If my pension is bought out by an insurer , I want to get my fair share of the surplus paid to me. And I want other pensioners and deferred pensioners to share in any surplus the fund may have built up, as QE is lifted and the cost of providing pensions reverts to the historical mean.
I am perfectly aware that the surplus has been the result of my former employer making substantial deficit payments at times when there was an imaginary deficit, but that does not mean it can have that money back.
If my former employer wants to find ways of doing so , even by funding all the costs of the buy-out out of the deficit, I would like to know just why it is better for my pension to be paid by Aviva or L&G rather than by the trustees of the scheme I joined back in 1995.
There are millions of people like me and I hope that I spoke for all of them when reported in the Mail on Sunday in an article by Stephanie Hawthorne.
There are of course several things that those like me who want to hang on to some of the £18bn surplus, can do about it.
- You can write now to your Chair of Trustees , explaining the support you will give her or him , in ensuring fairness to members – were a buy-out to happen.
- As and when the communication of the intention to buy-out arrives, you can remind her or him of your previous letter
- You can then start lobbying the trustees , especially any member nominated trustees, of the need to be fair
- You can get hold of the scheme rules and find out what your rights are with regards the surplus, the employer can only share in the surplus in certain circumstances.
- You can seek to become a member nominated trustee – yourself.
Stephanie’s article quotes Bina Mistry, head of UK Corporate Pensions Consulting at Willis Towers Watson, saying :
‘Of 139 defined benefit schemes, 89 scheme trustees have actively considered discretionary increases in 2022 with just 15 granting an increase.’
I am pleased to see that the article ends , not on this sour note but quoting two of my favorite actuaries
William McGrath, chief executive of C-Suite Pension Strategies, encourages members to ‘be more active in raising questions about what is in their best interests‘.
He adds: ‘Where a pension scheme is well funded, they can ask trustees for more.‘
Hilary Salt, a partner at First Actuarial LLP, advises that members can look at whether their pension scheme has offered significant increases in the past – and then use this as a bargaining tool.
Defined benefit pensions are mutuals , not corporate or political playthings. Those who have taken CETVs inflated by actuarial prudence will not share in any such surplus , but they shouldn’t begrudge members who stayed loyal to the scheme, their fair share of the pie.
Corporates have written off deficit contributions, they should not be seeking a windfall from their pension schemes.
And the Government should recognise that money paid as pensions is spent by pensioners, taxed by HMRC and used to grow the economy. Pension increases do not have to capped at 2.5% or 5% and any relief to pensioners by way of inflation proofing , means less strain on the state pension.
I think lawyers will disagree quite fundamentally that DB plans are mutuals. They are a means for an employer to pay the benefits it wants to its employees. The trust deed should be the document to look to in order to determine where surplus should belong.
But I agree that members should of course do their best to persuade a well-meaning employer to agree to fund some discretionary increases in a time of higher inflation if the funds have performed satisfactorily.
I did not see members being asked to make special deficit repair contributions over the past fifteen years – let’s pay those back to sponsors and then we can discuss division of the remaining spoils – and there may be a few problems there – Section 251 – Most actuaries won’t consider refunds to sponsors until all liabilities to members have been discharged and in a practical context that is after buy-out