William McGrath is not a lifelong agitator. Until recently he was CEO of Aga-Rangemaster. He is the kind of person you’d expect to bump into at CBI conferences (if they still had them). His is the authentic voice of the “concerned employer” , an employer who took his role as guardian of ESG seriously. This call for action links the issues of ESG to those of pension funding. Good governance means good pensions. Pensions should do good for their employees while doing good for society.
What follows is a call for action from William McGrath, CEO of C-Suite.
Time for a Pension Revolt by Current Employees
In changed circumstances all stakeholders should look to rethink
High sponsor cash contributions have been the staple diet of DB schemes. Now, higher interest and mortality rates have actually left schemes increasingly well-funded. The benefits should not be syphoned off by life insurers.
Sponsors and employees past and present have a mutual self-interest in running on and for a pension reset. Get stuck in. No need to wait around for regulatory battles. Action now.
Current employees can be the trigger for change.
DC pension provision is not a patch on old DB pensions. But what was shut on one basis can be reopened on another. Excess cash in legacy DB schemes can fund a new DC tier. With discretionary powers exercised by trustees, pensioners can have temporary uplifts while funds are added to DC pots. Fair to all stakeholders.
The sponsor needs to enable trustees to have long term but low risk investment plans (able to dial up productive, ESG aligned asset allocations as funding strengthens). Then they can agree (ahead of surplus returns) scheme money is used to fund pensions and add to them for the current and past employees (including the company contributions). The plan follows the original purpose of the trust. So better cash and profits for the sponsor and better off employees.
With increased contributions into their pots, DC members can reassess what they want to pay.
Sponsors and employees have left the pension sector to its own devices for too long. Now employees should revolt to start a pensions rethink.
DB schemes become ESG Flagships able to benefit all stakeholders. Ask about C-Suite and its partners about how.
“Current employees like institutional investors have been strangely passive during the DB derisking years. Some activism is called for to set a long term run on strategy. ESG aligned trustees and sponsors are ready to join in.”