This is an article I wrote on behalf of the AMNT in defence of Defined Benefit Pension schemes for all. It was published in Engaged Investor in its December edition.
"While the Association of Member Nominated Trustees (AMNT) has no formal view on the dispute between the Government and the public service unions, many of our
trustees are strong supporters of defined benefit (DB) schemes.
In fact, one of the most active AMNT working groups is dedicated to defending and promoting DB schemes and almost exclusively comprises private sector DB trustees. This group is convinced that DB should remain the cornerstone of occupational pension provision.
DB trustees are also concerned that the often inaccurate media attacks on public sector DB schemes are having an adverse impact on the standing of their schemes with their sponsors.
It is often forgotten that alongside the six million workers in the public schemes there are still 2.4 million continuing to build up DB benefits in private schemes. It is important that
the pension myths about all DB schemes are exposed and countered.
The first myth is that DB is “gold plated”. The average local government pension is only £4,000 per year while the average retired female NHS worker’s pension is less than £2,800 per year. The maximum that many retiring today will get in typical DB schemes is half pay and a lump sum typically 1.5 times their final salary. Are people really saying half pay after a lifetime of saving is too much?
Another myth is that DB is too expensive. Future employer contributions for many schemes are less than 14% and with some, such as the NHS’s scheme, it has already been agreed that employer contributions are capped at 14% and any future increase in cost will have to be wholly met by the employees.
There are many changes that could be made to improve DB. These could include merging DB funds and schemes; bringing together the 100 or so different local government pension schemes. We need changes in the accounting standards that currently treat century-long pension benefit liabilities as if they were a credit card bill. We need to get a grip on spiralling fees. We need to improve governance and make sure that savers are not ripped off in future financial scandals.