Josephine Cumbo has written an important blog in Pensions Expert.
If you aren’t registered to see the article, I urge you to do so. Access to the article is free and it pretty well sums up my views on the need for those who take decisions on our pension rights to be more transparent about why these decisions are being taken.
The piece focuses on a scheme where the members rose up and challenged the methodology being used to value their scheme and so to justify its closure for future pension accrual. That scheme is the University Superannuation Scheme, the largest funded pension scheme in the country.
Jo Cumbo leaves us in no doubt that without strike action, members would have seen their scheme close.
The reason why the USS has bucked the trend of DB scheme closures was a combination of factors: chiefly pressure applied on employers through a sustained campaign of disruptive strikes by thousands of USS members, including academics, lecturers and higher-education staff.
But the valuation was subjected to wide-ranging critique and challenge by members, including some of the UK’s leading statisticians, mathematicians, philosophers and industrial relations experts, who demanded to see the workings underpinning the deficit calculation.
What happened next was the setting up of a Joint Expert Panel which adjudicated on the differing basis of valuation that the trustees could have adopted (within the guidelines laid down by the Pensions Regulator).
18 months after a £7.5bn deficit was identified by the USS trustees the DB scheme remains open, with the funding hole now dramatically shrunk to £3.6bn.
People’s pensions trump political considerations
On the face of it, the employers who wanted to close the scheme have backed down and this seems a victory for people power. But there remains a sour taste in the mouth. Neither the USS or UUK have accepted they were wrong in their approach and the future of the scheme remains in doubt. The Pensions Regulator – which comes very badly out of the JEP report have not accepted any blame either.
The victims of the strike, the students who didn’t get taught for a term (but who are paying for that term’s tuition through student loans) are quite entitled to ask just why the strike was necessary and ask pertinent awkward questions of the people who run their colleges.
But on a much wider scale, the received wisdom of de-risking schemes into closure, has been challenged. Just how many of the large corporate funded defined benefit pension schemes which now sit like mothballed coal mines, could have stayed open?
Why was the obvious moderated solution – CDC – taken off the table – months after being legislated for in 2015?
Why have pension investment consultancies (First Actuarial accepted), failed to push back on the draconian approach adopted by the Pensions Regulator to investment strategies?
These are the questions this blog has been asking for several years. Sadly -this blog has been ineffective- it has been read but it has not been listened to.
Let us hope that Jo Cumbo, a much better journalist than I will ever be, with the weight of the FT behind her, will move the dial back towards common sense and an even-handed approach to valuations.
Jo finishes her article by stating what is becoming obvious from the NHS through USSS to BSPS – people need the proper information to take complex pension decisions and they are not getting it. Politics are trumping people’s pensions and that’s not the way it should be.
The USS dispute has shown that where members fully understand the ways in which a pension promise can be measured, they will ask uncomfortable and persistent questions.
Those involved in actions that weaken pension provision must be better prepared to address the transparency deficit that the USS dispute has exposed, and explain the reasons and evidence for their decisions.