Sustained economic growth is the only way to improve the lives of working people.

These are the words of Angela Rayner spoken yesterday at the Labour Party Conference. You can read the speech here

Rayner is Deputy Prime Minister, she was once shadow pension minister, she speaks to and for working people in a way few others can. She was a nurse and came to prominence because and through her union. The Labour party is in earnest from root to branch to improve growth in the UK.

One of the institutions capable of providing growth is the UK pension scheme. One of our great pension schemes is People’s Pension which is closing in on £30bn of people’s savings with £4-5bn cashflows each year. Nico and Darren, Alumni of People’s Pension were interviewing it’s CEO, Patrick Heath-Lay on their podcast. You can hear it here.

Like Rayner (and unlike me) Heath-Lay has had to do it the hard-way. I respect them both for that. He has helped build something special- as has Rayner.

People’s has become the private sector alternative to Nest with a strong ethos of offering no-frills low cost investment into easy to understand savings pots. There is nothing fancy about People’s or about Heath Lay who describes himself as a numbers man.

Towards the end of the Podcast, Heath- Lay sets out his vision for People’s Pension and explains it now has a separate investment department in London, that it will be investing in productive finance and that it intends to use the weight of money it has and is accumulating to the good of its members (it has no shareholders).

People’s has made many of the right calls for lower earner. It offered relief at source from day one, side-stepping the issues of net-pay schemes (next year’s trauma). It did not adopt a complicated charging structure, sticking with a member mono-charge and it invested in in-house technology early on, making it popular with payroll – it did not fall down. Its success is because it has served members and employers well – the key stakeholders of a workplace pension.

Now it faces a new challenge. Many of those it enrolled into workplace pensions up to 12 years ago, are now in the zone where they can draw their pensions . If you were 42 in 2012, you will be able to draw down your pension pot next year. As with the Australian Supers, similarly founded with Union power, People’s Pension has to work out whether its covenant is about “Retirement Income” or about savings. If it is a pension scheme, I would say the answer to that question is that People’s Pension must be about paying pensions.

So I would challenge People’s Pension and its CEO to lay out what it considers its purpose. Patrick Heath-Lay hinted that he himself was looking at retirement, there needs to be succession both for the CEO and for the business model.

Twin challenges

The first challenge is economic

The People’s Pension needs to capture the Zeitgeist of the Labour Party and the Government and help deliver sustained economic growth not just to its membership but to the wider economy. One challenge for People’s Pension and the wider Partnership is to align its investment strategy with the needs of the nation, this will not be easy, especially when the conception of VFM is so strongly embedded in not over-paying for investment

The second challenge is demographic

The 42 year old in 2012 is 55 next year but may only have the tiniest of People’s Pension’s pot. There are hundreds of thousands of us with small pots from fractured service, some people have been auto-enrolled multiple times into multiple schemes.

Nonetheless, every pot counts and those who do not have money elsewhere are particularly reliant on their workplace pensions as a means to bridge to and supplement their state pensions.

People’s Retirement Income Covenant

People’s Pension Retirement Income Covenant has yet to develop beyond a fairly bald drawdown service. It needs to consider its options, whether to create a default means to decumulate and if it does, to decide what the People’s Pension looks like – as a pension.

It cannot duck the issues of social insurance that are at the heart of B&CE union which founded People’s. People need to insure against living too long as well as immediate poverty. There are key considerations around the cost of growing old in terms of deteriorating mental and physical health. The common purpose around the world is to give dignity in retirement through a lifetime income.

My twin challenges to People’s and its longstanding CEO is that they get to grips with the long term investment strategy and the long term pension strategy of its £30bn fund. By embracing its retirement income covenant, it can extend the investment of its £30bn fund making it more sustainable, more economically useful and capable of paying the pensions of its millions of members through the rest of the century.