William McGrath presented to the Pension PlayPen this week and while I couldn’t be there, I’ve had the pleasure of watching him present and following the debate that followed. This really is a most interesting hour view.
McGrath argues that simply handing the agenda to the insurance industry is lazy thinking and that the new TAS 300 standard is the lever on the actuarial industry to get its act together.
There is one critical question McGrath is asking
“How can an industry that is transferring £50bn of pension liability from one regime to another , not actually do some basic work that works out what this means?”
Ignoring TAS 300, means ignoring the discretionary powers of Trustees to enable discretionary increases to be paid.
The “endgame for the endgame” could be upon us.
While many will not have an hour to spare to listen to the debate, we all have a few minutes to read some highlights which I include below.
Challenges
Rosalind Connor questioned whether many schemes, getting money back from a surplus is difficult. Is there a case Government intervening to re-tip the balance to allow surpluses to pay DC contributions and use the surplus for non-pension purposes
Get rid asap?
McGrath responded that there needs to be an appeal to the boards of corporates. Pensions should be part of the ESG rating of a corporate. Corporates can address the pension scheme when they see how the pension scheme can help them fulfill their climate change agenda.
The political agenda for growth is creating an obligation on companies to use pension schemes for productivity.
Will the pension scheme send you to prison for 7 years?
O’Connor pointed out the over-legislation against pension schemes caused corporates to see their pensions as a threat rather than an opportunity.
The Pension Regulator’s hostility to any kind of risk being taken by pension schemes, creates new risk for trustees.
In answer to a later question, McGrath called on Trustees not to be intimidated by the “thin layer of legality” to these threats.
Is the job of a trustee to give a better pension or just the minimum promised pension?
O’Connor questioned whether the duty of the trustee to do the best for the member. McGrath agreed that this was a moot point. The legal opinion here seems at odds with common sense.
Should we be widening the pool of DB beneficiaries
Peter Cameron-Brown suggested that the Trustee’s Duty is to pay discretionary benefits when they are in the deed. He remarked that applying the surplus to DC benefits, the surplus is going into individual accounts, by investing in DB benefits, the surplus is being pooled. He argued that schemes should consider widening the pool.
McGrath stressed that the solution did not have to be controversial but could be inclusive offering a DC tier and improvements to DB benefits “What a great chance with a new public policy team arriving, for Government get back to the situation before “project pension fear” arrived.
Bryn Davies asked how the FD could be bought into the C-Suite agenda?
Davies pointed to the consultation on the use of surpluses. Consultation doesn’t add up to much, proper discussion comes from deals being made between member representatives and employers. The precedent is good.
Davies pointed out the gaps in PPF cover, especially in pre-97 cover. The PPF is a safety net with holes. Running the scheme on provides protections for members that the PPF doesn’t.
McGrath suggested that shareholders need help from stockbrokers on the value of pension schemes. A mindset shift is needed from the HR departments and those in ESG governance in providing a holistic approach to pensions.
Susan McIlvogue of Hymans Robertson concluded the discussion with her view as a 30 yr practicing scheme actuary that the industry should indeed be pushing the actuarial profession. It was a positive finale to a positive meeting.
The detail
We have curated the slides to this event which you can download here or flick though using the deck below
