The questions no one is asking about the Royal Mail Pensions

[TrueBlueTerrier]

http://liberalconspiracy.org/2013/09/17 ... -sell-off/" onclick="window.open(this.href);return false;

From time to time a good Pensions trustee should have an ‘emperor has no clothes’ moment. This is when there is something about which there seems a pretty solid agreement, often with the wraparound of ‘we’ve always done it like this’. Generally when you press you find that something is done the way it is because it is the best way.

But just occasionally a challenge will reveal an opportunity to change or improve established behaviours for the benefit of the Pension fund and its members.

I was pondering this recently when the news about the government’s decision on the Royal Mail Pension Plan began to emerge. This decision is that this fund, the third largest in the UK with assets under management of some £31 billion at the end of 2011, should be wound up and its assets be requisitioned by the Treasury.

I was so astonished about this that I wrote a letter to The Times expressing my surprise that the pensions world had been so sanguine about what seemed to be an extraordinary and unprecedented action, which I said was “almost Maxwellian in its audacity”.

The conventional wisdom about the Royal Mail Pension Plan decision is that it is in the interests of members. The interests of these members are protected, so the argument goes, because the fund’s members will become like most other public sector employees – their pensions will not be funded but will be a long-term charge on the treasury.

This is to the advantage of members because they go from the uncertainty of being in a fund whose funding ratio is a weak 76% to having their pensions guaranteed by government.

But what about those huge assets which employees, the sponsor and trustees have built up over the years? Surely it is the members’ money and only they have a right to it? It is not being set aside into a special pot to help provide for future pension payments – it is being sequestered to help reduce the UK’s budget deficit.

And is the transfer of members from a funded trust into the status of being an unfunded liability on the public finances really necessarily in their interests? Governments can and do change the basis of public sector pensions at their discretion and there is little that anyone can do to stop them.

A pensions trust provides legal protection to its members and has trustees to exercise that protective role. At a stroke Royal Mail fund members will lose that security and no longer have trustees acting in their interests.

Was there an alternative to the decision that the government has taken?

The Royal Mail is to be privatised and self-evidently no buyer would wish to assume sponsor responsibility for its £40 billion of liabilities. But could the funding ratio gap not have been closed partly out of the proceeds of privatisation and partly from the exchequer and the fund given an assured long-term future, as an independent pension entity, by such payments?

And why should the taxpayers of the future have to provide for the pensions of a further 430,000 people over and on top of the public sector pensions obligations they already have? These may be ‘emperor has no clothes’ types of questions – but they should be asked.

[cyclemech1]

http://liberalconspiracy.org/2013/09/17 ... -sell-off/

From time to time a good Pensions trustee should have an ‘emperor has no clothes’ moment. This is when there is something about which there seems a pretty solid agreement, often with the wraparound of ‘we’ve always done it like this’. Generally when you press you find that something is done the way it is because it is the best way.

But just occasionally a challenge will reveal an opportunity to change or improve established behaviours for the benefit of the Pension fund and its members.

I was pondering this recently when the news about the government’s decision on the Royal Mail Pension Plan began to emerge. This decision is that this fund, the third largest in the UK with assets under management of some £31 billion at the end of 2011, should be wound up and its assets be requisitioned by the Treasury.

I was so astonished about this that I wrote a letter to The Times expressing my surprise that the pensions world had been so sanguine about what seemed to be an extraordinary and unprecedented action, which I said was “almost Maxwellian in its audacity”.

The conventional wisdom about the Royal Mail Pension Plan decision is that it is in the interests of members. The interests of these members are protected, so the argument goes, because the fund’s members will become like most other public sector employees – their pensions will not be funded but will be a long-term charge on the treasury.

This is to the advantage of members because they go from the uncertainty of being in a fund whose funding ratio is a weak 76% to having their pensions guaranteed by government.

But what about those huge assets which employees, the sponsor and trustees have built up over the years? Surely it is the members’ money and only they have a right to it? It is not being set aside into a special pot to help provide for future pension payments – it is being sequestered to help reduce the UK’s budget deficit.

And is the transfer of members from a funded trust into the status of being an unfunded liability on the public finances really necessarily in their interests? Governments can and do change the basis of public sector pensions at their discretion and there is little that anyone can do to stop them.A pensions trust provides legal protection to its members and has trustees to exercise that protective role. At a stroke Royal Mail fund members will lose that security and no longer have trustees acting in their interests.

Was there an alternative to the decision that the government has taken?

The Royal Mail is to be privatised and self-evidently no buyer would wish to assume sponsor responsibility for its £40 billion of liabilities. But could the funding ratio gap not have been closed partly out of the proceeds of privatisation and partly from the exchequer and the fund given an assured long-term future, as an independent pension entity, by such payments?

And why should the taxpayers of the future have to provide for the pensions of a further 430,000 people over and on top of the public sector pensions obligations they already have? These may be ‘emperor has no clothes’ types of questions – but they should be asked.

This is what I worry about. It's all very well saying that our pensions are protected 'by law' but thats what politicians do - create/change laws.

What's a politicians promise worth? They are all 'economical with the accualitey', as one (whose name I can't remember) famously said when he was caught out ( and no, it wasn't Tony Bliar over WMD!).

[baldrick]

Yes, they had a media campaign against the ' bloated gold plated' pensions of public sector workers earlier this year. It's gone quiet at the moment, but I expect they will be returning to the attack in the future, and I foresee freezes, capping or cuts of public sector pensions if the Conservatives get a majority at the next General Election.

[stephen500]

Why do Royal Mail keep telling us that the old pension, taken over by government that "The transfer of almost all of the Plan’s liabilities and assets to Government in April 2012 made your past pension considerably more secure" Why not totally secure?
http://www.myroyalmail.com/pensions

[cyclemech1]

Why do Royal Mail keep telling us that the old pension, taken over by government that "The transfer of almost all of the Plan’s liabilities and assets to Government in April 2012 made your past pension considerably more secure" Why not totally secure?http://www.myroyalmail.com/pensions

Coz it aint.

[fishtank]

I think the union was caught out over this.
They were understandably desperate to find a solution to the pension deficit,I get that but they failed to realise just how desperate the government were to get their hands on the £25 billion in assets.
The union were in a far stronger position than they realised and I think if they had pushed the point they could have forced the Government into guaranteeing the final salary link as well and we wouldn't be facing the changes we are facing now.
It's possible that the European Commission's may have knocked it back but I don't think they would have as the final salary link is still in essence a historic liability.