Sometimes I am so confused by pension judgements that I just stare blindly into the middle distance and sigh. I feel that way reading and re-reading the judgement handed down by the Supreme Court about firefighters and their pensions.

I declare an interest, my firm, First Actuarial – acts for the firefighters and I am genuinely pleased that they have won their case. The justification for their case was spelt out by general secretary Matt Wrack

“An occupational pension should be based on the realities of that occupation”,

Few would doubt that there are some occupations that are special cases and firefighting is top of the list. You don’t get better at fighting fires in your fifties, if you get that far, you deserve your pension early and that’s the same generation after generation.

But what I don’t get is the GMB’s argument that the Government should be treating 4m public sector workers the same as the firemen (taken from this article in the FT)

The GMB union, which represents many public sector staff, called for the government to immediately repay extra contributions made by the 4m public-sector staff that it estimated the judgment covered. It put the cost of that step at £2.4bn.

George Georgiou, the union’s national pensions organiser, said ministers had been doing everything they could to avoid paying back the money they owed public sector workers. “The government should take today’s ruling as an opportunity to do the right thing and pay up what they owe,” he said.

Do all public servants carry the same occupational risks?

Paying more for public pensions means people in private pensions have less disposable income to pay into their pensions. There comes a point where the private sector’s appetite for picking up every conceivable bill that the public sector’s pension policy teams can submit, is staunched. Frankly I am not comfortable with the stretch put on this judgement – by the GMB.

Pension farce at USS

After a year out, my son is due to resume the final year of his studies at Cambridge University in October. Having had his second year severely disrupted by pension strikes, he faces his final year going the same way. Students pay to be taught, if they don’t get taught they still get the debt. So I read this tweet with anger as well as mirth.

UUK:

“While employers are keen to avoid a further damaging dispute, it is clear that a ‘No detriment’ solution where employers and members refuse to pay additional contributions will not be acceptable to the USS Trustee or The Pensions Regulator.”

More follows:

— Josephine Cumbo (@JosephineCumbo) June 28, 2019

So we now have the USS Trustee working in concert with the Pensions Regulator protecting who’s interest?

It doesn’t seem to be the employers.

It doesn’t seem to be the University teachers

It doesn’t seem to be the students either!

As with the demands for public sector protectionism, the judgement of the Pensions Regulator in refusing to adopt a funding position that both employers and members are comfortable with- is farcical.

What is happening in this arcane world of defined benefit funding disputes is so far from the day to day pension problems of those not still accruing defined benefits.  The rest of us simply can’t work out why the GMB can’t let the fireman be a one off, why the Pensions Regulator can’t accept that the long-term funding position of USS should not be based on short-term interest rate anomalies.

The harsh reality of the private sector

The Pensions Regulator is dealing in “absolutes”, the absolute certainty that the USS will be solvent whatever the circumstance. The Supreme Court is dealing with absolutes

The Supreme Court refused the government leave to appeal on the grounds that it did not raise an arguable point of law.

These abstract positions are all very well but they do not play well with the majority of the population who do not have the comfort of a defined benefit pension arising from their occupation.

And this is very important as whatever we talk of as “intergenerational inequality” pales into pension-side insignificance when we consider “occupational inequality”.

The absolute rights of public sector workers, of USS as a Trustee and of the Pensions Regulator seem anachronistic and indefensible when so much risk is being shouldered by ordinary workers who are in defined contribution schemes.

This should be born in mind – whether you are the USS Trustee, the Pensions Regulator or indeed the GMB. There is not a bottomless treasury from which to pay pension contributions and we are going to have to get used to taking back some risk into pensions for pensions to work.

Simply demanding that the tax-payer meets all bills, as the GMB seem to be arguing is not fair on the tax-payer, simply demanding more contributions as tPR and the USS Trustee are doing , is not fair on employers, USS members and ultimately students.

The farce is that we’ve forgotten common sense

The further we climb up the ladder of legal abstraction, the further we depart from the grounding of common sense.

I am not arguing for a dumbing down of pensions so we all bear the risk individually. But I do argue for more risk sharing – and that includes taking investment or market risk, where it is possible to do it.

What USS and public sector pension schemes enjoy, is the capacity to take long-term risk. Where there is a fund – as with USS and LGPS, that long-term risk can be shared by investing in growth assets that may leave a mark-to-market deficit on the accounts from time to time. Where there is no fund- as with most public sector schemes, there needs to be a recognition , as Matt Wrack says – that an occupational pension should be based on the realities of that occupation.

Maybe we need to start thinking a little more about the realities of the occupations people are in , rather than abstractions. Maybe common sense and common law are more important than the absolute certainties of financial economics.