Mark's campaign notepad and other stuff

Notes from the writer/LibDem parliamentary candidate for Somerton & Frome

Janice Turner’s Pensions Motion to Lib Dem Conference

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I haven’t blogged since I stood as a PPC but thought I’d use this space for Janice’s excellent motion, supported by the Social Liberal Forum and with Steve Webb’s approval

Pensions reform in the public and private sectors

 

Conference notes:

 

a) the commitments in the Coalition Agreement to “safeguarding key benefits and pensions” and to “simplify rules and regulations relating to pensions to help invigorate occupational pensions encouraging companies to offer high quality pensions to all employees”.

 

b) there is now a major crisis in private sector occupational pension provision and, while welcoming the introduction of auto-enrolment, NEST and the Coalition proposals for reform of the state pension as important steps forward, acknowledges that these proposals cannot in themselves resolve this major crisis.

 

Conference reaffirms:

a) the party’s historic commitment to fighting poverty in old age which a century ago  brought our introduction of the Old Age Pension

 

b) the fundamental Liberal Democrat principle that “none shall be enslaved by poverty”.

 

Conference notes with concern that:

 

a) the retreat of private sector employers from providing quality pensions is the result of the failures of previous Labour and Conservative governments.

 

b) the severe market volatility and its uncontrollable impact on Defined Benefit (DB) pension fund deficits demonstrates that current actuarial funding policies introduced by Labour are not fit for purpose and are needlessly damaging sponsoring employers’ finances and destroying DB pension schemes.

 

c) DB pension schemes are under further pressure from over-regulation, in particular regulatory demands to pay off longterm theoretical deficits in short term time frames.

 

d) growing numbers of private sector workers are losing confidence in occupational Defined Contribution (DC) pension schemes which push all risk onto the individual, are too expensive and complicated and provide no guarantee of even a minimum pension.

 

e) there is too little transparency in the fees and charges of pension industry companies including investment companies and that there is a case to answer regarding the levels and structures of fees and charges.

 

f) the growing number of pension schemes that have no oversight by representatives of the beneficiaries;

 

g) The proliferation of a multitude of local government pension schemes with their costly duplication of administration costs, fees and charges, inadequate regulations to ensure member-nominated representatives on all LGPS boards and inadequate provision of training for LGPS representatives.

 

Conference welcomes

a) the Coalition government’s concessions in November/December 2011 regarding its public sector pension proposals;

 

b) the announcement dropping ideologically motivated proposals that would have allowed companies winning public sector contracts to lower their bids and increase profits by abolishing the privatised workforce’s “Fair Deal” entitlements;

 

c) the ‘big pots’ proposals to allow private sector workers to put their pension savings from multiple schemes into one place.

 

 

Conference calls upon Liberal Democrats in government to:

 

1) Act with great urgency to protect private sector DB schemes including

a) immediate reform of pension scheme actuarial valuation rules that make pension scheme costs so volatile for employers,

b) lifting such overly interventionist regulatory practices as automatic investigation of longer deficit repair periods; and

c) opposing European-level legislation that would inadvertently have the effect of closing DB schemes.

 

2) radically reform and simplify the design of occupational defined contribution pension schemes in order to achieve greater certainty of pension;

 

3) Legislate to ensure real transparency and accountability to scheme beneficiaries of contract-based schemes and make it a requirement that all trust-based schemes have member-nominated trustees;

 

4) investigate and act in relation to pensions industry charges, fees, annuity prices, benchmarks, transparency and disclosure, including investment charges and charging structures, in order to ensure that pension schemes and their members achieve better value for money.

 

5) Save money from the local government pension schemes by merging them into one or more schemes, while ensuring more effective control by member and employer representatives, with the resulting benefits shared with the scheme members.

 

6) Investigate the extension of the Pensions Regulator’s Online Toolkit, the foundation stone of private sector trustee training, to include training modules for public sector representatives, and introduce an entitlement for all pension scheme trustees and representatives to have specified minimum levels of paid time off for training and preparation.

 

………..

 

 

 

 

Explanatory notes:

 

The proposer has sought the advice of Conference Committee on drafting and all advice has been followed.

 

This motion has been discussed with Lib Dem Pensions Minister Steve Webb and he supports the motion.

 

Conference notes with concern b): The 2004 Pensions Act and subsequent 2005 regulations forced pension schemes to carry out their three-yearly valuation using a method based on theories of efficient markets. Schemes have to value their liabilities over a 30 or 40 year timeframe, but the new law forced them to value their assets on the basis of market prices on the day the valuation fell due. So if the markets did really well that day the scheme’s prospects would look good, but if the market did disastrously then the pension scheme could face closure. This has made DB schemes wildly unstable: last July the Pension Protection Fund stated that the combined pension scheme deficits were around £8.3 billion, but six weeks later it was £117.5-billion. Pension funds should plan for the long term but this makes it impossible and nearly 2.5-million people’s pension schemes are at risk of closure. Closures are being announced almost every week.

 

Conference welcomes

(b): announced by Chief Secretary to the Treasury Danny Alexander in advance of the 30 November strike.

(c): the “Fair Deal” agreement made some years ago between the government and the public sector unions ensured that public sector workers who were compulsorily transferred out of the public sector as a result of contracting out kept their entitlement to either remain in their existing pension scheme or transfer to a scheme with similar benefits. The government decided to review this policy and one option was to abolish this entitlement completely.

 

 

Conference calls upon…

1a) this is not a reference to international accounting standard IAS 19 or FRS 17, it refers to the 2004 Pensions Act and subsequent regulations.

 

1c) Solvency 2 is one such proposal. A European Commission green paper published last July aimed to launch a public debate on how to ensure adequate, sustainable and safe pensions across the EU. Its proposals include increasing capital requirements and possible pan-European regulation of pension funds. Pensions Minister Steve Webb, who is building an international coalition against it, believes the proposed “Solvency II” rules could burden DB schemes with a £100-billion bill which could trigger massive numbers of scheme closures.

 

6. There are more than 100 local government pension schemes. Unison commissioned a report from the world’s third-largest public sector pension fund management company which concluded that over £1-billion could be saved by merging them into around 14 schemes. The savings would be by removing duplication, negotiating better fees and obtaining better returns. By comparison, the government’s public sector pensions proposals were requiring £900-million savings. 

 

In conclusion

Public sector:

In November the Coalition’s controversial proposals on public sector pensions reform led to one of the biggest strikes of recent years. This motion, which welcomes the concessions the government made, will allow this to happen. It also sets out a way of making substantial savings in the LGPS to be shared with the scheme members.

 

Private sector:

If these proposals are adopted, they will bring back more stability into DB schemes and corporate financial planning and allow these schemes – the best in the private sector – to better ride out market downturns. But in radically reforming and simplifying DC schemes they will improve the retirement prospects of millions of private sector workers who are not in DB schemes. And by investigating and acting on the issue of pensions industry fees and charges, in particular investment fees and fee structures, the Lib Dems will be ensuring better value for money for all private sector pension schemes (and funded public sector schemes). This positive action for private sector workers’ pensions will put our party far ahead of both Labour and the Conservatives on this issue.

 

This motion is on the long side, on a par with the longest motions at the autumn conference. But most of the issues in this motion have not been debated by conference since 2004 and so much has happened to pensions since then that it has inevitably led to substantial proposals for change.

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Written by markblackburn

January 10, 2012 at 4:22 pm

Posted in Uncategorized

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