I got angry yesterday…
I was on a conference call with a couple of lawyers arguing about the technical difference between a “duty of care” and the need to “act in good faith”. Apparently the semantics let an employer off the hook for the outcomes of its workplace pension!
When I asked a group of 150 employers in a room at Sage Summit whether they felt they had a duty of care towards their staff 150 put up their hands to say “yes”.
I’m angry that employers are being plied with the “all pension schemes are the same” – “no one can be blamed for choosing NEST” and “you shouldn’t get involved” arguments.
If you believe your staff are your greatest asset, you care about how they are paid and how they save.
I was in the room with the most pacific colleague! That person in the room with me got angry with the casuistry – righteous anger is infectious!
Postal workers are angry
The 140,000 postal workers are angry too. They were told when the Government privatised their company 7 years ago they would remain in a defined benefit pension scheme. Money was put in that scheme to make it viable, seven years later that scheme is being closed because to keep it open would cost over 50% of payroll.
Nobody wants 50% of pay to go into a pension, we’ve got to pay today’s bills too and if I were a postie, I wouldn’t be argued that this pension scheme should stay open. But I’d be seriously angry that it has gone from fully funded to unfundable in such a short time! We all know the reasons, the trustees thought slamming funds into bonds was a risk free strategy, they were wrong, look at the share price in the past six months.
No one wins from this; the decision of the trustees to secure existing pensions has been a disaster not just for City investors but for the share options of Royal Mail staff, the job prospects of Royal Mail staff and for the postal service we rely on.
The posties should be angry, very angry.
In place of strife
The solution that the Royal Mail has come up with is clearly not pacifying the postal workers.
Nor will the advice of John Ralfe;
“Closing the DB scheme was inevitable to reduce RM’s costs and risk. Rather than trying to stop it, the CWU should be negotiating a more generous DC replacement”
Had the Royal Mail adopted a typical bond/equity mix rather than the slam-dunk into bonds, it would not have been inevitable that the scheme would have become unfundable for future accrual. But put the past aside, the old scheme is closed, good riddance to its niggardly strategies.
But DC is not the only option open to the Royal Mail, the FT reports (alongside John’s advice) that the Royal Mail has proposed
“a less generous, but commonplace, defined contribution scheme in which workers take responsibility for investing and drawing income from their retirement fund”
but the Communication Workers Union (CWU) have put forward a compromise proposal
Royal Mail considers union’s pitch for ‘new kind’ of pension planCWU says its proposal would strike a fairer balance over sharing some financial risks
The CWU proposal would keep the current (not the increased) funding level of the DB plan, making the new plan DC for funding purposes. It would float the benefits so that – in future, things like the level of indexation of pensions weren’t guaranteed.
So it’s good to see the Royal Mail tell the FT
“We continue to work closely with our unions on a sustainable and affordable solution for the provision of future pension benefits.”
It ain’t necessarily so
We’ve got used to being told by experts that we must sit back and accept the lowest common denominator.
But the Gershwins wrote “it ain’t necessarily so” in the aftermath of the great recession to counter the heterodoxy that people should take it lying down!
Here is the cut verse of the song, that I sing to myself when I’m told that shit happens,
Way back in 5000 B.C.
Ole Adam an’ Eve had to flee
Sure, dey did dat deed in
De Garden of Eden
But why chasterize you an’ me?
Employers should have a duty of care to their staff (no matter what the lawyers say!)
The Royal Mail should negotiate for a more certain solution (no matter what John Ralfe says)
The DWP/tPR should pursue Philip Green/Rutland Partners and all the other shitesters who want to make money restructuring pension obligations into the PPF.
I could (and won’t) go on.
It ain’t necessarily so, but you won’t hear anyone singing that song – that’s because the voices of the 140,000 postal workers and their union are marginalised as “disruptive”.
It seems ok to be disruptive if you are a trendy Fintech, but not so if you’re fighting for your employment and pension rights.
As my friend Hilary Salt points out;
The 140,000 postal workers should be very angry with those who argue DC is the only option.
It ain’t necessarily so – and it’s time that they and their union – got a little more airtime!
Read more (and get an FT sub!)
Read about the DB closure and the strike threat here; https://www.ft.com/content/936f47e0-201c-11e7-a454-ab04428977f9
Read about the CWU alternative proposal here; https://www.ft.com/content/465fcda4-05bd-11e7-aa5b-6bb07f5c8e12
Read the latest news on Private Equity pre-packing pension rights into the PPF here; https://www.ft.com/content/f9126af2-2051-11e7-a454-ab04428977f9