Decent pension provision is not dying out - it's being murdered

A headline in last Friday's "Professional Pensions" was "DB surplus hits record high of £382bn on best estimate basis, says First Actuarial"

It is becoming increasingly clear that the the huge decline in decent pension provision in the UK (employer defined benefit schemes) is mistaken and even completely unnecessary. Millions of workers in this country will retire and die in poverty because of this.

Pension schemes were valued according to outdated and irrelevant accounting measures which pretended that they had huge unmanageable deficits. It was a little bit like telling someone who had just taken out a 25 year mortgage to buy a home that they were really bankrupt since they could not immediately pay off the loan.

6 years ago the AMNT argued that defined benefit schemes were affordable and stopping workers from joining or closing schemes was a nonsense.

Instead of using a broken yardstick to measure present and future costs, First Actuarial, have produced an index based upon a prudent estimate of investment performance. They calculate that the 6000 defined benefit schemes left need an actual return of only 2.6% per annum to pay its pension promises. While the stock market will go up and down, unless you honestly believe that the end of capitalism is nigh, surely in the long run, this return is more than achievable.

Last year there was a series of bitter strikes by University staff opposed to the dismantling of their supposedly bankrupt pension scheme USS. Under best estimate calculation they could have a surplus of £10 billion.

If you think I am angry about this situation then read below Death by Discount Rates

"Discount rate controversy is nothing new. One rarely, if ever, hears people in the industry say that using the yield on high-quality corporate bonds (as accountants do), or a rate just above gilt yields (as most actuarial valuations do) is without problems.

But the flaws are more serious than many realise. The theoretical case for these rates is acutely defective. They have wrecked company balance sheets, caused the misallocation of billions of pounds of corporate resources to plug illusory deficits, distorted scheme investment strategies, and played a major part in the collapse of private DB provision. If a disaster even a fraction of the size had befallen the state pension system, governments would have been voted out of office. It's a national scandal."

Frank Curtiss is the immediate past president of the ICSA and the former head of corporate governance at RPMI Railpen. Tim Wilkinson is the former chief accountant at RPMI Railpen

Sense about fantasy pension deficits

A great article by Henry Tapper in his blog "Pension Playpen" about the nonsense being spread about the "fantasy deficits" of by the huge UK pension fund, University Superannuation Scheme (USS).

The USS has produced investment returns of 21% increasing its assets to £60 billion in the last year yet due to the broken accounting yardstick that many pensions schemes use to value their liabilities, its supposed deficit has increased by 33% to £71 million.

What a load of old nonsense. As Henry points out why has the deficit increased by such an amount? Have university staff suddenly increased their lifespan by a third?

No, of course they have not and shame on the Daily Mail headline hunters, who claim that lecturers will have to be sacked or  student fees increased to pay for these "fantasy deficits".

Check the comments page of his post for a useful contribution by former pensions minister, Roz Altmann on why gilt driven liability investment is bonkers (my interpretation)  

View from the Coalface - The role of trade unionists as pension trustees

This picture is from the panel seminar last week at the "Workplace Pension 2015" conference in Birmingham.

I was with Bill Trythall, who is a fellow AMNT union appointed trustee on the massive USS Pension scheme. The chair was Louise Farrand from "Engaged Investor".

We took a number of questions from the chair and members of the audience on amongst other things - time limits for trustees on schemes; do trade unions help bring diversity and how can we tell if our pension board is any good?

My response (and since I was obviously not making notes I won't report on what Bill said) was "Yes", we should have time limits on trustees serving on a board. It is wrong that people like me have been on boards for 20 years. We need new blood and realistic succession plans. But so should all our professional advisors be similarly time limited to 5-10 years maximum. 

I think that trade unions do help drive the diversity agenda, since not only is equality and fairness a reason for our existence, we know that if a company does not recruit, for example, any women to its board, then it is is ignoring the potential talent pool from half the population. That is a bad business decision and ignorant companies who do so will suffer in the long term. 

This has nothing to do with political correctness but a well founded belief that companies who don't discriminate, do not  cause harm to its workers, destroy the environment, employ child labour or bribe public officials will in the long run be far more successful businesses to invest in than does that do.

My response to how we can tell if we are doing a good job or not as pension trustees will be to see firstly how we perform according to our benchmark, when compared to our peers and at our triennial valuations. But also we should see how open and transparent we are with our members and other stakeholders, do we seriously challenge our advisors, how realistic are our assumptions about future performance and liabilities, do we really drill down on all our fees and transaction costs and do we take our responsibilities as owners of capital seriously?

We ran out of time at the end but I think that Bill and I enjoyed the seminar and hopefully those who watched and participated did so likewise.

AMNT stall at Workplace Pensions Live 2015

On Thursday I went for a flying visit to Edgbaston, Birmingham to take part in a panel on the second day of Workplace Pensions conference.

The theme of the panel was "View from the coalfield - This session will explore the role of unions on trustee boards, and the conflicts union members may face in their interactions with employers and members".

I was speaking with Bill Trythall (see on right of picture), a trade union appointed director, of the massive university pension fund USS.

The session went okay I think and afterwards Bill and I joined our colleagues at the Association of Member Nominated Trustees (AMNT) stall.

I had to rush back to London for the Newham Council AGM. 

Pension Minister Steve Webb MP to address AMNT 26 June 2013

Association of Member Nominated Trustees

Pensions Minister Steve Webb MP will be the keynote speaker at our first AMNT Summer Conference which will take place on June 26th 2013, at Towers Watson, 21, Tothill Street, London SW1H 9LL. Some details are still to be finalised, but currently, the day looks like this:

We will begin with registration from 0930, and the main conference starts at 1000.
Steve Webb has agreed to start us off with a keynote speech.

Then Co-Chair Barry Parr will go through the results of our Member Survey.
Bill Trythall (Committee Member) will then talk on "The Universities Superannuation Scheme".

After coffee, Ewan McGaughey will talk on "MNTs in Corporate Governance", then another Member will talk on "A Smaller DC Scheme".

Lunch and networking will be followed by our hosts Towers Watson talking on Current Pension Issues, then John Gray (Committee Member) will present on "London Borough/Local Government Schemes".

Following this, Michael Johnson will speak on "Charging in Pensions".

After a tea break, our Friends will leave us, and we will go into Round Table Debates on Current Pensions Issues with one of our Sponsors leading each table.

A final feedback session will be followed by a closing summary, which is due to finish at 1700.

After the meeting has closed, there will be the usual networking opportunity with drinks provided by our hosts Towers Watson

There are limited places available for this event, so please let us know as soon as possible if you are able to attend. Click on one of the below links and let us know by email, including whether you have any dietary requirements and if you plan to attend for the drinks reception.

Email mail@amnt.org if you wish to send the whole or part of the day at the meeting.

(if you are a member nominated Trustee or representative then join and apply to attend)