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. 

"Union representatives here to stay on trustee boards"

The "Local Government Chronicle" reports huge fights currently going on between trade unions and Council officers about representation on the new Local Government Pension Scheme  Boards. 

It is clear that some Councils are trying to openly sabotage the independence and effectiveness of these Boards. 

This recent article by Laura MacPhee from "Engaged Investor" show the value of union representatives on Pension Boards generally.

Some 4 million people in the UK depend upon the LGPS and it has over £180 billion of assets, so it is imperative to the national economy that it is well run. It is completely disgraceful what is going on and I hope a future Labour Government moves swiftly to sort out the mess created by this Tory Governments failure to take on their paymasters in the financial services industry.

Trustees are still in the dark over ethical investing

From Engaged Investor 2 December 2013 "As a trustee, is my duty to maximise return or invest responsibly? Or can I do both?”

Recently one of the funds that I serve on as a trustee held a special training event on socially responsible investment and fiduciary duty.

 Our scheme advisers and external experts made presentations, followed by wide-ranging Q&A sessions. It was a fascinating experience and I feel that all pension trustee boards should consider holding similar events.

The basic principles of trust law are loyalty, prudence and impartiality, in order to act in the best interests of beneficiaries

The charity ShareAction gave us a presentation based upon their recent paper The Enlightened Shareholder, which for the first time made me feel confident that I really understood the conflicts that many trustees feel about this topic. The basic principles of trust law are loyalty, prudence and impartiality, in order to act in the best interests of beneficiaries.

Rightly or wrongly, there is no trustee duty to maximise returns.

Trustees have been given considerable discretion as to how to act in these ‘best interests’, subject to the core legal principles and acting within their statutory duties. If trustees also act on professional advice then it is unlikely that their decisions can be challenged, since courts are loath to second guess trustees.

The infamous Scargill v Cowan case was a pretty unusual set of circumstances. Miners’ leader Arthur Scargill wanted the pension scheme to exclude all overseas investments and all investments competing with coal. He was found to be putting the interests of the union first and not acting in the ‘best interests’ of all the beneficiaries.

The judge did, however, make the specific point in his judgement that he was not saying that only the financial interest of the beneficiaries could be considered.

A report by law firm Freshfields made it clear that, not only was it permissible for funds to have a responsible investment policy, it was arguably their fiduciary duty to do so

A report by law firm Freshfields in 2005 made it clear that, not only was it permissible for funds to have a responsible investment policy, it was arguably their fiduciary duty to do so, and trustees could be sued if they did not have one.

Finally and most importantly, not being obliged as a trustee to maximise return does not mean that you are uninterested in financial consequences, but it does gives trustees the confidence to challenge their managers and advisers on non-financial issues that are of concern to beneficiaries.

It also should give trustees the confidence to consider and take advice on the negative financial consequences of investing in companies that may be irresponsible.

And how much money has your fund lost in disastrous mergers and acquisitions?

There is also the belief, which is beginning to be backed by empirical research, that in the long term companies that act responsibly and do not, for example, destroy the environment or employ child labour ultimately produce genuine superior returns for all beneficiaries.

This is surely in everyone’s best interests.

John Gray is a member-nominated representative of the Tower Hamlets’ Local Government Pension Fund 

"Will no one rid me of these turbulent Member Trustees!"

I've been sent a rather odd and disturbing link to a story here on "Engaged Investor" magazine's website.

In which a pension consultant is quoted as saying he understands that the Government is maybe thinking of getting rid of Member Nominated trustees who sit on Pension scheme Boards???

So who will replace the  representatives of those who actually pay into the pension scheme and act as the owners of their capital? Let me think now? - perchance, more highly paid consultants?

The timing seems most peculiar, since the Government has recently agreed to a significant increase in member nominated representatives (MNR) in the Local Government Pension Scheme and is making promising noises about giving more powers to MNRs in Governance Committees for Contract based pensions schemes and Master trusts. I fully expect the next Labour Government to continue with this process.

I actually support the important role played by professional advisers and consultants in running pension schemes and think many of them are honourable and genuinely want to do the right thing for us. However, there is no getting away from the fact that we have the fiduciary duty to our beneficiaries and they do not.

But as the full article in Engaged Investor makes clear, never forget the reason, why the requirement for member nominated trustees came about in the first place. The picture above is of Bob Maxwell in his famous yacht a year before his death, who stole hundreds of millions of pounds belonging to pensioners.This resulted in legislation that requires at least 1/3 of member trustees make up the Board.

The institution of trusteeship in this country is centuries old and although not perfect is still fit for purpose. Our primary role is to ensure that the money we hold in trust is held for the benefit of the beneficiaries and not be totally ripped off by those who are paid to manage our money. Even Adam Smith (not someone I normally cite on this blog) would have understood this.

In the past some trustees have not been properly trained and supported and have been held back on Boards. The requirement to have member representation and the growth of trustee based organisations such as the TUC Trustee network and especially the Association of Member Nominated Trustees (AMNT) will help counter these problems.  

Anyone who opens a newspaper or who turns on the telly to watch the news, will be aware on practically a daily basis, that we actually need more member trustees and representatives looking after all aspects of our money - not less.

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".

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 

It's the Same the Whole World Over

"It's the same the whole world over,

It's the poor what gets the blame,

It's the rich what gets the pleasure,

Ain’t it all a bleeding shame?"

I’ve been on a fair few pickets, lobbies and protests over the years where (especially in the East End) this music hall ditty was sung heartily by all those present. The tune and chorus have always been the same but the lyrics of the verses - dare I say – were usually somewhat more direct and lively!

I thought of the chorus yesterday when I was on an underground train going to a TUPE/ redundancy meeting in West London. I was reading the pension magazine “Engaged Investment” and a cheerily named article called “How Long is Life?” It was a bit teckie but one statistic did horrify me about the impact of income inequality in this country.

“...the extent to which salary affects life expectancy: an individual between 60 and 65 years old earning less than £15,000 is more than three times as likely to die in the following year than someone earning more than £35,000”.

So we have it - inequality kills - Something must be done...BTW The Tories ain't going to do it.

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.