"Pensions people can trust"

This post is just a little bit late but I was away when the Labour Party and Ed Miliband launched its policy review document on pensions last

month and I am still catching up on things.

I thought the review was pretty good and was pleased that the Party recognise that not only are pension policy holders being ripped off in charges but one of the most obvious solutions is that all pension schemes should be "Trustee based". 

This would mean that schemes are looked after by representatives of the beneficiaries who have a financial stake in their scheme and therefore a real fiduciary duty to their fellow pension scheme members. Most company defined contribution schemes are run by pension or insurance companies and have no trustee representation at all. These schemes tend to be run in the interests of private companies and their shareholders, not pension policy holders. No wonder in so many cases they get such a rotten deal.

The review was not perfect. I was disappointed that the review did not mention any positive measures to protect and encourage defined benefit schemes. It did put its finger on the major pension challenge. The complete and utter lack of trust by the British public in our financial institutions.  Who would blame them for this? Since all the evidence is that for at least the last 30 years most have at best ripped off and at worse defrauded savers. The latest loan protection mis-selling scandals and LIBOR fixing shows it is still going on. Things need to change. 

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).

Vote YES to Protect Your Pension: LGPS 2014 Ballot

From tomorrow (31 July 2012) UNISON members will be able to vote on the new look Local Government Pension Scheme 2014.

My advice is to ignore the miserablists who are urging rejection for reasons I cannot even begin to understand never mind explain.  This (LGPS 2014) is a good deal.

Since the Union cannot identify who is in the scheme or not, all those who work for employers who have membership of the LGPS will be balloted. If you are currently in the pension scheme you need to vote YES to secure it. If you are not currently in the scheme I would also recommend you vote YES since you may be able to join it later.

Voting YES is a "no-brainer" in my view. This is a good deal that should secure the scheme for the future. Check out the latest advice below from the UNISON pension advisors:-

"It’s time to have your say! Use your vote on the new pensions proposals.

• Ballot will be held 31 July – 24 August.
• Ballot helpline (10-21 August) 0845 355 0845

Among the improvements to the LGPS negotiated by Unison are:

• No overall contribution increase – 90% of members will pay the same or lower contributions than now – you will only pay more if you earn over £43,001 a year.
• A career average scheme which uses all your pensionable pay to calculate your pension, increase in line with the Consumer Prices Index (CPI)
• An improved 1/49th accrual rate, which means your pension builds up faster each year
• Pensionable pay will include non contractual overtime and additional hours worked by part-time and term-time wokrers – so more of your earnings will count towards your pension
• Most part time workers will pay less for their pension as contributions for part timers will be based on actual pensionable earnings from 2014, not the full time equivalent as they are now
• A new 50/50 option means that after April 2014 you can choose to pay half the contribution to receive half the pension in those years while keeping full survivor benefit and ill-health pension protection. You can opt back into the full contribution for full pension rate at any time.
• If you are transferred to a private or voluntrary sector employer, you will still have the right to stay in the LGPS.

Current scheme members’ pensions benefits for service before 1 April 2014 are protected and will still be calculated on final pensionable salary on leaving service or retirement. The current normal pension age of 65 will continue to apply to this part of your pension. The existing Rule of 85 protections will still apply and members will not have their pension reduced if they are made redundant after the age of 55 regardless of normal pension age.

If you want to find out more about how these changes will affect you then go to http://www.unison.org.uk/pensions/lgps.asp"

"Pension schemes need urgent rule change"

Catching up after annual leave last week. Just read Janice's important letter on pensions published in the Guardian on 25 July.

"Phillip Inman's welcome report on the dire state of private sector pensions (No wonder ministers are panicking over pensions, 23 July) nevertheless omits one major reason for the horrendous deficits of defined benefit (ie final salary and career average) pension schemes: a couple of clauses buried in the 2005 Pension Regulations. The clauses force defined benefit schemes to conduct valuations using methods derived from free market theory: basing scheme projections, decades into the future, on the state of the markets on one day. If the markets are fine, the pension fund is fine. If not, schemes are in trouble. These rules have caused wild volatility: no one has a clue about how big their deficit will become. Last year the Pension Protection Fund reported DB schemes' combined deficits as £8.3bn. A few weeks ago they passed £300bn.

The Association of Member Nominated Trustees, whose members are trustees of pension schemes with collective assets of about £200bn, says DB schemes must be enabled to ride out short-term market volatility by smoothing the valuation – taking an average of asset values and gilt yields over several years. The PPF has adopted this method for itself. What's good enough for the PPF is good enough for the schemes that fund it. The AMNT has submitted rule changes to the Department for Work and Pensions, and our views are shared by organisations such as the CBI and the National Association of Pension Funds.

This may sound like a dusty technical issue. But what's at stake are the pensions of more than 2 million working people, and the chance for the millions coming after them of having a decent pension.
Janice Turner
Co-chair, AMNT

Letter to Chair of Community SGE on LGPS 2014 proposals

Dear Kevin

Please present my apologies to today’s Community Service Group Executive (SGE) meeting on the proposed new Local Government Pension Scheme 2014.

I have a long standing family commitment.  I would however like to make a report to the SGE on what I believe to be the merits of the LGPS 2014 (England and Wales) proposals.

I will declare an interest. I am a member of the LGPS and have been for around 18 years. Three other members of my immediate family are also members of the LGPS and we are all dependent on the scheme for financial security in our old age. The scheme needs to be made sustainable to ensure this.

My branch carried out the consultative process of members about the proposed new scheme. Out of the 1400 members consulted the response was poor but all members who did respond were in favour of the new look 2014 scheme and no-one was in favour of taking industrial action against it. There is no appetite whatsoever in my branch, my service group nor (I understand) my region for any strike action on this issue. 

Why would there be? Since we should be celebrating LGPS 2014 as a significant victory for the Union and the labour movement! Brought about by collective campaigning, lobbying, mobilising and effective industrial action.

In many ways LGPS 2014 is actually an improvement for our members. Pension build up (accrual) will increase for all but 90% will pay the same or less. The existing final salary pension scheme discriminates against low paid women workers in favour of highly paid senior managers and Chief Executives. This is just wrong. Most members will do better under LGPS 2014 than 2008. Not only low paid women but nearly all part time workers and those who rely on non contractual bonuses and overtime to live on.  The 50/50 option will be a godsend to hard pressed members who due to cuts and pay freezes feel forced to leave the scheme.

In our Service Group (and others) the 2014 protection and extension of “Fair Deal” is absolutely crucial. Members being TUPE transferred will not have to accept 2nd class pensions schemes and will still be able to keep their LGPS pension if transferred again (and again). This requirement will also scare off the more blatant and obvious quick buck profiteers who don’t want to take on the responsibilities of a decent pensions scheme.  It will remain a world class guaranteed defined benefit scheme.

It’s a no brainer in my view. Let us support the LGPS 2014 in the forthcoming ballot and make this affordable and sustainable scheme a bench mark for all pensions for all workers. 

(Oh, and please forgive the miserablists. In the future they will be citing the success of the LGPS as an example of what you can achieve by industrial action)

Regards

John Gray
UNISON National Executive Council Member for Community & Voluntary sector.

UPDATE: LGPS 2014 endorsed overwhelmingly by SGE's see here

"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 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"

Why the financial services industry can be so corrupt (and yet so smug?)

Amidst the current media fury about the Barclays Bank LIBOR fiddle and the latest miss- selling scandal to small businesses, the only thing that really astonishes me is the shock and horror about what has gone on?

Already we have excuses that this was a “one off” or “all the fault of the last government” as well as it’s just a few “rogue traders”.   Rubbish. It is not.

Does everyone forget already that we are in the worse recession for 60 years due to either fraudulent or at best reckless behaviour by Banks and financial institutions?

Barclays Bank has been ripping off its customers for years, it not for decades. Does no-one remember the Personal Pension scandal during the 1980’s and 1990’s? When Barclays (and practically all the other Banks and life assurance companies) persuaded its loyal and but completely naive customers to  come out of their guaranteed Company defined benefit pension schemes and buy their expensive personal pensions? When people wanting short term saving plans were sold 25 year life insurance endowment bonds?

When, very like the current debacle over small business interest hedges,  the Banks instructed all their retail staff that they had to make so many sales a week of these products or they were in trouble. All senior management knew exactly what was going on since it made no financial sense whatsoever for anyone to leave their company pension scheme.  But they did nothing to protect their customers nor ultimately their shareholders who had to pick up the bill for compensation. These corrupt practices are due to widespread bad company and industry wide governance.

Yet time after time, whenever I go to governance conferences and meetings, we are told how wonderful UK governance is especially compared to the rest of the world (Which is probably true but if so, then God help the rest of the world). When sensible proposals are made to improve corporate behaviour and governance such as the compulsory publication of Company AGM voting by fund managers or putting employee representatives on remuneration committees then they are too often simply dismissed - often sneeringly.  

This frankly smug and self satisfied attitude has change.  The UK financial services is very, very important to the UK economy. We can argue that maybe it is too important which is another matter. But at the moment it is responsible for 10% of our tax take, employs hundreds of thousands of workers and is the main source of finance for our economy.

While there is some very good people work in finance there is not enough of them to stop us, the principles who own assets (such shareholders in pension and insurance funds) being robbed off by the agents, we employ to look after our assts. 

Cosy crony remuneration committees must stop. Shareholder votes on pay at company AGM’s should be binding and compulsory. Retail and investment banks should be separated to stop casino capitalism.  The Government should retain a significant shareholding in the Banks we own at the moment and we should buy shares in those we do not own.  Better regulation is not enough we need a state holding not to run the Banks but to try and make sure that they are run by grownups who will act in the long term interests of shareholders and customers not the selfish short termism driven by Bollinger Champagne dudes.

The massive life insurance funds and Mastertrust pension schemes which have no beneficiary governance at all should have a trustee structure set up to ensure that they are not being robbed either.  Doing so would help put UK PLC in order as well. 

Finally fraudsters should be brought to book and locked up as well as those higher up who turn a blind eye to matters in order to ensure their own well paid positions and bonuses. Anyone making a deception in order to gain a pecuniary advantage is guilty of a serious criminal offence while aiding and abetting any criminal offence is a crime as well.  These people must be dealt with in the same way we treat rioters.

Rant over. Hat tip great cartoon by Steve Bell from The Guardian

UNISON to ballot on Local Government Pension Scheme

Key Facts About LGPS 2014 Proposals and LGPS Members

·                     90% of members will pay the same contributions as now

·                       Nearly All part-time workers and those earning between £15,801 and £21,000 will pay less in LGPS 2014

·                     Over 55% of local government workers work part-time

·                     Only those earning over £43,001 will pay more

·                     They make up just 4% of LGPS members

·                     95.6% members earn less than £43,000 - the point at which contributions increase

·                     The LGPS 2014 will deliver a better pension than LGPS 2008 for members until 20 – 25 years of membership

·                     But the average length of membership in the scheme is just 7 years, so most members will do better in LGPS 2014

·                     From 1 April 2014 the Normal Pension Age (NPA) will be linked to the State Pension Age – which is set to rise to 68 between 2044 and 2046

·                     But many members retire before 62, the increase in NPA will not stop this.

·                     Those who have to work longer will get a bigger pension because they will be paying contributions – and benefitting from employer contributions for longer

·                     Because all earnings will be pensionable – including non-contractual overtime and additional hours for part-time workers – members will have bigger pensions than now

·                      Most UNISON members not in the LGPS give cost and low pay as the reason.  The “50/50 option” will help them to join.

Recruit and Organise - You will soon receive a recruitment leaflet based on the LGPS 2014 proposals.  PLEASE USE IT!  Many low-paid and part-time members will be able to join the LGPS for the first time because of UNISON’s negotiations – and most members will pay no more for the same – or better pension.

This is a big achievement in the face of a hostile government which wanted to end defined benefit pensions, increase contributions and worsen benefits.

Let non-members know what UNISON has done and will continue to do for our members.

(based on UNISON LGPS Campaign news 20 which I have updated a little)

Consultation is taking place until July 11 - the ballot  starts 31 July and finish 24 August.

More reasons to shop at Morrisons? DB Pensions!

The Pensions press seem to be astonished that the supermarket giant Morrison's is still going to offer a defined benefit pension (DB) scheme to its staff when auto enrolling begins. Now the "cash balance" scheme they will be offering is not that great, but as "Professional Pensions" points out it has bucked the trend away from DB schemes and "runs contrary to the predominant theory that the decline of defined benefit provision spells doom for retirement incomes".

So well done to Morrison's who seem to be proving that they actually are a company that does pride itself on its business ethos. They obviously do not want their 115,000 employees to end their days dying in abject poverty.

Unlike their so called "ethical" rivals methinks?

Modern Defined Benefit Schemes are as valid and affordable now as they have ever been.

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".

"Active Responsible and Engagement Investment Approaches: Do they deliver positive returns?"

Last Tuesday evening I went to a seminar organised by the Pension Investment Academy and the University of Westminster Business School(Marylebone Campus) via the AMNT. The seminar was about whether responsible investment and engagement approaches actually work. Which is a pretty fundamental topic I posted on recently here.

Why I believe as a pension investor and trustee that investments should be made in a social responsible manner. I have to ask what empirical proof or evidence is there that such a policy actually achieves a positive return especially when compared to investments on behalf of those who don't worry what happens to their investments as long as they make money. 

I can remember being told many years ago that it is the duty of pension trustees to maximise the performance of their fund and nothing else. Which is clearly nonsense (then and now).

There was a pretty high powered panel of speakers from the Pension Protection Fund, Mercer, BT Pension fund and Henderson Global Investors.

The good news is that it seems that there is now research that engagement can add to returns and could reduce risk and volatility. However, the evidence is so far patchy. Certainly there is the argument that such active stewardship in Banks could make a "rerun" of the recent global banking disaster "materially less likely" (Walker Review 2009).

In the Q&A I did respond to the points made by some members of the panel that voluntary regulation is better than the state being involved, by saying that the lessons from the Banking crisis is that laissez faire capitalism failed and that you need more state regulation not less.

Also that until our investment advisers start advising trustees that it does make financial sense for the fund to be active then most trustees will not have the confidence to do so. Many fund managers (not all) in my experience see SRI as a unnecessary interference  in their right to manage money as they see fit. They simply pretend otherwise to win and keep business.  Regardless of the Stewardship Code you will need the support of your advisers to take them on.

Update: evidence on positive returns by Helene Winch from BTPF  here ; here; here and here 

Hat tip cartoon Kevin Wong

(I spent 3 years on a day release at the Westminster University site in the late 1990's to do a CIH post-graduate diploma. It was nice to be back but due to expansion and building works the campus is now unrecognisable).

"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)

Don't mention the ...Pension tax advantages on your P60!

I've just been trying to work out what on earth my P60 actually means? To any non-Brits looking at this post, every year in the UK if you are employed your employer should send you a legal certificate showing your salary and how much you have paid in income tax and national insurance. It also use to show how much you paid into your company pension scheme.

But for some reason - no longer? My P60 just shows my income for the year "net" of my pension contributions despite claiming to show my "total pay" for the year. Which is wrong since I know I earned more in that year than is shown on my P60. No wonder people get confused and don't know their true income nor more importantly, the advantages they may have from having a company pension scheme.

One of these many advantages of a company pension scheme is that it is usually paid out of your income before the taxman has a go at it and what this means is that your tax bill is slashed if you have a pension. What this also means to your wallet or your purse is that your pension is bumped up for free by the taxman!!! Result!

But you would not know that from your P60. It not only misleads you on your total income but it totally fails to show the benefit from being a part of a company pension scheme. Which is just plain daft and stupid. We should be encouraging people to save not only for their futures but also to save the State from forking out for those who retire with no private pension and then are totally dependant on the State.

The Madness of "Mark to Market" Accounting: Destroying our Pension Futures

Last week I heard that one of our employers wants to meet my trade union branch to "discuss" closing their defined benefit pension scheme. At the same time an union pension trustee colleague sent me this link to an article by the "Daily Telegraph" on defined benefit  schemes struggling to stay open.

The article itself was as usual for the "Torygraph" ill informed and biased, shaped by the self interest of it's owners and its advertisers' but what I found interesting was in a on-line comment by "mchenry" about final salary schemes.

I support mchenry's argument that a key reason why private companies have been closing their  pension schemes and therefore creating "penury for millions of ordinary workers in the future" is not to do so much with people living longer or the (mistaken) past taxation of pension funds but instead it is "a frankly insane requirement to value long term liabilities spread over decades via volatile short term measurements". This is the legal accounting requirement of pension schemes called "Mark to Market" (or even more laughable - "Fair value") Accounting.

What this means is that pension fund liabilities (the promises made so far by the scheme to pay pensions now and in the future) which may be spread over the next 60 years are costed using completely daft and inappropriate means. UK Government bonds which are currently on a 200 year all time historic low have to be used to price the future cost of pensions to the scheme even if this notional cost is decades and decades from now.

Would you take out a £150k mortgage to buy a house if depending on events entirely out of your control this mortgage liability could just jump up in a matter of months to £300k? Also if your credit rating was based on your ability to pay all your loans and mortgages off immediately - would you be declared bankrupt?

Which is all completely and utterly bonkers.

"Mark to market" accounting makes it appear that perfectly good pension schemes are in massive deficits. These "deficits" have also been completely unpredictable and volatile in recent years and months. Since the so called "deficits" must appear on the company accounts, no wonder some finance directors  panic.

Not only this but because of these entirely artificial measurements the investment policy of pensions schemes is being driven entirely off course by this "funny money" calculation.   Schemes may be tempted to take all sort of riskier investment options or even buy totally unnecessary insurance policies to reduce these artificial "deficits".

Look, there are huge problems and challenges that defined benefit schemes need to face. But we need to deal with the real problems of uncertain market returns and longevity not stupid accounting rules  no matter how well meaning. Unless we sort this out millions and millions of Brits will be spending the latter part of their lives in the misery of abject poverty.

UNISON International Seminar 2012

The seminar is taking place in York. It actually started Friday evening which I missed due to work commitments. This morning the first presentation was by  local Labour MP Hugh Bayley (former junior minister) on "International Development and the UK Parliament". Isobel McVicar, Community NEC and member of the UNISON international Committee chaired.

Hugh reminded everyone that York itself use to be an Italian and Danish Colony. While he in a former life was a NALGO district and national officer and can remember the "incredibility" he use to face (I suspect he is being polite) when he first tried to get NALGO to take international trade union solidiarity seriously, especially with regard to the staff pension fund and a boycott of investments in Apartite South Africa. Nowadays it is also widely accepted that the purpose of international aid is to eliminate poverty not promote trade. This is a victory for progressives. He remembers the howls of protest by the Tories in the Commons when he first suggested this. It is also a victory that the Tories have agreed to honour the Labour Commitment to 0.7% of GNP to international aid (even if they have cut this with a £1.2 billion delay). You can be cynical that they are just pretending not to be "the nasty party" anymore but there has been a sea change in views. The same with Gay rights.

Hugh sees himself and the Labour Party as very much the "political wing of the wider Labour movement".  Which may I suppose be the reason why he was sacked as Pension minster by Tony Blair!

Dirty Unilever

“Unilever – not as clean as it claims” reveals how the world’s third largest consumer products company pays its CEO Paul Polman 285 times more than the average worker yet is forcing through plans that will see UK workers’ pensions fall by between 20 and 40 per cent. Unite says this is a continuation of a global strategy which has seen the company cut jobs and pursue ruthless outsourcing in order to generate wealth for its executives at the expense of the workforce.

Unite is urging viewers to send a simple message to CEO Paul Polman, which is “it is time for you to talk.

On Wednesday January 18th workers will begin a programme of 11 days of strike action right across the UK operation, hitting production of leading brands from Pot Noodle to Marmite, Persil to Dove. The workers are furious that the company is planning to ditch their final salary pension scheme despite earlier assurance to the workforce that it would be retained and the company’s point-blank refusal to discuss alternatives with the workers’ unions".

UNISON Pensions decision: jaw-jaw better than war-war (for now)

In a victory for common sense UNISON elected lay reps have voted to continue with negotiations

over Local Government and NHS pensions.

This morning there was a two hour Pension Summit with 250 senior lay reps present were it was clear that an overwhelming majority of branches, up and down the country, wanted negotiations to continue.  While reserving the right to call further action if these talks break down. Their was near unanimous agreement that there had been a significant improvement in the offer over pensions and that we had a duty to talk not walk.

Next there were separate detailed briefings on the Local Government and NHS pension schemes after which the different Service Group Executive's (SGE)  met and debated on what to do next.  I am really pleased that all the SGE's voted to talk further. 

One sour point in an otherwise positive and constructive day is that it is clear that certain "individuals" outside the union have been telling completely despicable lies about UNISON and trying to interfere in our internal democratic process.  Now while I can respect the opinion of those who genuinely feel that UNISON have made a wrong call.  This is the decision of our democratically elected representatives. What many UNISON reps will not tolerate is unrepresentative, ultra left sects playing out their toy town revolutionary fantasies at our expense. We will not do what we are told to do and think by rule or ruin wreckers and splitters.

LAPFF Conference 2011: The Continuing Crisis

Another early start on Thursday to get to the Local Authority Pension Fund Forum (LAPFF) 16th annual conference in Bournemouth from East London for 9am. LAPFF “exists to promote the investment interests of local authority pension funds, and to maximise their influence as shareholders whilst promoting social responsibility and corporate governance at the companies in which they invest....Formed in 1990....combined assets of over £100 billion”.

It is of course quite ironic that this conference took place less than 24 hours after I had been on a (number of) picket lines in the biggest industrial dispute since 1926 over pensions.

Both of the local government pensions schemes I have an “interest” in are members of LAPFF. This year for the first time I was at the conference as a Councillor rather than as a Staff side representative. Which caused some confusion. I’ll try and post on as many of the excellent presentations and debates as possible. If you are a member of a local authority pension committee or panel in any capacity (and any Party or Union) then this is the conference to come to. It is politically non-partisan which in this context I think is very much a good thing.

Tom Watson MP was to be the opening speaker but his mum has fallen ill so he has had to send his apologies. The Chair of LAPFF Cllr Ian Greenwood and PIRC Tom Powdrill instead did a presentation on “The Hacking Scandal: Lessons for Investors”.  

LAPFF have been trying to remove James Murdock (son of Rupert) as Chair of BSkyB not so much with regard to the appalling behaviour of News of the World reporters etc but concern about his independence and the reputational risk to our investments and what this is doing to shareholder value. For example will OFCOM still consider NewsCorp to be a fit and proper shareholder of BSkyB? If they don’t - what impact will this have to Pension fund investments in BSkyB?

TUC Trustee Conference 2011: Fiduciary Duty for Trustees

This is from last weeks TUC Member Trustee Network Annual Conference at Congress House.  I missed the morning session due to regional meetings.  Which was a shame.  Especially the

Steve Webb MP (Minster for Pensions) keynote address.

I came in during the end of the panel discussion on "Fiduciary duty for Trustees". Which in the exciting world of pensions is a "hot topic". It use to be the case that Pension Trustees were told that they could not consider any other investment issues except maximising financial returns. This has recently been turned on its head.

As panel member,Thompson's solicitor Ivan Walker put it, there could be a breach of your duties as a trustee if you do NOT consider environment, social and governance (ESG) issues. Will Oulton from Mercer pointed out how many companies boast about their Corporate ESG activities yet when you ask them about their company pension fund ESG you get blank looks.

Christine Berry from Fair Pensions asked trade union pension trustees to reclaim their funds from outdated dogma which suits the interests of the financial services industry. I'll post further on the conference when I can.