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. 

TUC 2012: Unions21 fringe - Extending collective bargaining; Extending union influence

Lunchtime fringe sponsored by Unions21. Somewhat similar content to last nights History & Policy fringe.

Meeting Chaired by Brian Groom. Business & Employment Editor of the FT.

Paul Nowak (left of picture) from the TUC spoke first about the crisis in the private sector. The Government is trying to drive a wedge between the public and private sector.  The reason why there tends to be poorer terms and conditions in the private sector is due to low density. His 3 big ideas are:- due to fragmented workplaces we need to work better together, we need to think strategically; examine other sources of leverage such as the campaign for a living wage & develop a coherent political narrative or "ask".

Christine Payne General Secretary of Equity. Her union has gone from 35k to 43k members in 6 yrs with no extra staffing resource. Her 3 ideas are to increase member participation in the running of the union, involve young people & improve communications.

Mike Clancy, General Secretary Designate of  Prospect was a little provocative. He posed the question How well have we really done during the last few days? Surely quality is better than quantity? All the breast beating, the suicidal brand damage we have done to ourselves in the last 24 hours?

Frances, our new GS will have her work cut out. We have got to be part of economic alternative that is believable. Not just about fairness at work but message that unions are good for business. We will still be the sword of justice for our members. We have got to be realistic. Is there an alternative to a market economy by 2pm today? How to make the market economy better for all. We have got to be credible.  Why is it that we all consider ourselves to be progressive but we appear to be so conservative?

Tess Lanning,  IPPR Research Fellow, spoke last (apologies but out of photo). She quoted Tony Benn "nationalisation & robens doesn't mean socialism". In Europe they tend to do things better. Trade Unions involved in redesigning work & jobs; they favour the "high road to growth". UNISON praised for helping to win an in-house bid in Newcastle.

My question (modified from last night's fringe) was piped to the post by Paul from 1st Actuarial who also asked whether there is a role for unions to play in the provision of pensions. I made the specific reference to organising around running a decent defined benefit scheme based on the new look LGPS.