Posted by Jim Gilchrist on 10 October 2000 at 00:00:16:
A lengthy article from The Times 30 Sep 2000 makes a point...
Alan Copson, a 67-year-old who lives in Swanage, has been making his pension scheme hear his voice for 20 years. Letters to the management, appearances at AGMs and unrelenting pressure on those who run his pension scheme have finally borne fruit.
Mr Copson retired from a brewing firm through ill-health in 1971, and his pension scheme was later merged, along with his old employer, with Grand Metropolitan. In 1980, he began to question the level of his ill-health early retirement pension.
The Grand Metropolitan pension scheme, in common with many other company plans at the time, gave its pensioners an escalating pension at a fixed rate - in this case, 3 per cent.
However, high inflation in the 1970s and 80s meant that the purchasing power of this pension decreased. Attempts were made in 1986 to take account of the losses by boosting the pensions, but Mr Copson maintains that these did not go far enough.
He believes that he and other pensioners of his era have been substantially underpaid by the pension plan - in his case by about £50,000.
The Grand Metropolitan pension scheme merged into the Diageo pension scheme in 1998, and the new scheme has promised to boost pensions in payments by an estimated £100 million, validating Mr Copson's 20-year campaign in the process.
Paul Charles, UK pension administration manager at Diageo Pension Scheme, says that every pension in payment from the scheme will be checked to see if it has reduced in value with inflation. He says the boost will help all pensioners, "particularly those who retired or left employment in the 70s and 80s, because they will probably have been the most adversely affected by high inflation".
The scheme is now in a position to fulfil more than its basic legal obligation to pensioners. Over the past 12 months its fund has enjoyed investment performance of 23 per cent, contributing to a surplus of £1 billion. The benefits paid from contributions made after 1997 must, by law, rise by either 5 per cent a year, or by the retail price index. Diageo has said that as long as the scheme is in a healthy position, it will, in the future, match inflation on its pensions in payment, even if it exceeds 5 per cent.
Twenty years of remorseless campaigning seem to have borne fruit for Mr Copson, although the amount he and the other pensioners will receive is yet to be decided. Mr Copson believes the battle has been worth it. He says simply: "It had to be done."
Scheme members tend to speak out in two circumstances: when there is something amiss with an individual pension, or when the scheme as a whole is perceived to have a problem.
Des Hamilton, technical director of the Pensions Advisory Service, Opas, says that in both cases your first task should be to contact the scheme manager or the trustees. If their reply to your query is not satisfactory, contact Opas, which is a free service run on a voluntary basis by pensions professionals.
One lesson to be drawn from Mr Copson's battle with his pension scheme is that if you have a problem, do not be put off by techno-babble. Pensions are complex, and governed by a myriad of regulations, so it is all too easy for those who understand the technicalities to confuse those who do not. Mr Copson's scheme, until this year, repeatedly told him that his pension had not been eroded by inflation, and provided complicated statistics to prove its case.
Opas will be able to advise you on what course of action to take. Initially, it will try to broker a deal between the warring parties, giving you the benefit of its advisers' pensions experience.
If a mistake has been made, and Opas cannot resolve the matter, it will refer you to the Pensions Ombudsman service. Mr Hamilton says: "We would not normally advise members to go to litigation, because of the costs involved. The ombudsman service gives free access to a judicial process. The ombudsman's determination is legally binding on all parties."
In some circumstances, you may have to go straight to the Occupational Pensions Regulatory Authority (Opra), the body charged with overseeing the regulations of company pension plans. Mr Hamilton says: "If there is an imminent danger to the assets of the scheme, go straight to Opra and do not pass go."
If you feel the scheme is being poorly run, consider becoming a trustee. The Government stipulates that one-third of a scheme's trustees must be nominated by its members.
Pension funds are set up under trust to keep the assets separate from those of the sponsoring employer. The trustees look after the assets on behalf of members, pensioners and their dependants. Their primary tasks are to ensure payments are made on time, the assets are properly invested, and the administrators and advisers are doing their jobs.
Lay trustees are not expected to be pensions experts. The trustee board has advisers - typically an actuary, an auditor, an investment manager and a lawyer - to guide them through the labyrinthine regulations governing the scheme's management. The job of the trustee is to make decisions about the running of the scheme, based on the advice of the experts.
Training is available to help you ask the right questions by explaining the basics. The Pensions Management Institute can provide a list of courses.
It is not a job to take on lightly. You will not receive any extra pay, although your employer is obliged to give you time off to fulfil your duties.
Trustees can be fined, or even jailed, for some breaches of pensions law, and the job may occasionally put you on a collision course with your employer.
Schemes have different methods of electing trustees: your pensions department will be able to tell you how to go about it. But, if you want to make your voice heard by the people running a pension scheme, what better way is there than to become part of the club?