Last Wednesday was a day for vetera campaigners for the rights of those stripped of their pension benefits could remind the Work and Pensions Committee that for all of the success of the PPF, the pre 1997 rights of those who entered the PPF via FAS or directly are not being revalued. What was promised as a 90% pay-out, is often slipping to below a 50% honouring of promised made.

It seems appropriate on 11th November to watch the moving first session of the WPC hearing – lest we forget.

The pensions of Terry Monk, Roger Sainsbury and Richard Nicholl and the pensioners they represent , were brought to the attention of the committee by these eloquent men and by Neil Walsh, the pensions officer of Prospect. It was a moving session and it was good to see that those from the PPF, who followed, had a chance to hear their grievance.

The top brass at the UK’s Pension Protection Fund will be grilled by MP’s today, who are investigating the broader landscape for Defined Benefit #pension schemes in the UK.

The work and pensions select committee inquiry starts at 0925.https://t.co/5viBCq0jQ1

— Josephine Cumbo (@JosephineCumbo) November 8, 2023

The session which followed seems to have met with consternation from those who watched it. Peter Cameron-Brown posted this comment on my “not my Government” post.

He traced the “politics before pensions” complaint back to the start of the century and before.

Yes I agree. I watched yesterday’s proceedings on the PPF with increasing concern and despair.

It became increasingly clear why Stephen Timms in the Chair commenced proceedings with a conflict of interest declaration concerning his own ministerial roles during the period of the establishment of the PPF (and his current role as Chair of the WPC)

What emerged was that pensions legislation post Maxwell and possibly before was entirely crisis driven and designed to protect the public purse rather than to establish a durable and robust system to protect the pension income of pension scheme members over their lifetimes

Peter goes on to describe the main thrust of the initial session – before the PPF top-brass took the floor.

The session started with impassioned and emotional pleas on behalf of the members of both the PPF and FAS for pre 1997 benefits to be indexed under both schemes in line with the indexation provisions of the original pension scheme.

This was justified on two grounds: the indexation provisions were a key defined benefit just as much as the accrual rate or the definition of pensionable salary of the pension scheme funded by their contributions; secondly UK legislation at the relevant time had been deficient and non compliant with the applicable EU Directives.

It was also noted that indexation of post 1988 Guaranteed Minimum Pensions had been lost. The 1997 cut-off date was therefore entirely arbitrary and unfair, resulting in current pensions of less than 60% of their protected value in real terms causing real hardship, and the effect was both age and sex discriminatory.

Possibly remembering the impact of the “naked pensioner” protests that led to the establishment of the FAS in the first place, there appeared to be sympathy for at least non-retrospective indexation (estimated cost to the PPF of £2BN).

Again Public Purse issues were touched upon – obviously in the case of the FAS by but also apparently in respect of the PPF as it is reflected in Government borrowing figures, despite the fact that it is the Members who bear the ultimate under-funding risk.

The pre-97 pensioners are another group whose grievances cannot now be aired in parliament, as we have no pensions bill.

However amendment to the Schemes’ benefit rules requires primary legislation and the lack of a Pensions Bill in the Kings Speech was commented, By the time any change reaches the Statute Book a proportion of the affected Members will have died.

Peter went on to ask “What of those whose benefits were denied the protection of the PPF?”

Of personal interest, one thing that was not touched on in yesterday’s discussion on this was the position of members of a former pension scheme which was refused entry to the PPF on the basis that the scheme could buy-out at least PPF level benefits. It would seem grossly unfair that pensioners of a better funded scheme should suffer the deprivations partly mitigated for a comparable pensioner in the PPF. But who should bear the cost (of deficient legislation)?

When the  PPF took over in the second half of the session , they showed a reluctance to engage with how their burgeoning surplus could be used for the benefit of its pensioners or deferred pensioners, Peter Cameron-Brown continues..

There was less enthusiasm from the speakers for bringing pre-retirement benefits up to 90% to 100% of Scheme benefits.

The LCP proposal for an optional additional levy to bring protection levels up to 100% of Scheme benefits was rather dismissed by the PPF. They noted it would give greater reassurance to Trustee Boards that they were meeting their fiduciary duties but the effect on the Mansion House Productive Finance agenda they felt would be minimal.

Their argument being the option would only be attractive to well funded schemes with a strong employer covenant who would tend to be larger schemes and already capable of managing a productive finance agenda.

Peter made further observations

The PPF would be content if their protection should no longer be the primary objective of the Pensions Regulator and would be happy if PPF protection became part of a more widely drawn set of objectives. Again a primary legislation matter!

The PPF consider they have now reached self-sufficiency against the 2030 target date. I am not sure of the significance of this.

This comment drew further comment on my blog from Byron McKeeby

My recollection was that we might expect the main levy to be suspended by 2030. If they’re there now (though I share your concern about a much less prudent gilts-relative assumption being used) then this would seem to increase the case for arguing that even a £100m annual levy is no longer required.

To which Peter replied

 I meant to add that when questioned about the levy, the PPF stated that they would be content with no levy provided they had the power to re-introduce a levy required to reflect future circumstances. Again a primary legislation matter.

Peter also commented  on the PPF becoming a consolidator:

Their case appeared to be partly based on their view that there had been a failure in the commercial consolidator market. They also claimed a very good administration service (bouquets given) at lower cost particularly for smaller scheme. More questionably, they also claimed their experience and expertise pooling investment would provide greater scope for Productive Finance investing and hence better returns.

Peter shared with other commentators , disquiet about the PPF’s recollection of recent investment events

On questions concerning the effect of the LDI Crisis, the PPF appeared to be on shaky ground. They suggested their estimates of the effect on pension scheme assets values being based on historic data rolled forward were less reliable than the ONS’ larger loss figure.

A figure of £400BN was widely quoted. The long term effect of the Crisis was unclear but they repeated the discredited mantra that the reduction in the asset value does not matter if the present value of the liabilities has gone down by an equivalent amount.

Surely as the PPF paying 10 million pensions, they should know that those pensions have not gone down, all that has happened is that a more bullish and hence more risky assumption has been made about the future, while the fund is left with a lower value of assets to sell to meet cash flow needs.

The PPF operates well and we should be glad of its work for those who are its members. But , having now watched the event myself, I am far from convinced it has a clear vision for the future, not least since it is losing its CEO.

In its beginning is its end and whatever the PPF’s strategy is – going forward – is must remember the members it has taken on in the past.

The increasing  inadequacy of PPF and FAS pensions accrued before 1997 should not be forgotten. Pensioners should be given what they paid for, as a matter of priority.