National Association of Pension Funds Local Authority Conference 2012

This was very informative and well organised conference taking place during an absolutely crucial time for the future of the local government pensions scheme (LGPS). I was there as a Councillor and member of the Borough LGPS Investment and Accounts committee.

I did “twitter” (in my case a very apt term?) during the conference (see hash tag @grayee and #napf).
The NAPF had amongst many other speakers the minster responsible for the LGPS, Bob Neill MP, the Deputy Governor of the Bank of England, Charlie Bean; the Chair of the Local Government Association, Sir Merrick Cockell (who in a Q&A I referred to as “Michael”) and from the unions, GMB national secretary Brian Strutton.

The Chair of the NAPF is Joanne Segers. By coincidence the first ever trade union pension course I ever went on was delivered by her father, TUC tutor Terry Segers. Proper old school ex-fire brigade union.

Considering the number of forthright and opinionated individuals present at the conference, the Q&A sessions were quite quiet, which gave a opportunity to a certain gobby part time politician and union rep to somewhat hog the floor during questions.

Key issues to me from the speeches and seminars were:- how Housing associations are “gagging to build new homes” which if happened could help us get out of recession like it did in 1930’s; the real problem in pensions is not in the public sector but that private sector pensions were destroyed by various incompetents; if you truly want diversity on company boards why not have employee reps on them? Are fund advisers really interested in good governance and making company boards accountable? It’s a “no brainer that LGPS should share services" (if so why not just merge?); in the current LGPS if you earn £150k per year you pay less in percentage terms net than if you earn £15k pa (this is wrong, wrong, wrong); What is the collective term for Actuaries? Answer “An invoice”; the new proposed £2 billion infrastructure fund and LGPS governance (a possible national Local Government Pensions Board?)

There was clearly an expectation by speakers that the future of the LGPS negotiations would have been finalised by now. But there is some last minute hic-cups. This is immensely frustrating but I suppose they do want to make sure, as far as possible, that there is no misunderstanding or ambiguities about the “agreement”. The ultra left trade union cry babies (the so called 0.8%ers) are of course still weeping tears at the prospect of no more strike chasing to bring about the revolution but we should have the final offer very soon.

It was good to see at the final session that the conference applauded DCLG pensions lead, Terry Crossley, who is retiring from the civil service. I have crossed swords (politely) with Terry for the past 10 years or so over beneficiary representation on the LGPS. I wish him well in his retirement and told him that if a deal is reached on a new look LGPS then he should have a new part time job and go out and sell the model to the private sector who are in desperate need of affordable and sustainable defined benefit pension schemes. 

The Enlightened Shareholder

Last week I went to the launch at the House of Commons of the report "The Enlightened Shareholder: Clarifying investors'

fiduciary duties" by Fair Pensions.

The speakers included "Professor John Kay, who is currently leading a review which looks into long-termism in the UK equities market; Saker Nusseibah, Acting CEO of Hermes; Roger Urwin, Global Head of Investment Content at Towers Watson and Baroness Jeannie Drake".  Fair Pensions CEO, Catherine Howarth, chaired the meeting and its author, Christine Berry presented the report.

The big issue is whether or not the "fiduciary duty" of shareholder representatives (and trustees) ought to be legally redefined to deal with "crony capitalism and excessive executive pay". Pension trustees (and member nominated representatives) still come across advisers who tell them (completely wrongly I think) that  their only role is to "maximise returns" of the scheme regardless of the impact it has on stakeholders, the wider economy and even the long term interests of the scheme. Which is clearly stupid and frankly bonkers. But it happens and it needs to be dealt with.

I think this problem is widely recognised but there is the usual dispute about the solution. Should this be by statutory regulation or some sort of a voluntary code? As pointed out in the debate we have tried the voluntary approach for a long, long time. It has clearly failed due to agent self interests and conflicts. We need to regulate.

Why you should join your company pension scheme NOW! (it's use it or lose it)

It's a no brainer actually (apologies to Homer Simpson whose scan in on right does show he has a brain although it is very small and rarely used e.g tax payers alliance supporter). There are millions and millions of workers in the UK who have access to a pension provided by their employer but they have not joined the scheme.

Sometimes it is because the scheme is pretty rubbish and that there are no real incentives given by the employer to encourage their staff to join. Yet often this is not the case and workers are losing vast amounts of money each year by not joining.

The 25% apparently eligible to join the Local Government Pension Scheme (LGPS) who haven't are losing at least 14% of their wages each year. They also even pay more income tax and national insurance.

However, the real people at risk from not joining their scheme NOW are in defined contribution (aka Group stakeholder or personal pensions) company schemes whose employers pay reasonable contributions if the members also pay something into it. Many of scheme are pretty good. Not as good as say the LGPS but nothing to turn your nose up upon. Decent employers know that any decent pension will cost a lot of money and they have to play their part in providing funding.

The risk ironically to these "decent" schemes is the introduction of pension autro enrolement next year. Enrolement is a "good" thing and will mean that nearly all workers in the UK for the first time will be automatically put into a pension scheme.  What is worrying some employers is that this may mean that the total bill for pensions will rise. If auto enrolling works (and there is some doubt) then instead of 25% of the workforce being in the company pension scheme this may rise to say 50% or more. Potentially doubling the pension payroll.

What many people fear is that some companies (including ones that use to provide non contributory final salary schemes free to all their employees in a more enlightened age) are planning to either slash and burn existing contribution rates or introduce 2nd tier pensions for employees who have not joined the existing scheme. We need to oppose all attempts to reduce contributions. The more in the scheme the more difficult it will be to cut it.

This is a call to arms to all union reps to "encourage" (we cannot give specific individual financial advice) our members to consider joining their scheme.  If they don't, it may not be around much longer. Use it or lose it.