My own personal blog. Labour & Co-op Cllr, Statutory Deputy Mayor & Cabinet Lead for Housing, UNISON NEC member for Community, Branch Secretary, London Regional Council Officer & Chair of its Labour Link Committee.
Newham Cllr for West Ham Ward, Vice Chair of Local Authority Pension Fund Forum, Pension trustee, Housing & Safety Practitioner.
Centre left and proud member of the Labour movement family. Strictly no trolls please.
Yesterday I returned to Congress House, the TUC headquarters for its annual pension conference. This event involves union officers, pension trustees and activists with expert presentations/Q&A and workshops. It was great to be back in person at long last. I am a UNISON appointed employee member of a LGPS Pension Board and the Local Government trade union appointee to the London CIV.
The theme this year had to be "Pensions in a Cost of Living Crisis". Below is based on my tweets during the day. Not a comprehensive report on all the presentations since I was trying to pull together and send to my employer a pay claim while listening.
I was lucky to be picked by panel chairs to ask a number of questions. I was sitting in the front (as normal) and wearing my lucky blue checked shirt.
& unions but now must undo when in power years of #tory pension failure
Labour’s priorities for pensions:
Economic growth underpinning a growing state pension
Support for older people who want to stay in work
Expanding auto-enrolment
reconsider role of #DB pensions? My #LGPS is now 123% funded. Lots of colleagues here in Private DB have had their funds closed unnecessary. Also, do you share concerns about employers breaking #tupe & #pension promises?
He asked for clarification & yes to concern about employers breaking pension promises
Panel on Extending working lives. #TUCpension23 being addressed by
The ideas - state annuity, state pension as property right, public asset manager - certainly lived up to the ‘think big ideas’ challenge
Since this was the TUC, of course, the event had to finish with some "beer and sandwiches" (well, crisps and nuts). At which I was given a great compliment by the legendly pension figure, Con Keating "I see you are still causing trouble John".
Check out this post below by UNISON's head of bargaining and Campaigns in Scotland, Dave Watson, on the first day of the Workers Capital Conference which took place yesterday.
Workers pensions across the world are facing similar challenges and we need to learn and act together.
I was at the 2015 Workers Capital Conference today, meeting with union pension negotiators and trustees from across the world. There is great best practice that we need to learn from, but also recognise that funds are invested internationally. We are investing in each other's communities and economies. Pension funds own half of the assets in the world and we should act collectively.
The first session looked at the role of trustees and shareholder activism.
The Californian teachers pension fund had some good advice for union pension trustees. They distilled these into seven effective ways of working.
No place for fear. Don't be intimidated by the experts and hand over your fiduciary duty to the 'money people'.
Stay curious. Be inquisitive and don't be afraid to ask questions.
Be unwaveringly ethical. Remain true to those you represent. Without this funds are vulnerable to manipulation.
Think objectively. Not enough to know what to do, be ready and willing to share views.
Work hard. Read the materials, understand best practice. But recognise there is never enough time to do everything.
Keep focused. Money managers are skilled at distracting trustees.
Listen first. Speak less and listen more. Intervene at the right moment, don't just follow the money managers.
The Dutch pension fund ABP talked about shareholder activism. Examples included tackling poor labour conditions for textile workers in Bangladesh and Burma. Lack of safety standards and resolving the 'leukaemia dispute' at Samsung. Anti-union practices at Walmart. The latter resulted in four years of work before divesting. Their strategy involves intense dialogue, asking key questions and site visits. Sanctions included voted against directors remuneration and finally divestment, but only when all else fails. All of this is much more robust than the sort of ESG engagement advisors in Scotland pursue.
The U.S. Bakers union have a similar strategy through their capital stewardship programme. Part of their organising department because they see this work as building the union. Companies with good governance perform better, particularly those who treat their workforce fairly. They work with other funds collaboratively to target specific issues and sectors, particularly retail companies. An example of their engagement was the retail firm GAP, promoting a living wage and a good jobs strategy.
While there were different views on priorities, there were some common issues. Infrastructure investment to boost the economy (but not PPP), climate change and workers rights are probably the three main ones and there was support for some broad common goals. Pension funds are long term investors and there was an interesting debate about the pace of change funds should expect from the companies they invest in. Fiduciary duty shouldn't be a barrier to achieving common union goals.
The second session looked at pension fund management and transaction costs. The best approach is the Dutch model who have a level of understanding and transparency that we should aim for. Scottish funds have very little grasp of the true transaction costs of their equity investments. The Dutch now have legislation regulating this approach and this includes an asset management contract that is reducing costs.
Unsurprisingly, commercial asset managers in the UK resist this approach - even those who can do it in The Netherlands, because they have to! There is no good reason for telling us what something costs - if they can't tell you don't buy their services!
We probably only know about one third of the real costs. They are much higher than we think, probably three times higher at least. This matters when pension funds are under financial pressure. When resources are tight we should look closely at costs. It is also a fiduciary duty on trustees to know the true costs of their scheme, so they save contributions, not pay for profits.
Cutting costs is best done by bringing services in house. The top performing LGPS schemes in the UK are largely delivered by in house teams, cutting out the rent seekers. Active fund management is an illusion to fool us into trading that makes huge profits for the asset managers and hedge funds. It was interesting to hear that even New York public pension funds are coming to the same conclusion about active fund management.
The lessons for Scotland are that we should introduce systems that make real costs transparent, bring services in house, and largely get out of active fund management. Another lesson is that size matters and we should pool assets.
A lot of these issues appear complex to the average union trustee. But the value of today's conference is the sharing of information and developing common approaches. There are few more important issues than our member's pensions and there is much to do".
I was really pleased to take part in the debate and vote in favour of the AMNT's Red Lines initiative which was approved at our summer conference on Wednesday this week. They cover a wide range of environmental, social and corporate governance issues.
Red Line Voting empowers pension trustees to make responsible investing a reality and will direct fund managers to oppose poor governance practise in companies where failure poses a risk to its shareholders.
Trustees bodies will be able to instruct fund managers to follow all Red Lines en bloc or a sub section. It should not cost the scheme for doing so. Fund managers will have to comply with these instructions or explain why not and then run the risk of being sacked by trustees.
On environmental Red Lines the AMNT worked with Carbon Disclosure Project and will be urging pension schemes to adopt them as they believe it would take climate change up the UK corporate agenda.
On social issues the Red Lines include trade union recognition, race equality, gender equality, commitment to equality monitoring and publishing the data, that companies should have a plan to introduce the Living Wage, and get rid of zero hours contracts.
On governance there will be a vote against the remuneration policy if any director is paid more than 100 times the average pay in that company’s UK workforce. Also on governance companies should have a tax policy stating what their tax practises are.
The AMNT are now planning to launch Red Line Voting in Autumn, in time for the 2016 voting season. They have have worked closely with UKSIF on the development of these Red Lines and major fund managers are already preparing to implement Red Line Voting instructions.
The big campaign now is to persuade pension schemes to adopt Red Line Voting, particularly those in pooled funds. Up to now investors in pooled funds were in practise unable to direct the engagement and voting on the shares associated with their investments. Red Line Voting gets round this. Fund managers may receive dozens of Red Line Voting instructions, but they are all the same instructions so they can then allocate votes pro rata. Since more than £2-trillion of assets under management in the UK are in pooled funds this could have a significant impact.
The AMNT has been granted £75,000 by the Joseph Rowntree Charitable trust over two years to develop and launch this initiative.
Red Line Voting is a revolutionary concept. I agree with "Responsible Investment" magazine that this is "a major evolution in UK Pension funds" but think "Engaged Investor" got it right when they called it "Power to the People: the new power for trustees to control fat cat behaviour".
Many people have been involved in the AMNT project on Red Lines but special mention to its Co Chair Janice Turner, who thought it up and was the driving force behind it and Co Chair, Barry Parr and Committee member, Bill Trythall.
(this post was pulled in January since I didn't realise that we had to wait until formal launch of Red Lines which took place yesterday. I will post further on this "revolutionary" proposal)
Picture is from last weeks workshop on "Red Lines" run jointly with the AMNT (Association of Member Nominated Trustees) and UKSIF (United Kingdom Sustainable Investment & Finance Forum)
AMNT co-chair Janice Turner talks about her "Red Lines" idea to the audience.
Pension funds are blamed for being partly responsible for the crash of 2008. As asset owners they were "asleep at the wheel" and did not take their responsibility seriously and allowed the banks and financial institutions to nearly destroy our economy and seriously damage our investments.
What "Red Lines" hopes to do is to allow all pension funds regardless of size assert their rights of ownership on the assets they own and are responsible for. Small pension funds do not have a voice even though they are estimated to own £300 billion of assets. Large pension funds can afford to engage with their fund managers and the companies they own but they always lose important votes at company AGMs since most fund managers interests are not aligned with asset owner interests.
In a telling phrase from AMNT activist Bill Trythall (on left of photo) there are "Armies without generals and generals without armies".
Janice compared the current arrangements with the electoral system in the 18th Century when only the rich and powerful had a vote.
What "Red Lines" is about is small and large pension funds, as well as a wide range of other charitable and ethical funds, agreeing a common set of Environment, Social and Governance (ESG) beliefs and instructing their fund managers to vote in a certain way or explain why not.
The devil will be in the detail of course but it should not be beyond the wit of man or woman to agree a common set of voting instructions to fund managers on issues based, for example, on the UK Stewardship Code or the United Nations Compact on Human Rights.
If companies do not comply with "Red Lines" instructions without good reason then fund managers should vote against the Board at AGMs and if fund managers do not comply without good reason, then they should run the risk of being sacked by trustees.
After speeches there were various workshops on how to formulate and enable "Red Lines". It is at an early stage and is going to be a time consuming and difficult process to bring about but potentially "Red Lines" will indeed revolutionise governance practices and bring about more responsible ownership and accountability.
Thursday evening I went to a well attended ShareAction event to mark "Living Wage" week and the launch of their latest "Investor Briefing" on the business case for a Living Wage.
Rhys Moore, the director of the Living Wage Foundation, spoke first about the doubling of employers who now pay a living wage in the last 12 months. It is now £9.15 per hour in London and £7.85 in the rest of the country. The national minimum wage is only £6.50 per hour. The Living Wage is about 70% of the medium national income while the international definition for poverty is 60%. Last year there was only 5 FT100 companies who paid a living wage, now there is 19.
Rhys thinks that a living wage is becoming a norm for responsible employers. Research shows that 25% of workers who earn less than a living wage, do not work in a "low pay" sector. The foundation are about to launch a living wage "consumer movement" to encourage people to "buy" only at living wage employers.
Next speaker was Phillipa Birtwell from Barclays Bank, who is its "Head of Reputational Risk" and told us about their ground breaking agreement in 2004 with the community group TELCO, over cleaners being paid a living wage at their Canary Wharf offices. Even though only 200 workers were involved, the story went "viral". The benefits of applying a living wage is a fantastic human interest story.
Lisa Nathan from ShareAction spoke about the investor benefits from a living wage such as staff retention and reduction in turnover, reduced absenteeism and improved morale
leading to increased productivity.
As well as being a corporate citizenship
issue there is also a macro economic growth argument since if those who are paid the least, get a pay rise, they will spend it locally and boost demand.
Finally, there was a panel (see my pretty rubbish photograph above) with Cllr Richard Greening, Chair of Islington Council Pension Fund; Janice Turner, Vice Chair of the Association of Member Nominated Trustees (AMNT); Sarah Smart, Chair of the Pension Trust, James Corah from CCLA and chair Catherine Howarth.
Richard explained how 98% of all its employees are on a living wage, the only major area that they are not is a Private Finance Initiative (PFI) providing residential care. As a member of LAPFF they are also trying to control executive pay. He believes that the living wage campaign is now at a tipping point and becoming main stream.
Janice from the AMNT talked about an exciting new initiative which could have an significant impact on the living wage. At the moment the vast majority of votes at company annual general meetings are automatically voted in favour of management. Fund managers who do this are not held to account. The AMNT in partnership with others, is trying to draw up "Red Lines" voting guidelines. Pension funds of all sizes could agree to adopt a common set of voting instructions on Governance issues. So it could (this is early days) mean that fund managers are instructed to vote against any company that does not have all its staff on a living wage and and no future plans to do so.
Sarah
explained that the Pension Trust was a £6 billion pension fund that caters for the "not for profit" sector. While its primary purpose is of course to meet its pension obligations, she doesn't think that companies paying a living wage is a huge investment problem. Pension funds are for the long term and believe in responsible investment. The Pension Trust recently became a Living Wage employer.
The contract cleaners in their head office in Leeds had a pay rise of £1 per hour which has made a big difference to their lives.
Last speaker was James from ethical fund managers CCLA
who were hosting this event. He quoted sections from the famous classical economic textbook "The Wealth of Nations" which appear to support the arguments for a living wage. He pointed out therefore that both the author Adam Smith and the Bank of England argue for a living wage.
In the Q&A I made a comment that as a pension trustee we believe that we will get better returns in the long run if we invest in well governed and responsible companies. For example, those who treat their staff well, who do not destroy the environment, bribe public officials etc. As investors we must be concerned with the substainablity of companies whose entire business model is dependent on paying its staff poverty wages and being reliant on state benefits to exist.
Economic growth underpinning a growing state pension
Support for older people who want to stay in work
Expanding auto-enrolment 
