This page bangs the same drum as Newsletter 46, with additional links and explanations.

NATIONAL NUMBERS

The DWP reckons about £86 billion will be transferred from private occupational pensions to shareholders.  Here is the account by Robert Preston of the BBC.

How much is £86 Billion?  Most of us can relate to a million - it is the sort of money you can earn in a lifetime.  Although we hear political arguments about billions, it is hard to have a grasp of their relevance.  (How many potholes can get mended for £1B?  Or sick children saved for £86B?).  A trillion becomes just a number, rather than a measure we can relate to.  (A normal deck of 52 playing cards can be dealt to four players in 53,644,737,765,488,792,839,237,440,000 ways).

The total sum of UK pension funds is about £1 trillion.  The skim from a pool that vast supports money managers, insurers, actuaries, lawyers, administrators, journalists, trustees, regulators, and the occasional politician - collectively "the pensions industry".  It is a freak when any of these people work for you, the scheme member.  The money managers want more of the returns to go to their company and less to our funds, provided they are not so greedy for their fees that they lose the commissions.  The advisers have no duty towards you - their ambition is to stay employed and keep their firm employed.   The administrators would be happiest if their job was simply collecting from payroll and depositing correct amounts in bank accounts, without the complications of special cases that individual human characteristics lead to.  The Pensions Regulator is clear - his customers are the pensions industry.  There was once a Pensions Ombudsman who saw himself as "levelling the playing field" but Ombudsmen since have aspired to be referees - refereeing the clash between a scheme member equipped with the sword of anger and the Trustee/Company equipped with the strike craft of selecting which facts to reveal, and the armour of selecting sympathetic legal firms and leading counsel.

Trustees have a duty to you but...  The bounds on trustee behaviour create a very large envelope of possible decisions.  It is not a surprise when the Ombudsman writes that he rejects a complaint against a decision and would have rejected a complaint against the exactly opposite decision.  This freedom without accountability makes it too easy to contort the notion of the members' best interest  (i.e with "good relations with the employer are most important") and to take advisers' input as direction rather than as a component of deciding (i.e. the "why keep a dog and bark?" argument).   Experience across the country varies a lot but where the experience is good that will be the result of the local context, not because "acting in the members' best interests" is a sufficient discipline.

It is good that pension funds support so many jobs, but also important for scheme members to recognise that their rights are not thereby protected; quite the opposite.

In lobbying, the supporters of scheme members are heavily outclassed in numbers and money.  Some major organisations - TUC, Which - can be heard because of their resources, even though pensions are only a component of their interests.  The rest of the members' support is mainly a "Dad's Army" of volunteers, who hope their voices will be magnified by reference to the numbers of people they speak for.

Given this overall context scheme members are vulnerable.  The key defence to losing already earned pension is the Section 67 regulation. The principle of it is that you won't lose benefits you have already earned, unless you agree.  This principle still stands.  The problem is in the murkiness of interpreting the principle.   In earlier years actuaries and legal experts were confident that LPI increases (capped RPI on relevant service) were part of what you had (subsisting rights).  Now they may find it satisfies those who commission them if they decide you never owned the LPI increases.

Meanwhile, companies are not concerned about principles - they are busy counting the profit if they can get their actuaries and legal briefs to bypass the principle.   Towers-Watson provide both the actuary and financial advice for the Trustee.  John Ball is head of UK pensions at Towers Watson.  His perspective is "The government's policy change has transferred wealth from pension scheme members to sponsoring employers, who are busy quantifying these windfalls on their balance sheets"