10,000 Housing workers face threat to their pensions because: "The whole yardstick for measuring the cost of liabilities in pension schemes is broken"

This is my message to UNISON  members of the Social Housing Pension Scheme, who will no doubt be worried about their family's pension futures.

Inside Housing magazine has reported on this completely unwarranted attack on the future of the Social Housing Pension Scheme (SHPS) which appears to be claiming it will have to increase employer's contributions by 50%.  If that happens then the whole existence of the SHPS is in jeopardy.

In my view, this is dangerous nonsense. While employees should wake up and smell the coffee about the completely flawed threats to their futures, employers in SHPS should not "panic".

My comment on line was this (not in print version)

"John Gray, branch secretary of the housing association sector for Unison, added: “I’m making a general plea for people to stop and step back. Let’s talk about this. I’ve got lots of members in my Unison branch who are members of the scheme. It’s really important to them and their future.

“The whole yardstick for measuring the cost of liabilities in pension schemes is broken and loads of schemes have been closed down prematurely for no good reason whatsoever.”

Why is it that similar so called "defined benefit" funds such as the Local Government Pension schemes are not in such a mess? Most of them are now nearly fully funded and employers have even reduced contributions are not threatening to massively increase them.

The method by which you work out the future cost of pensions is key. There is a huge amount of research that many schemes use completely flawed and outdated measurements. They think there is a problem, when there isn't. We need to oppose this outdated methodology and point out that the emperor has no clothes.

To be clear, trade unions members have been in the past reluctant to take strike action over their pay or other terms and conditions, but they have been willing to strike over their pensions. They do not want to retire and die in abject poverty. There could be massive strikes and protests if the chance of a decent pension is removed.

"...thieves and con merchants to steal and feast upon our members pensions..."

This was my speech to the UNISON Community Conference yesterday on Pensions. The Composite motion had been moved by Community member June Poole from Rochdale Local Government Branch on behalf of National Women's Committee.

It was very positive to see the motion being seconded by a delegate from Ymlaen/Forward – Unison Cymru, who reminded us to make sure we get representation for our sector on the new Local Government Pension Boards.

"Conference, John Gray, NEC member for Community, speaking on behalf of the Service Group Executive, in favour of Composite A.

Conference, let us never forget that Pensions are a fundamental trade union issue. In fact one of the founder unions that went to form UNISON was set up specifically to argue for pensions for its members.

As a housing officer in the east end of London, I see first hand the miserable and degrading poverty that so many of our elders live in. Too frightened to put the heating on in winter, surviving on cheap out of date foodstuffs, too poor to buy their grandchildren treats.

In many ways, the current situation facing workers is now even worse. Millions of workers in our sector have no access to any employer pension, since they work part time or are paid too little. Millions more are being cheated by their employer with tiny and inadequate contributions.

While complete untruths are said about the sustainability of defined benefit schemes such as the Social Housing Pension Scheme (SHPS).

To top it all Conference, this Tory led government, will from April 6, allow thieves and con merchants to steal and feast upon our members pensions, in what I have no doubt will be the greatest ever miss-selling scandal.

Conference, Pensions are expensive.

There is no getting away from this. The employer has to pay enough money into a pension scheme to allow its workers to retire in dignity.

The State must also play its part by providing funding for our services which will ensure there is enough money to pay for pensions. But don't forget that the top 15 housing association made over £1 billion surplus last year, yet many pay rubbish pension contributions to their workers.

Equally employers who have left or are threatening to leave our existing defined benefit schemes, know it is a simple lie, that you will get rid of any so called "deficit" if they leave. In fact it can make it worse.

While those of us still in the Local Government Pension Scheme, see the financial service industry continue to rip us off on charges and an often rotten and undemocratic governance structure.

Conference. We can make a change. In Australia where many pension funds are run by trade unions, they have used their organising and political power to make it the law that all employers have to contribute 12% of pay into a workers pension.

We have to organise and campaign for decent pensions with our own employers and we have to ensure that we use our political influence and clout, not only to get more money to fund decent pensions in our sector, but to win the wider political argument.

That we want to live in a more equal and just society, that simply will not tolerate poverty for the old or any body else for that matter and will do whatever is necessary to bring about change.

Conference, Go back to your branches and organise, campaign and fight for your pension futures, Conference, Please support this motion. Thank you.

(the motion was passed unanimously and hat tip picture to branch delegate Ionela Flood) 

"Landlords face strikes after predicted rise in pension contributions"

On Friday Inside Housing Magazine reported on some of my comments about how angry UNISON members will be if employers tried to close their pension schemes or raise contributions so high that schemes would have to close anyway since no one could afford to join.

The world is a very different place from where it was 3 years ago, when some employers took advantage of the recession to close schemes or increase contributions. While we are certainly not out of the economic woods yet, most Housing Associations are now enjoying record surpluses and paying their Executives inflation plus pay rises and bonuses.

Modern day Defined benefit pension schemes are affordable and sustainable. If any employer decides now that it wants its employees to end up dying in miserable retirement poverty then they could find themselves in for a fight.

Payday loan pension scandal? Disinvest or engage?

I have been very critical about the Social Housing Pension Scheme (SHPS) on their decision to raise contributions to the scheme for what I think are "artificial" deficits.

Yet I think that industry magazine "Inside Housing" has got the wrong end of the stick about its front page story on Friday "Revealed - Pay Day Loan Pension Scandal".

The "Scandal" is that the £2.6 billion SHPS invests less than 1% of its money in rip off Pay Day loan providers as does the Cheshire Local Government Pension Scheme (LGPS)

My view on this are similar to the post I made about the similar pickle the Church of England Pension fund found itself in last month.

Pay Day lenders have "despicable business model based on ripping off its vulnerable customer base but hey, "welcome to capitalism", this is what happens when you get poor corporate governance of a company coupled with wholly inadequate state regulation.....engagement by responsible investors with the companies they own is key".

Pension Scheme trustees have a fiduciary duty to run funds in the interests of beneficiaries.  They have an obligation to take advice from their professional advisers on where they should invest beneficiaries money.

To ignore this advice there is very slippery legal and practical slope if you decide to call for disinvestment on "ethical grounds". If you are a Muslim then you would probably want to call for disinvestment in all companies that lend money for interest (its all "usury"). So no investment in any banks or insurance companies then? If you are a vegetarian or vegan you would be unhappy in any investment in companies that take part in the production and sale of meat. So no investment in supermarkets or shopping centres?

Teetotallers would object to companies that sell alcohol, animal rights activists would object to investments in pharmaceuticals and environmentalists would not want their money in oil companies or mines. I can go on and on - but I think you get the picture.

What all pension trustees should be doing is making sure that they and their fund managers engage with all the companies that they own to try and ensure that they are socially responsible.  SHPS should be working with other pension funds to firstly in private, try and change pay day loan business models. If (and when) this fails then they should instructing their fund managers to vote out the company Board and Executive team at the next AGM.

Now, I am currently unclear whether SHPS do any engagement? I am not sure either about the quote in "Inside Housing" from Cheshire LGPS that  they do "not operate a socially responsible investment policy". Since it is clear from their statement of Investment Principles that they do (if appropriate) - and they are members of the Local Authority Pension Fund Forum (LAPFF), who are very well known for their active engagement with companies on a whole range of socially responsible investment issues.

I think that the key development in pension fund governance in recent years is the rising (not total) acceptance that you will in the long run get better returns from investing in well managed and responsible companies and that trustees have a duty as owners to try and ensure the companies they invest in act in this way.

The real "scandal" of Pay Days loans is the failure of successful governments (including Labour) to properly regulate the sector. Hopefully the next government will sort this out. In the meantime the SHPS, the Pensions Trust, the LGPS and all the Pension funds in the Community and Voluntary sector ought to be working together to bring about meaningful change in the companies they own.

More nonsense about Pension fund deficits

Last week Inside Housing contacted me about the latest report warning members of the Social Housing Pension Scheme (SHPS) that it's deficit (put simply the difference between assets held by the scheme and its "liabilities") has grown again.

The investments in the SHPS have actually been doing pretty well. While it is practically impossible to get information about SHPS from its web site,  the parent body "The Pension Trust" saw net investment income grow by over £400 million last year. This positive information is hardly ever reported.

Instead the emphasis is always on the "deficit". Which I keep repeating is calculated in an outdated and increasingly meaningless manner.  Now, this argument is not as complicated as it seems. Bear with me a little on this.

The "deficit" is calculated by reference to the yield (return) of government bonds called gilts. Due to fears over the survival of the Euro and government bonds in some parts of Europe and the so-called Quantitative Easing programme (the mass buying up of gilts by the Bank of England aka "QE"). Gilt yields are at a 200 year historic low. The lower the yield the higher the deficit. The pensions fundamentals haven't suddenly changed. It's just the way they calculate the deficit.This also leads to wild volatility in pension deficits which can double or half in a matter of weeks.

So even if your investments are doing okay and there has been no sudden change in any other material factors such as life expectancy, due to changes in gilts your scheme is somehow in "trouble" and you have to raise contributions, close the scheme or reduce benefits?

This isn't just the SHPS, it is practically all defined benefit (DB) pension schemes that suffer from these "Alice in Wonderland" calculations.

Picture above of typical DB trustee meeting when discussing latest "deficit" projections.

"Pensions, Pensions and more Pensions"

(This is an article I wrote last week for my Branch Stewards newsletter).

"Let’s face it. Many members probably consider Pensions to be a pretty boring issue and something that they would prefer to put off thinking about too much until another day (or preferably never). Well, whether you like it or not, in the coming months, all UNISON members and in fact nearly all employees will have to wake up and start thinking about pensions. 

For those of us in the Local Government Pension Scheme there is an ongoing consultation process at the moment by UNISON on a new look scheme. LGPS 2014 agreed last month with the unions, LGA employers and the Government. You will be balloted on the scheme at the end of the month. Have a look at what is being proposed on the UNISON website http://www.unison.org.uk/pensions/lgps.asp

While members in the Social Housing Pension Scheme (Pensions Trust) will need to be aware that their employers have been sent letters about the deficits in their pension schemes which is causing some employers to panic and start talking of closing the scheme or massive increase in contributions. There has also been some outrageous scaremongering by some financial “advisors” to schemes. UNISON is arranging an urgent meeting with the Pensions Trust. In the meanwhile if your employers start talking of any changes to your pension scheme please contact the branch immediately and ask your employer to send us copies of what is being proposed.

Remember – the current pension so-called “deficits” are valued in a completely discredited and inaccurate manner which even the current Pensions minster has recognised is wrong and needlessly “killing” good pensions schemes. Remember closing a pension scheme does not get rid of any deficit - in fact it can make things worse.

Finally, for those of you who are not in the LGPS or SHPS please be aware that “auto-rolling” is kicking in at the end of this year. Nearly all employees who are currently not in a pension scheme will be automatically enrolled into the employer’s scheme or a state scheme.

Now this is “good news” for those not in a scheme but what we are concerned about is that some employers who currently have decently funded defined contribution schemes (also known as DC, Group personal pensions, Group Stakeholders, money purchase etc) may be tempted to cut existing employer contributions, since they are worried about an increase in the pension bill from more people being in it.

We have to fight this as well. Pensions are expensive. Employer’s have to realise that unless they want their staff to retire in poverty they have to fund pensions properly.

Pensions are obviously not boring nor are they as complicated as you think. We need to have at least one UNISON Pension Champion (or rep) in every employer. If you are interested in being a “Pension Champion” let the branch office know and we will sort out some training for you on the role in the very near future".

John Gray
Branch secretary

"Housing staff face massive pension hikes"

I was contacted by "Inside Housing" (trade magazine for Social Housing) this week about possible significant increases in pension contributions for members of the Social Housing Pension Scheme (SHPS).  What I told them is hardly rocket science, but after years of below inflation wages increases (and savage cuts in care and support) if the cost of pensions go up then members will leave the scheme.

I have also posted on line this comment:-

Can I recommend that if anyone learns that their employer is considering increasing contributions or closing their scheme to contact their trade union. UNISON is in the process of organising a meeting with the Social Housing Pension Fund and also will want to meet with employers.

Please remember that this “deficit” is an accounting figure which is almost entirely bogus and due a double whammy of recent exceptionally low fund management returns and a 200 year low in the price of gilts. Some things might have to change but defined benefit schemes are as affordable now as they have ever been. Housing associations should not panic. They will only run the risk of making the deficit seem even worse if they do. Instead they should meet up with their unions and negotiate a way forward.

and in reply to a blog by its Editor here

Sorry Stuart but it would not be a pragmatic step to consider closing the scheme nor raising contributions significantly. It could make things very much worse. This “deficit” is completely artificial and discredited accounting figure due to a double whammy of recent exceptionally low fund management returns and a 200 year low in the yield of gilts.

The Pensions Minister accepts that this "mark to market" accounting should be reviewed. Even the Bank of England says that you should not take a "mechanical" viewpoint of such "deficits"....

In housing management we see first hand the awful consequences of poverty in old age. Defined benefits schemes gives dignity in retirement for millions and should remain as the cornerstone of decent occupational pension provision.

I am also writing a guide/resource for the AMNT on what should trade unions and trustees do if their employer decides to try and close their defined benefit scheme (or increase costs so much it will close)

Engaged Investor Awards 2007 (and possible pension industrial dispute)

First “pension” awards ceremony I have ever been to and I really enjoyed it. A sign of age maybe, but I now tend to know a few people at such events which makes a difference. There was no “hard sell “by sponsors either.

It was held on the “Silver Barracuda”, Savoy Pier, a London Thames restaurant ship.

Everything seemed to go off smoothly despite the bombs found early on that morning in central London. It did pour down with rain at the start and I got soaked walking to the ship from Temple underground.

Picture of top UNISON Pension trustee and national treasure, Stan Edwards ,(above right National Grid Pension scheme) who was judging in the award. Also, next picture (below left) is of Pete Davis from the Prudential who is on the national (TUC nominated) Pension Trustee panel. They meet up on a regular basis with the Pensions minister (who we are still waiting to be announced due to the reshuffle). Next year we ought to organise trustees to make nominations to such awards.

On my table I sat with Peter Vercoe who is a trustee with Carnaud Metal Box group. He won the runner up award for Trustee of the Year. There were also two members of staff from the Pensions Trust who were very pleasant and knowledgeable. Even though I did upset them somewhat about my dismay over the Social Housing Pension Fund (SHPS - which is part of their group).

I am holding a meeting next week with UNISON members of a housing association where they are trying to replace the SHPS 1/60th final pension scheme with a vastly inferior CARE (career average) scheme. Trouble at Mill – I am certain that my members will not be happy with accepting what amounts in the long run as a massive cut in their terms and conditions. Watch this space.