why don’t unions in this country help provide pensions as they do in many other countries? Is one reason why members in private companies won’t join a pension scheme is because they just don’t trust the financial services industry? Isn’t the provision of pensions something the labour movement should be at least looking at?

Finally Forum, in my view if guaranteed defined pensions schemes like mine only remain in the traditional public sector then our pensions will never be safe. We must have guaranteed pensions in the private sector – we must have decent pensions for all".

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?

How to allocate a £1 billion of pension assets?

Picture is from an unusual meeting held recently with other members of Newham Pension Committee on fund "asset allocation".

What types of investments you should allocate pension fund money into is arguably the most important decision that a board or trustees can make. Far more important than deciding who you employ to manage the funds day to day or even how much they charge.

Depending on your fund requirements, if you say decide to invest too much money in high risk equities rather than lower risk bonds it could have a devastating impact. Conversely if your fund really needs to take more risk and you think the economic outlook is right, then it can have a very negative effect if you opt for the safe options.

Newham decided that instead of having the usual type of review meeting meeting, where our fund advisers will  present  issues and options to the Committee who will then be expected to make a decision - to try something different. So the fund officers organised a special "round table" meeting and invited different City professionals and the Committee members (including the trade union reps) to debate and argue what should be our asset allocation fundamentals.

There was  a robust but productive wide exchange of views and I think all committee members went away with a much better understanding of the problems and possible solutions than a dry presentation. Good stuff. I recommend other pension schemes should consider doing the same. (picture of me with Cllr Ayesha Chowdhury and UNISON pension rep Gloria Hanson)

Yes Google is evil..so are Amazon, Starbucks and all such tax thieves

I was at a pension trustee meeting a little while ago where I was criticised for bringing up our share holding in companies who don't pay their fair share in taxes. I was told that it was the duty of such companies to reduce their exposure to all taxes.

I disagreed and while I didn't express my true views that these companies are spongers who steal from the old and the sick. I did point out that we expect companies we invest in to be well managed, aware of risk and run with integrity.

There is a balancing act to be made by companies on minimising their taxes while recognising they have a duty to pay towards in public services and infrastructure they rely on to run their company in the UK.

The negative publicity and financial damage to the brand if they misbehave is also immense. 

If they get this balance wrong then the CEO and the Board are simply incompetent as well as immoral and not fit and proper people to run the company.

"Chavs", "lazy thinking" and Pension investments into Social Housing

A couple of weeks ago Pension Weekly published this useful article on "The risks and rewards of social housing".

I've been a pension trustee (of sorts) for about 16 years and during this time I have asked various property fund managers and professional advisers "why don't we invest in social housing?"

To which I have had a number of different replies, most of which have not been that convincing to be honest.

Why is there this apparent mismatch between  social housing providers who say that there is not enough investment available for them to build while pension funds say there is inadequate opportunities to invest in such long term stable investments linked to inflation?

Usually the first response from a fund manager to my question is a blank look, followed by a little bit of waffle about how their current property portfolio is so good then saying this is a "very good question" and that they will speak to their people and get back to me (they don't).

However, over the years I have been told that there is a "reputational risk" if a pension fund invests in social housing since the fund agents may have to evict residents for non payment of rent etc. Well, Councils for example already evict tenants for non payment of rent up and down the country yet they still run pension schemes?

At a drinks reception after a pension conference (I admit not a reliable source for information) I was told by a property fund manager that  no one invests in social housing because of the risk that "chavs" would turn up at their posh City HQ demanding that they fix their leaking central heating!

Only once or twice have I heard the argument that the return from investing in social housing is not good enough compared to other asset classes.  Now this is a real argument but rather odd since pension funds normally invest in a range of investments with variable returns in order to spread risk. I also understand that the yields from bonds issued from housing associations are far greater than gilts or other bonds?

I am also aware that it may be possible to get a greater possible return from an investment by a pension fund if it was able to share in the capital appreciation of new build social housing stock? Obviously the funds would have to take more risk to get this return but I am informed that it is risk that is currently putting off existing social landlords from making new investments. So why can't Councils and Housing Associations share this development risk with pension funds?

I suspect that the real problem is that property fund managers and advisers are use to what they know. One adviser told me that the excuses put forward by such managers is just "lazy thinking". They are experienced in investing in shiny new retail parks, hotels and warehouses. Investing in Social Housing is outside their comfort blanket. Also Housing Associations are not use to sharing the capital appreciation of their assets either.

We need to sort this out. In other countries I understand that pension funds invest in social housing as a matter of course. They make decent money for their beneficiaries and they build affordable homes for rent. Kick starting the economy with new construction starts is another important consideration you would think. How often do we get a possible win-win-win on such a question?