There are two questions here
- Who owns this whopping surplus?
- How did this whopping surplus arise
A couple of weeks back, I sat down beside a modest looking gent as we both waited to go into a session at the PLSA investment conference. The gent turned out to be Mark Walker , CIO of the Coal Pension Trustee
During our brief chat , I discovered that
- His efforts had been embarrassingly successful
- He was running a pension scheme with a Government guarantee
- TPR had nothing to do with how he invested
- Based on the guarantee and the absence of interference, the Scheme had gone for it
- “Going for it” has meant investing almost entirely in growth – productive assets
I wasn’t why Mr Walker was looking shy about being embarrassingly successful, but thinking about it since, I guess he must feel the embarrassment is with other schemes with various kinds of Crown or other Government guarantees. Why for instance has BT been knocked sideways by the implosion of its LDI portfolio when the worst that could have happened to pensioners was that they were paid by the State rather than a telecoms monopoly.
A couple of weeks later, Walker’s dirty secret is out. His efforts have netted the Government £420m over the past three years, as much again has gone to the pensioners.
Far from presiding over a liability, the Coal Pension Trustee has delivered everyone the kind of windfall that could secure the nation another year of the triple lock.
The government is entitled to half the surplus cash from the scheme under an agreement signed 30 years ago.
Labour says the deal is unfair to former miners and their families.
Shadow minister Ed Miliband says Labour will review the agreement if it wins power to “deliver the justice to which miners are entitled”.
Forget the political argument, let’s remember that this money has been generated because the Coal Pension Trustee , with Walker’s able assistance, got stuck in and invested the pension in exactly the kind of assets that The Pensions Regulator is charged with encouraging.
So what’s the beef?
A Department for Energy Security and Net Zero spokesperson said:
“We remain committed to protecting the pensions of mineworkers, while striking a fair balance between scheme members and taxpayers.
“Mineworkers’ Pension Scheme members are receiving payments 33% higher than they would have been thanks to the government’s guarantee. On most occasions, the scheme has been in surplus, and scheme members have received bonuses in addition to their guaranteed pension.”
We cannot pay our former miners too much pension. They have massively reduced life expectancies from the working conditions they endured and so will enjoy their pensions for shorter than their well heeled white-collared peers.
That they are already getting 33% more than their statutory payments is testament to a deal struck 30 years ago which got it so right. Many in power should ponder this statement from the BBC report.
While many schemes are overseen by the Pensions Regulator, the piece of law which led to this agreement means the government has sole responsibility.
There will be financial economists who will point to the supposed risk of investing for growth and that the Coal Pension Trustee has been gaming the Government guarantee.
I doubt that any miner would take a 33% pay-cut in exchange for a platinum respray of a gold plated promise.
I doubt that any tax payer will turn their nose up at a £210m bung from the scheme. There are parts of Britain right now , where councils are struggling to light the streets for lack of this kind of money.
If ever there is a case study for why we need to run pensions on with long-term investment strategies using productive finance, the Coal Pension Scheme is it.
Paul Maynard, Laura Trott , Bim Afolami, Mel Stride Jeremy Hunt, Rachel Reeves, Gill Furniss and Liz Kendall – take note!
Sunny uplands for DB pensioners
The Coal Pension Trustees have put pensions on steroids, they have bet the house in glorious contradiction to the Pension Regulator’s various funding codes.
Pension schemes that have been forced into disastrous geared liability driven investments to satisfy these restrictions, have now emerged from 12 years of QE into some sunny uplands. It is time we celebrated the surplus, reward the deficit payments and seek to pay all pensioners full inflation linked benefits wherever possible.
We all owe the Coal Pension Trustees and Mark Walker a drink from that barrel. a loaf from that field!
Further congratulations
It is not just the mineworker who have done well, there is a similarly successful staff scheme
Alan Rubenstein for being a trustee and chair of the investment committee.
Barry Kenneth (PPF CIO) a non-voting member of the investment committee
And of course Andrew Young who was a GAD actuarial student working on the scheme in 1974-5
A nation salutes
A comment on the 50:50 surplus split would be that before privatisation surplus was split 70:30 in favour of the members.
The current government guarantee is no different really from previous state ownership.
https://commonslibrary.parliament.uk/research-briefings/sn01189/
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As an ex coal miner my only quality increase in pension was to see colleagues dying early 15 to18 per day 7days a week. And sharing the money between fewer pensioners
Shame on all governments