Busting pension fund myths - Stop the scare-mongering & pay up!

This opinion piece was published today in "Inside Housing".

"There is a lot of old nonsense being put out about defined benefit pension schemes and the Social Housing Pension (SHP) fund in particular.

Let us kill some pension myths.

Yes, many pension schemes have a deficit, but these ‘deficits’ are calculated in the main by using the return of government bonds called ‘gilts’. Due to recession these gilts are at a near 200-year low. Therefore, these so-called ‘deficits’ are pretty meaningless.

You do not get rid of any deficit by closing your pension scheme or raising contributions so high that members cannot afford to remain.

In fact, you could make it worse.

A closed pension scheme will not have new money coming in and will soon find that it will not be able to invest in long-term equity investments that produce superior returns. So employers could end up paying even more to close this gap.

It is the cost of future membership that is key. Ignore the scare stories. The cost of a modern defined benefit pension is affordable and sustainable. Why is it that they are opening brand new defined benefit pensions in South Korea, which has among the highest life expectancy in the world?

Unless an employer wants its workers to retire and die in poverty then they have to pay up. There is no alternative. At my first ever Trades Union Congress  pension course we were told there is a old-fashioned but valid rule of thumb that, if you want to retire at half pay and with a lump sum, you need to save 20% of your income into a pension fund for 40 years.

Whenever I tell people this they are shocked. But this is the reality. Pensions are expensive. Employers need to be putting in at least 14% of the wage bill into pensions.

Poverty in all its ugly forms is obscene, but in front-line housing management I find poverty in older people to be perhaps the most depressing, since there is little they can do about it at that stage.

At a time that many housing associations are making massive record surpluses, giving above inflation pay rises to executives and after years of pay cuts (most staff are at least 20% worse off in real terms because they received no or below inflation pay rises) they meddle with their staff pension schemes at their peril.

Unison has arranged for early talks with the SHPS and is more than willing to meet up with any employer to discuss their concerns. But enough is enough.

John Gray is housing association branch secretary at Unison 

(I'm actually the Secretary of the Greater London Housing Association Branch of UNISON but never mind)

Social Housing Pension Scheme guide and Seminar

UNISON and the other unions may have achieved success with the Local Government & NHS pensions but the battle continues in the Community and private sector.

UNISON pensions experts have issued a guide to protecting the Social Housing Pension Fund (Pensions Trust).  There is likely to be a major industrial dispute over plans by some employers to close their SHPS schemes.  This is totally unnecessary.

It is also running a seminar on November 15 at the UNISON centre in London.

All branches with Community members should have been invited to send delegates. It is imperative that they attend.

Pensions: Wakey, Wakey Community and Voluntary sector!

This initial advice below was sent out yesterday by UNISON Community national officer, Simon Watson. We met up with the Pension Trust last week (with Unite and the UNISON pension officer
Alan Fox). 

"Pensions: Auto enrolment and scheme changes

UNISON is aware that many employers are reviewing their position in light of the forthcoming auto-enrolment of staff into pension schemes, and recent valuation of some pension schemes. Some employers are considering raising contribution rates, or even closing schemes.

UNISON believes that some employers are panicking unnecessarily, and the outcome of the LGPS negotiations shows that high quality defined benefit pension schemes remain a viable and realistic option for the community and voluntary sector.

We recently met with the Pensions Trust to discuss the schemes that they administer (including the Social Housing Pension Scheme) and we are preparing advice on both what to do if an employer proposes changes, and on “auto-enrolment” into pension schemes. Look out for these soon.

Employers are legally obliged to consult with current and prospective members of the pension scheme before making changes, under regulations from 2006 (www.legislation.gov.uk/uksi/2006/349/contents).

Please get in touch with UNISON if you hear of any changes to your pension scheme – email pensionsm@unison.co.uk."

"Landlords hit with extra £30m in pension costs"

"Inside Housing" magazine today reports that the Pensions Trust has told 700 employers who are part of the Social Housing Pension Fund (SHPS) that they are facing a rise in

pension contributions of £30 million.

The Pension Trust runs schemes for "over 2,400 charitable, social, educational, voluntary and not-for-profit organisations". I imagine that all their defined benefit scheme employers will be receiving similar messages.

I posted the following comments in response on the Inside Housing website:-  

"What employers should be saying to the Pensions Trust is why should they pay more when this so called "deficit" is a completely meaningless figure based on a discredited and outdated accounting standard? Which even the Government pensions minister describes as a "nightmare" and has promised to change?

Why isn't the Pension trust looking into the alternatives to simply raising contributions and threatening the long term sustainability of the scheme?

Why aren't they following the lessons learnt from the new Local Government Pension Scheme 2014 on how to keep contributions down but still offer a first class defined benefit scheme?

John Gray
Branch Secretary Greater London UNISON Housing Association Branch".

UNISON Community e-news: Voting YES in LGPS ballot is "vital"

Community e-news

July 2012

UNISON’s e-newsletter for the Community service group

Vote “Yes” in the LGPS ballot

The leadership of UNISON’s Community service group is urging members to vote “YES” to accept the proposals for a new Local Government Pension Scheme.

Service Group chair Kevin Jackson said: “This is a vital vote for all our members in housing associations and charities.

·         If you are in the LGPS, then it’s a good deal, especially for part-time workers.

·         If you are not in the LGPS, then keeping a high quality scheme for public service workers will help put the brakes on other employers who want to ‘dumb down’ pension schemes.

·         If you are being TUPE-transferred then the “Fair Deal” for pensions is being beefed up to give you more protection too.

“Not all members are in the LGPS.  But we have to ballot everyone in employers which have some members in the LGPS.  We are also working hard to protect the Social Housing Pension Scheme and other pension schemes.  A high turnout in the ballot will send a message of strength to the government. 

Make sure you vote!

The ballot runs from 31 July to 24 August, and members can vote by post or online.  There is more information on www.unison.org.uk/pensions/lgps.asp.

Pensions: Fight to keep schemes! and “auto-enrolment”

Members in the Social Housing Pension Scheme (Pensions Trust) need to be aware that their employers have been sent letters about the deficits in their pensions 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 Trusts.  In the meanwhile if your employers starts talking of any changes to your pension scheme please contact your branch and UNISON’s pensions unit immediately and ask your employer to send 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 everyone, “auto-rolling” for pension schemes is starting from 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 may be “good news” for those not in a scheme but we are concerned about some employers who currently have decently funded defined contribution schemes (“final salary” or “career average” schemes) 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.  Employers’ have to realise that unless they want their staff to retire in poverty they have 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 contact) in every employer.  If you are interested in being a “Pension Champion” let us know and we will sort out some training for you on the role in the very near future.

Contact: pensionsm@unison.co.uk

(top two stories on pensions in this months Community e-news. Check out rest of news here on
campaigns and research against cuts and austerity; pay deals and employer reports from around the country; activity in regions; and a new chair for your service group executive).

"Housing bodies fight to protect staff pension pots"

Today the Social Housing Magazine "Inside Housing" led with a report that housing organisations are to challenge a threat to their workers' pensions.

The Pension Trust which administrates the Social Housing Pension Fund (and many other Community and voluntary sector pension funds) is being blamed for attempting to force employers to close decent defined benefit schemes and force them to open less secure defined contributions schemes. This is supposed to be about rising pension "deficits".

To be fair to the Pension's Trust I have had conversations with people closely connected with the Trust and they say that they are fully committed to keeping these schemes affordable and open.

This morning I posted these comments on the Inside Housing website.

"While it is good news that Housing organisation are going to fight to protect their pension schemes it is absolutely vital that everyone understands that these “deficits” are frankly meaningless.

The cost of pension schemes is measured by a discredited and outdated accounting system called “Mark to Market” which even the Pensions minister Steve Webb described as a “Nightmare” which is “killing” perfectly good schemes. He has promised “not to stand “idly by” and to do something.

All employers and defined benefit pension schemes must not panic or over react. They should be working jointly with the trade unions to resolve this temporary problem. Remember closing the scheme will not get rid of the deficit. It can make it even worse.

Modern defined benefit pension schemes are as sustainable and affordable now as they have ever been. 

John Gray Branch Secretary UNISON Greater London Housing Association Branch"

UNISON NDC 12: What to do if your employer wants to close your pension scheme?

This picture is of me supporting the call for the TUC demo on October 20th was in the Friday morning edition of "London Calling" which is our regional conference new sheet. Next to it was this article I had written about:-  

"What to do if your employer wants to close your pension scheme?"

Tomorrow’s debate on the future of the traditional public sector pension scheme will be very important. But we must also remember the current threat to UNISON members in the Community and Private sectors.

Some employers have started consulting our members who work in Charities and housing association about getting rid of their pension schemes held with the Pension Trust and the Social Housing Pension fund. While the contractor Sodexo (which provides many privatised town hall and hospital services) is at this moment trying to close one of its defined benefit schemes.

If you are aware of any attempt to close your pension scheme you must get in touch with your branch ASAP. Do not believe the misinformation being put out about by some employers about how their pension fund deficits means they have no choice but to close. This is rubbish! In nearly all cases such “deficits” are completely artificial. Its "funny money". As everyone knows due to the recession the stock market is depressed and government bonds (which are used to measure such deficits) are at a 200 year historic low.

Most importantly, if you close your pension scheme it does not mean you get rid of the deficit. It is still there and could make things even worse since a closed pension fund has to sell its long term investments to raise cash to pay out existing pensions. 

I am writing a guide on what trustees and members should do if their employer tries to close your pension scheme. This should be out soon.

If the new look LGPS 2014 is accepted I hope it could become a model and beacon for all pensions schemes and lead to a rebirth of guaranteed defined benefit schemes - especially for the 60% of private sector workers who get no pension whatsoever from their employer".

"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)

Housing Pension scheme deficit reduced by £103 Million, Workers pensions slashed?

Pleased to see that the deficit in the Social Housing Pension fund (SHPS) has been reduced in the last 2 years from £283 million to £180 million. Many Housing organisations subscribe to this pension fund; it has about 53,000 members in some 700 schemes, many of which will of course be Unison members.

However, I must admit to feeling exasperated (to say the least) that many social housing organisations (e.g. RSL’s, Housing associations or voluntary groups) were apparently advised to either leave the SHPS or pick an inferior scheme in the last two years because this terrible “deficit” and supposed long term increased payroll costs. The original deficit had very little to do with any increases in people living longer.

Many UNISON members have either been refused access to a decent final salary scheme or had their existing scheme radically downgraded. For what reason?

Pensions are long term saving plans, usually over 20-30 even 40 years. Stocks markets almost by definition go up and down. Why was there this “panic” to reduce benefits from traditional and sound 1/60th final salary schemes to grossly inferior 1/70th; CARE schemes or even group personal pension schemes?

Since funded pension schemes assets will go up and down in line with stock market volatility, my point is that it is wrong to change your staff pension scheme on the basis of short term valuations, especially if you are a socially responsible organisation. Housing organisation often also employ local people and residents. Elder poverty is one of the greater evils in our society and it is simply wrong for housing organisations to contribute to this poverty for short time gain. Come on finance directors and boards - you know what the decent thing is! Save your existing Final Salary Pensions Schemes and if you have changed it, change it back.