Your future pension plan? "Keep calm and work till you drop"

 

This is a motion submitted by my trade union branch to UNISON Greater London Regional Council. Unless we get decent pension provision for all workers, you will indeed have to "work till you drop". UNISON must review and investigate what do do to tackle the future pension poverty of millions of workers. 

"Motion 2 Received from the Housing Associations Branch

Future Pension Provision for Public Service Workers not eligible for Defined Benefit Scheme

This Regional Council/ National Delegate Conference recognises the vital importance of “Defined Benefit” (DB) schemes in providing decent pensions for so many public service workers.

However, many millions of public service workers (including hundreds of thousands of UNISON Members) are not eligible to join such schemes and are instead dependent on Defined Contributions (DC) schemes.

Many (not all) of these DC schemes are grossly inadequate, badly run and expensive with little or no involvement by workers in their Capital stewardship.

UNISON has negotiated with employers in these sectors and have successfully brought about a number of relatively high quality DC schemes for members in recent years.

It is likely that in the near future the Government will allow a new type of Pension scheme to operate in the UK. It is called a “Collective Defined Contribution” (CDC) which is a commonplace scheme elsewhere in Europe and in some cases operates with the assistance and direct involvement of trade unions.

The CWU union strongly supports the establishment of a CDC scheme for Royal Mail.

This Regional Council/National Delegate Conferences requests:-

1. The Regional Council officers/NEC to carry out a review to collate information and identify best practice with regard to current pension provision for workers not eligible for DB schemes. This can also be used for collective bargaining purposes

2. Examine our members attitudes to pensions and identify barriers as well as means to encourage improved take up of existing pension provision

3. Evaluate possible alternatives to current pension provision including CDC and Sectorial DB

4. Report back to Regional Council/NDC in 2023 with recommendations.

(If this motion is passed and then selected as a regional motion to NDC then the wording will be changed appropriately)

For consideration as a regional motion to National Delegate Conference 2022

Newham Council Pension Fund is 100% funded (DB pensions are not dead. They are alive and kicking)

On Monday evening during the Newham Pension committee meeting, I was pleased to read the following item in our "Investment Strategy Update".

"2. Fund Investment Performance 2.1 The estimated funding level is currently at 100% the highest recorded for the Fund and up from 98% at Q1. The Fund’s asset valuation for Q2 (quarter ending 30/06/19) is £1.51Bn up from £1.44Bn at Q1". 

This means that for the first time in many years the pension fund has enough assets (shares, bonds, property and cash) to meet all its expected liabilities (the pension promises we have made to members of the fund) at this point of time.

Now with the uncertainty over Brexit, possible recession, future revaluations and a recent unhelpful court case (The McCloud Judgement) who can predict the financial future.

However, what this achievement by Council Officers, Advisers, Fund Managers (and maybe even Councillors) shows is that modern, well run decent pension provision is affordable and achievable in this country.

The Newham Pension fund is a "defined benefit scheme" (DB) In which workers receive a pension based on their length of service and salary. Such collective schemes are not only usually cheaper and more affordable than individual pension schemes but they are far less risky for workers and they usually offer added benefits such as protection against ill health and free life assurance.

For many years such collective schemes have been derided as too expensive for employers and "unaffordable". Most employers have taken the opportunity to close their schemes and instead introduce insecure funds which place all the risk on workers for their pensions. Many employers have also grossly underfunded these schemes, which will mean that their workers will face acute poverty when they retire (if they can ever afford to retire that is or will have to work until they drop).

I hope that the positive experience of the Newham Pension fund (and other Local Government Pension Funds) will mean that the Government and employers will think again about providing decent collective pension provision for workers in the future. 

Newham Council Pension Fund is 100% funded!

This evening I attended the Pension Committee in East Ham Town Hall during which Council officers reported that for the first time in living memory, the staff pension fund was 100% funded with a record £1.5 billion of assets.

This means that at this moment, all the pension liabilities/promises to our staff (and those who are retired as well as those may no longer work for Newham but are waiting for their pension) are backed 100% by real assets (shares in companies, government bonds and cash in banks etc).

I have been a member of the Local Government Pension Scheme since 1993 and a member of various pension committees, trusts and boards since 1996.

This is the first time ever that I have been involved in any pension scheme that is fully funded (usually it has always been in deficit which means that that there are less money than liabilities/pension promises).

While there is a standard 3 yearly review due soon on the way we calculate liabilities/pension promises, which could change the situation (and of course Brexit) I think we should thank Pension committee officers, advisers, fund managers and committee members for this incredible improvement in our Council pension fund finances.

I will also personally call out all the dreadful untruths and attacks on such defined benefit pensions schemes in recent years, saying wrongly they are unaffordable and outdated, that has resulted in thousands of decent pension schemes closing and millions of British workers losing out.

The Madness of "Mark to Market" Accounting: Destroying our Pension Futures

Last week I heard that one of our employers wants to meet my trade union branch to "discuss" closing their defined benefit pension scheme. At the same time an union pension trustee colleague sent me this link to an article by the "Daily Telegraph" on defined benefit  schemes struggling to stay open.

The article itself was as usual for the "Torygraph" ill informed and biased, shaped by the self interest of it's owners and its advertisers' but what I found interesting was in a on-line comment by "mchenry" about final salary schemes.

I support mchenry's argument that a key reason why private companies have been closing their  pension schemes and therefore creating "penury for millions of ordinary workers in the future" is not to do so much with people living longer or the (mistaken) past taxation of pension funds but instead it is "a frankly insane requirement to value long term liabilities spread over decades via volatile short term measurements". This is the legal accounting requirement of pension schemes called "Mark to Market" (or even more laughable - "Fair value") Accounting.

What this means is that pension fund liabilities (the promises made so far by the scheme to pay pensions now and in the future) which may be spread over the next 60 years are costed using completely daft and inappropriate means. UK Government bonds which are currently on a 200 year all time historic low have to be used to price the future cost of pensions to the scheme even if this notional cost is decades and decades from now.

Would you take out a £150k mortgage to buy a house if depending on events entirely out of your control this mortgage liability could just jump up in a matter of months to £300k? Also if your credit rating was based on your ability to pay all your loans and mortgages off immediately - would you be declared bankrupt?

Which is all completely and utterly bonkers.

"Mark to market" accounting makes it appear that perfectly good pension schemes are in massive deficits. These "deficits" have also been completely unpredictable and volatile in recent years and months. Since the so called "deficits" must appear on the company accounts, no wonder some finance directors  panic.

Not only this but because of these entirely artificial measurements the investment policy of pensions schemes is being driven entirely off course by this "funny money" calculation.   Schemes may be tempted to take all sort of riskier investment options or even buy totally unnecessary insurance policies to reduce these artificial "deficits".

Look, there are huge problems and challenges that defined benefit schemes need to face. But we need to deal with the real problems of uncertain market returns and longevity not stupid accounting rules  no matter how well meaning. Unless we sort this out millions and millions of Brits will be spending the latter part of their lives in the misery of abject poverty.

In defence of DB

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.

In the absence of compulsion, unless we have pension schemes which are attractive to employees then people will simply not join or opt out. This will leave the taxpayer with an even greater bill to support these people on the poverty line when they are old.

Nobody is arguing that DB schemes are perfect, or that hugely damaging mistakes were not made in the past. Deficits for past accrual are often confused with future costs of DB, however. Most DB trustees remain convinced that people want a degree of certainty in their retirement. They want to share the investment risk with the employer and the state, not to personally bear the brunt of it.

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.

The real scandal in pensions is not DB schemes but the two thirds of private sector employers who do not pay a penny towards their employees’ pension and the 50% of private sector workers who have no pension provision whatsoever".

AMNT Presentation to Irish Banking Trade Association

Yesterday, during a visit to their headquarters in Dublin, Janice Turner, the Joint Chair of the Association of Member Nominated Trustees (AMNT) and I gave a 45 minute presentation to the Irish Bank Officials Association (IBOA) National Executive Committee.

The IBOA represents 22,000 finance workers in the Republic and Northern Ireland. It has has been very supportive of the AMNT and its lay pension trustees NEC have played a key role in our growth. Their members are in Defined Benefit (DB) and Defined Contribution (DC) pensions schemes.

Being finance workers they are acutely aware of the value of pensions and the threats that all their schemes currently face. The employer pension "promise" and "covenant" is under attack. For example the UK regulated Banks suffer from unnecessary and damaging accounting standards while in the Republic there is also no equivalent of the Pension Protection Fund (PPF).  This needs to be challenged.

I think that the IBOA committee members and officers appreciate that the AMNT is the only organisation that is run solely by member nominated pension trustees who want to not only defend and promote DB but also want to improve all DC schemes as well.

At some point in the future it would make sense to try and organise local pension training and briefings by the AMNT outside London. 

Many thanks to the IBOA for the warm welcome and hospitality they showed to us during our visit.

AMNT Pension Week article on Governance & the LGPS

I wrote this article on behalf of the Association of Member Nominated Trustees (AMNT) last month which was published in Pensions Week.

I tried to answer the following question. "I have just been elected as a trade union employee representative on my local government pension scheme. What should I do next?".

Quick plug for the next open meeting of the AMNT on 23 February 2012. One of our speakers is Con Keating. Who is one of the leading proponents of Defined Benefit (DB) Pensions Schemes.  To attend this event join the AMNT here.

(NB I am Chair of the AMNT DB working group not the AMNT as stated in the Pension Week article)

SERTUC Regional Council motion: Response to Government Economic Policies

This is a picture of me addressing the recent SERTUC (South East Regional TUC) Council meeting.

(Yes, I must remember to stick my head up from my speech notes when speaking).

Motion 1 was about the "Response to Government Economic Policies". It was quite a good motion which I spoke in favour of but I felt that it needed to be emphasised what November 30 should really be about.

"President, Council....Winning the Ballot with a big majority and a big turnout then making strike action on November 30th a success, is indeed the 1st important counter attack against this Government's policies.

But as a member of the Local Government Pension Scheme for 20 years and currently facing a bleak pension future. If we win the ballot then the strike action on November 30 is first and foremost an industrial issue. It is an industrial dispute around the fundamental threat to a basic term and condition for all workers. The right to a safe and secure future in retirement.

And we must continue to remind the public that this is a last resort industrial dispute brought about by the abject failure by this Government to negotiate.

The focus on November 30 should be the picket line. Winning the dispute with effective pickets on every single town hall and public building. Leafleting the public, talking to them about our cause, supporting hospital workers at their lunch time protests, then maximising turnout at rallies and lobbies.

Also as someone who now works for a private organisation that does not offer its new employees a safe and secure defined benefit pension. As part of this fight back we must never forget the 2/3 of employers in the private sector that do not pay a penny towards the pensions of their staff nor the horrific figure that 50% of all private sector workers have no pension provision whatsoever.

However, despite the impression given by the Daily Hates and the Tax Evaders Alliance, don’t forget that as well as the 6 million in public service pension schemes that there are still 2.4 million private sector workers who are still accruing service in private defined benefit schemes. They know if the public service defined benefit schemes collapse - so will theirs.

Council, the message to all workers, public and private sector, must be quite clear, that on 30 November we will be striking to defend safe and secure pensions for all".

Battling for defined benefit pensions

 From May/June Engaged Investor John Gray of the Association of Member Nominated Trustees (AMNT) on the battle to keep defined benefit alive.

The inaugural AGM of the Association of Member Nominated Trustees (AMNT) was held last month in Pension Corporation’s headquarters. Over 40 MNTs attended (out of 150 members recruited so far) who safeguard between them over £50bn of pension assets. What really enthused me about this meeting was the work group I attended on defined benefit (DB) schemes. After so much negative and misinformed mudslinging at DB schemes in recent years, it was a real tonic to be in a room full of people who were genuinely positive and supportive about DB.

Yes, things need to change. Yes, we need to look again at structural problems caused by inappropriate accounting standards and unnecessary regulation. Yes, it is “bleeding obvious” that schemes should merge whenever practical and cut costs. However the message should be shouted out loudly and clearly at every opportunity that DB schemes are still affordable and can offer massive benefits to both employer and employees. They should, in my view, be the bedrock of everyone’s pension’s provision. While trust-based defined contribution (DC) schemes have an important role to play, the vast majority of ordinary working people are desperate to seek financial certainty in their old age. Employers need to not only offer a package that will attract and retain staff but they also have a duty to try and ensure that their staff do not end their lives in poverty.


We cannot let the huge mistakes made decades ago in the funding and actuarial assumptions of DB schemes distract us from the little said facts that future contribution projections in DB schemes have barely altered from traditional assumptions. With some necessary updating they are as affordable now as they have ever been.

I was the only public sector representative in the group and the others were from the private sector. They were very concerned at the obnoxious and incredibly misleading so-called “gold plating” attacks made by some on public sector DB schemes. There are still millions of private sector employees in DB schemes and all these attacks on public schemes do is to undermine decent pension provision in the private sector and encourage a race to the gutter.

"The message should be shouted out loudly and clearly at every opportunaity that DB schemes are still affordable"

  

When I reported back to the main meeting on our workshop I was pleased that it agreed that such is the importance of the defined benefit schemes that there should be a dedicated Working Group (which I will Chair) on not just defending DB schemes but battling for DB.We will be championing and promoting what use to be considered not so long ago as the “Crown Jewels” of the British occupational pension provision. www.amnt.org 

Association of Member Nominated Trustees

Recently I joined the "Association of Member Nominated Trustees".  The AMNT was only launched last year and has already 150 members who serve as trustees or representatives on pension funds with over £50 billion of assets. 

On Wikipedia the AMNT is described as being "composed of pension trustees selected by employees or members of private and public sector pension funds in the United Kingdom. It a non-profit group which seeks to organise employee representatives through sharing information, expertise and coordinating policies for pensions and corporations in which money is invested".

I went to its AGM in March and was very impressed.  In particular I went to a work group on Defined Benefit pension schemes and was pleased to be in a room full of people who were genuinely positive and supportive about DB. I was also the only person from a public sector scheme.  At the meeting it was decided to form a working group defending and promoting DB pensions schemes which I will Chair.

I have always thought that despite the good work of the TUC Pension Trustee network and LAPFF there needs to be some form of national forum for all member nominated trustees and representatives. Our schemes are all different but we all have particular pressures and problems common to all. The founding joint Chairs are Janice Turner, Member Nominated Trustee of the BECTU Staff Retirement Scheme and Barry Parr, Member Nominated Director of the Orange Pension Scheme.

If you are interested in getting more information or becoming a member check out its temporary website here.   The next open meeting will be on 7 July in London.