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".

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?

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.

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"

"Will no one rid me of these turbulent Member Trustees!"

I've been sent a rather odd and disturbing link to a story here on "Engaged Investor" magazine's website.

In which a pension consultant is quoted as saying he understands that the Government is maybe thinking of getting rid of Member Nominated trustees who sit on Pension scheme Boards???

So who will replace the  representatives of those who actually pay into the pension scheme and act as the owners of their capital? Let me think now? - perchance, more highly paid consultants?

The timing seems most peculiar, since the Government has recently agreed to a significant increase in member nominated representatives (MNR) in the Local Government Pension Scheme and is making promising noises about giving more powers to MNRs in Governance Committees for Contract based pensions schemes and Master trusts. I fully expect the next Labour Government to continue with this process.

I actually support the important role played by professional advisers and consultants in running pension schemes and think many of them are honourable and genuinely want to do the right thing for us. However, there is no getting away from the fact that we have the fiduciary duty to our beneficiaries and they do not.

But as the full article in Engaged Investor makes clear, never forget the reason, why the requirement for member nominated trustees came about in the first place. The picture above is of Bob Maxwell in his famous yacht a year before his death, who stole hundreds of millions of pounds belonging to pensioners.This resulted in legislation that requires at least 1/3 of member trustees make up the Board.

The institution of trusteeship in this country is centuries old and although not perfect is still fit for purpose. Our primary role is to ensure that the money we hold in trust is held for the benefit of the beneficiaries and not be totally ripped off by those who are paid to manage our money. Even Adam Smith (not someone I normally cite on this blog) would have understood this.

In the past some trustees have not been properly trained and supported and have been held back on Boards. The requirement to have member representation and the growth of trustee based organisations such as the TUC Trustee network and especially the Association of Member Nominated Trustees (AMNT) will help counter these problems.  

Anyone who opens a newspaper or who turns on the telly to watch the news, will be aware on practically a daily basis, that we actually need more member trustees and representatives looking after all aspects of our money - not less.

TUC Pension Member Trustee Conference 2012

Today I finally booked a place here for this year's TUC trustee conference.

"Date Tue, 27 Nov 2012

Location Congress House, London WC1B 3LS

Cost - Unions: £50
- Educational, public or voluntary sector: £75
- Commercial and others: £250

Description
The TUC invites pension trustees to the annual conference on Tuesday 27th November. The Conference will feature speakers from the pensions and wider financial and political world and will engage delegates with a range of technical and informative workshops.

Keynote speakers include:
- Pensions Minister Steve Webb MP
- Professor John Kay, author of the Kay Review of UK Equity Markets and long term decision making.
Contact for more information
Enquiries: Jennifer Mann 0207 467 1222, Email: trusteenetwork@tuc.org.uk
To register for this event please visit:

http://tucmembertrustee.eventbrite.co.uk/