Taking the Long View – Effective Pension Trusteeship in Uncertain Times.

Back again to last Friday and to the annual TUC pension’s trustee conference at Congress house. The first speaker was James Purnell, Secretary of State for Work and Pensions (and bad photographer).

James called Pension trustees the “unsung heroes” of financial services. This is something useful which I will store away for the future. He thought that there was a vital role for member nominated representatives to play in helping rebuild confidence in pensions.

Confidence is key to the future success (or otherwise) of Pension Personal Accounts. In the 1980’s and 1990s we had Maxwell, collapse of pension schemes, contribution holidays and the mis-selling of private pension plans. The government now has the “Architecture in Place” to help rebuild confidence. The Pension protection fund (PPF) protects some 11 million pensioners. Together with a strong regulator and compensation for those schemes that failed before the PPF.

James celebrated the 100th anniversary of the Old Age pension. He told the audience though that there use to be a “Character Test” for access to pensions in 1908. He joked that maybe this should be re-introduced for MPs before they could get their pensions! Only 25% of the population reached the age of 70 in 1908, most died in their 40’s. Only 500, 000 people were entitled to a state pension in 1909, now over 11 million. Including probably the first woman who will live in the UK to be 120, who he thought was probably 65 now and would live off her pension for the next 55 years. I think he put this fact in to make people think.

He finished off by pointing out how significant Personal Accounts will be – he estimated there will be up to 9 million extra savers and within a few years £10 billion of extra savings.

Could we be finally, starting the long and tortuous journey to the abolition of poverty for all in old age?

Red Rose-tinted Glasses and the Pension Protection Fund

Another excellent post by ex-TUC pensions expert, Tom P, in his “Labour and Capital” blog. Tom has a dig at the Tory dominated Financial press who constantly attack the government for “interfering” in their industry. If they were just left alone everything would just be sweetness and light. Yeah.

It beggars belief that anyone in the British Financial services industry think that they can rest on their laurels and be trusted to be left alone? Time and time again, the industry has proved itself incapable of self-regulation and driven by short term self interest. I’m not just sticking the boot in over present day difficulties over the US sub-prime mortgages and Northern Rock. In my life time, there has been a constant drip-drip of financial crisis’s and scandals by so-called “respected” Financial institutions. Do I really need to list them all?

Tom contrasts the collective failure of the industry to do anything about companies that go bust and break their pension promise, with the success of the Pension Protection Fund (PPF) set up by the government. Which within only 3 years of its existence is already protecting 41 schemes and over 12000 pensioners, paying out £1.4 per month? A further 225 schemes and 118,000 members are being assessed for help.

The hypocrisy gets even worse. Many of those who failed to do anything about this problem before the government stepped in, then incredibly began to complain about the failure to protect those who schemes failed before the PPF was set up. Tom points out that the government once again responded by introducing the financial assistance scheme. A bit late admittedly and much chivvied on the way, but better late than never.

Tom concludes that "If I take my red rose-tinted specs off I can see that Labour's record on pensions is not without blemishes. However on the specific issue of protecting pensions where employers have become insolvent it has a very good story to tell.

Tom, put your specs back on mate, they are not “rose-tinted” in the slightest. This government with pensions at least, is doing what it says on the side of the tin. A true left of centre progressive government that is prepared to actively intervene into the market to protect ordinary people. Not only vulnerable pensioners whose schemes have gone bust but to also vigorously regulate schemes to ensure that they remain solvent in the future.

A government that recognises that most personal pension plans only benefit the financial industry and the rich, have intervened again to provide State run quasi-compulsory, Personal Pension Accounts.

Most importantly, the government has also intervened via pension credit and fuel payments etc to (dare I say "redistribute"?) pour money into the pockets of the poorest British pensioners.

They have done this without scaring the horses. In private at least, I am sure that the more intelligent City folk realise that there are limits to what “free for all” capitalism can achieve and that there is a positive role for the state. However many simply do not have the intellectual honesty to admit it.

Personal Pension Accounts – Get Rid of Poverty in Old Age?

Wednesday lunch time fringe with Pension minister, Mike O'Brien (far left) and Jeannie Drake from the TUC. First time I have seen Mike in action.

He seemed to deal very effectively with “Cheeky Chappie” Chair, Liam Halligan (Sunday Telegraph) over the compensation for the 250,000 pensioners whose schemes collapsed before present day safeguards. He gave a hint that there could be further help for these pensioners.

In the Q&A I was able to make a plea to Mike to ensure that the future Pension Personal Accounts scheme has proper independent (trade union) trustees on the board.

In order to explain why I and many others have such a mistrust of most (not all) financial practices and institutions in this country. I shared with the meeting my past, less than glorious, financial acumen. For example I was “sold” a low cost, low start, with-profit Endowment policy to pay off my first mortgage and had a company AVC pension policy with the Equitable Life!

I suppose as UNISON London Finance Convener I really should keep such things quiet?

However, this amongst other reasons is why I am extremely suspicious of our financial service industry in general and also I think the Northern Rock fiasco is just the latest in a number of scandals that could result in a complete collapse of confidence and the failure of the vitally important PPA. People will not join the PPA if they do not trust it and think it is not properly run. Please keep industry interests well away!