Rudd’s posturing – no help at all

When BHS went belly up, this blog pointed the finger of blame at Philip Green for putting dividends before the pensions of the staff who earned him them.

Green coughed up over £350m and the BHS pension scheme restructured into BHS2. Most members chose BHS2 rather than the PPF and BHS has now been bought out by a specialist insurer for £800m. This is actually a good news story and shows how things can be put right, even when a lot of damage has been done.

So why do we read in the Telegraph, the DWP’s Amber Rudd threatening fat cats with lengthy jail cells? Is not the lesson from BHS that co-operation works better than confrontation?

Although Rudd’s article doesn’t explicitly mention BHS or Green, it’s clear that it’s they and  Carillion  that she has in mind. She is barking up the wrong tree, as was Frank Field.

The casualties of Frank Field’s posturing on BHS have already included a very good CEO of the Pensions Regulator.  Carillion’s casualties include thousands of small businesses that didn’t get paid. It was not the pension scheme of either company that brought the companies down, it was a combination of a poor business model and poor management.

Read the 100 or so comments to the article and you get a unanimous rejection of Rudd’s comments as ill-judged and over the top.


Judge for yourself.

Here is the Secretary of State for Work and Pensions.

Maybe you’d planned to see the world but can no longer afford to, or you’re shopping for the grandkids at Christmas on a really tight budget.

 “It has always been our goal to deliver the best possible outcome for the members of this scheme.
A buyout guarantees member benefits under the BHS2 Scheme, and is the most secure solution for the members of this scheme. I am delighted that we have been able to accomplish this transaction far earlier than expected”.
If what matters are people’s pensions, then Rudd’s vision of retributive justice doesn’t help one jot. Rudd finishes her article with a piece of populist rhetoric that made me angry.
So if your boss recklessly risks your retirement, they’ll have plenty of time behind bars to contemplate their fate.

Beware unseen consequences.

The new system of unlimited fines and long jail sentences goes much further than preventing fraud. The offences Rudd has in mind include recklessly increasing liabilities and reckless investment.

So if you run your company pension into the ground, saddling it with massive, unsustainable debts, we’re coming for you.

If you gamble your employees’ futures on risky investments that put a pension scheme at risk, we’re coming for you.

The grant of accelerated pension benefits (recklessly increasing liabilities) is one that MP’s have benefited from. Some of the most irresponsible investment strategies I have come across – have been selected by Local Government Pension Schemes.

Government has set up a Pensions Regulator with a remit to improve liability management and ensure responsible investment strategy.

The result has been a funding regime that has put most pension schemes into lockdown, closing the door not just to new employees but to future accrual from existing members.

Rudd’s nightmare scenario, writ loud throughout this shrill article, suggests that the Pensions Regulator will be going after bosses like the Sweeney.

Rudd claims “that for too long, the reckless few playing fast and loose with people’s futures have got away scot-free”.  But who is she referring to?

The great debates about funding are going on at some of Britain’s largest employers. The University Scheme and Royal Mail are two cases where the debate on how to responsibly pay hundreds of thousands of staff a wage for life is ongoing.

I doubt that even the most zealous “de-risker” considers that the advocates of best-estimate funding should be locked up or given unlimited fines. Certainly those with an eye to keeping defined benefit schemes open can’t be characterised as “fat cats boarding private jets”. For the most part, they are people with left of centre views who believe in sustainable strategies such as CDC.

Amber Rudd’s own department is  supportive of open collective pensions, they are what will keep claims on Universal Credit down in years to come.

Auto-enrolment at current contribution rates carries its own risks, not least the false promise that the workplace pensions it is feeding will solve the long term problems of people living longer, making greater claims on the NHS and having no system of turning cash into pensions other than the annuity – discredited by one of Rudd’s former colleagues.

The unseen consequences of the measures Rudd is proposing and the way that she is proposing them, is that she and her department bring pensions into further disrepute.

Frightening employers and trustees  into ever more conservative investment strategies is not always the best way to solve funding problems. Many jobs are at risk from increases in employer contributions that result from risk-free investment strategies. When those strategies push companies into insolvency, the impact is felt on remaining schemes through PPF levies.

She should look to what happened at BHS and build on that success, Philip Green has had his kicking and coughed up. The PPF has only seen a few BHS employees choose to enter it, BHS pensions are arguably the more secure for the constructive approach adopted by all sides.


No help at all

I have no reason to dislike Amber Rudd, I am a member of her party and I support the work being done by her department.

I suspect that this initiative is being launched at this very time for very political reasons which I don’t want to or need to speculate about.

I do dislike this posturing because it confronts a problem that isn’t there.

Meanwhile, the real damage being done to pensions, the atrocious behaviour of those who scam people out of their life savings, goes on.

Meanwhile, the failure to get promised Government Incentives to over one million savers (due to the net pay anomaly), goes on.

Meanwhile, over half a million people reach 55 each year with little help or guidance on how to convert their pension savings to a lifetime income.

On these matters, Rudd’s posturing gives us no help at all.


You can hear and watch  me talk about this  on BBC news this morning

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , . Bookmark the permalink.

4 Responses to Rudd’s posturing – no help at all

  1. John Mather says:

    I think we have to go back in time to look at situations like this looking beyond pensions I don’t know the full details of BHS but ones I have seen before will typically start with the company creating liquidity say with the mortgaging or sale and leaseback of freehold or long lease property followed by a large dividend often with a foreign shareholder. Did this happen with BHS?
    What sort of balance sheet justified the £1share sale? I think AR is looking at a wider commercial issue than just the pension

  2. Peter Tompkins says:

    Really well written. As you say, the BHS saga actually ended up pretty fairly and is a good example of why carrots are better than sticks. Also, making types of behaviour criminal is often counter-productive. Civil penalties work better often than criminal threats because the burden of proof is so much lower and the penalty is easier to administer.

  3. Bob Compton says:

    Henry
    It seems to me that Amber Rudd is positioning herself as a minister who can take tough actions. She is clearly laying down a marker to be the next Conservative leader when Teresa May steps down.
    All this will do is make it certain that Companies will close down final salary schemes at a faster rate. It will also mean overseas inventons will not want to control U.K. Companies with DB schemes. Investment will dry up. Brilliant game play by Amber (I think not) bearing in mind In under 50 days Britain could be on its own in the international stage building bridges to attract investment. She clearly wants to sabotage Brexit!!!!

  4. con keating says:

    This is almost certainly uneforceable. To prove reckless behaviour will require proof of harm and current valuation and funding standards will not bear scrutiny and stand up on a criminal court. Onw court case would destroy the Pensions Regulator’s narrative forever.

Leave a Reply