Campaigners have urged MPs to enhance member representation on trustee boards through the Pension Schemes Bill, as part of their fight to address the lack of indexation from some corporate pension schemes.
Representatives of retired former Hewlett-Packard, BP, and American Express workers appeared before the Work and Pensions Committee this week to put the case forward for changes to the bill related to the indexation of defined benefit (DB) pensions.
They highlighted that their pension schemes had ceased allowing discretionary increases to benefits – a move that had led to some members losing approximately 40% of the purchasing power of their pensions due to the impact of inflation over the past 30 years.
In some cases, the campaigners argued, the power of trustee boards had been eroded by the sponsoring company, meaning that it could veto additional payments.
The government intends to give trustee boards greater power over DB surpluses through the Pension Schemes Bill, allowing them to share surpluses with members and sponsors – and potentially contribute to economic growth.
Caroline Emery, of the Amex UK Pensioners Justice group, said: “We’d like to see the trustees definitely having binding authority, because we’re just powerless in this situation without that. They need to have the authority to distribute part of the surplus to pensioners.”
Jonathan Popper, a co-founder of the BP Pensioner Group, added: “It comes down to giving trustees the power to deal with the companies and to be genuinely independent, and that is the problem. What is fiduciary duty? When defined, it essentially means making sure that the scheme can pay the pensions that it’s legally obligated to pay. But that’s not the same as acting in the best interests of members.”
He called for the surplus sharing clause in the Pension Schemes Bill to include a requirement for a fixed percentage to go to pensioners.
Failure ‘risks undermining trust’
Patricia Kennedy, co-chair of the Hewlett-Packard Pension Association, told the committee: “The intent of a pension scheme is to provide for the financial security of pensioners. It’s not there as a vehicle to stimulate the economy.
“I think those two purposes are at odds with one another. One is oriented towards conservative investment; the other one is trying to be more aggressive, take more risk. As a pensioner, I’m much more in favour of the conservative approach.”
Jack Jones, pensions policy lead at the Trades Union Congress, argued that failing to address the discretionary increases issue risked undermining trust in the pensions system.
“Even though most people now save into pension schemes that are very different to these DB schemes, it clearly undermines trust in the system when people see that there was what looked like a promise that has been broken,” he said.
“We still rely a lot on people having trust in the system, and a kind of paternal approach to it. Anything like this that undermines that trust is damaging for the system as a whole, not just the people in this position.”
MPs keep up indexation battle
Liberal Democrat MPs last month attempted to insert an amendment to the Pension Schemes Bill that would have placed pre-97 indexation on a statutory footing by requiring DB pension scheme trustees to consider these members when weighing up how to use surplus capital.
However, pensions minister Torsten Bell insisted that the amendment “would not work”. While he has promised to continue to consider the issue, he did not present an alternative during the committee’s debates.
Plaid Cymru MP Ann Davies has tabled a similar amendment for consideration at the bill’s report stage, as MPs continue to push for change. Davies and other MPs have also tabled similar amendments aimed at introducing indexation for members of the Pension Protection Fund and the Financial Assistance Scheme related to pre-97 accrual – despite Bell also rejecting a previous similar amendment.
