Friday, 18 November 2011

Learning points from the NAPF Conference

(From November 2011 “Pensions Age” magazine)


So what, from a Pension Fund Trustee perspective, were the learning points from the NAPF Conference in Manchester? I would start, perversely and slightly controversially perhaps, from a visit, as a guest of AON Hewitt, to Manchester United on the Wednesday evening. (In the photo I’m with former United stars Gary Pallister and Gary Neville – and the Premier League trophy). You did not need to be a United fan to appreciate the sheer class and management grip of what we saw at Old Trafford. The class came from the feeling that this was a brand that takes seriously the need to make its stakeholders confident that it knows what it’s doing. And the management grip was seen in the manifestation of this focus. Those at the club who organised the evening knew that our host (and their sponsor) wanted the guests to have a good time. But as we were trustees and actuaries and analysts (in the main) so this didn’t mean anything vulgar or trivial – it meant delivering a truly memorable evening where we saw the wonderful cathedral that is Old Trafford, talked with a couple of United’s recent stars and were, albeit briefly, enrolled in the Manchester United family.

The lesson from Old Trafford was surely that whatever you do you must do it well. Life might be tough, but if your core beliefs are sound and you are true to your values, you too could be a winner. I was, I admit, not instinctively supportive of Steve Webb when he strode to the podium to speak (see various articles of mine in this place!). But I have to admit that he did seem to have a grip which, whilst not of the “Red Devils” standard, was at least of decent proportions. Similarly with the excellent John Hutton, the impressive shadow Minister (new to the task) Gregg McClymont and the Pensions Regulator Chairman Michael O'Higgins. These heavies persuaded me that we do have people at the top of the Pensions world in positions that can influence the future who have the best interests of us all in mind.

There was much talk about finding common ground and working together – and that message (about teamwork) was wonderfully encapsulated in the final session of the conference when Sir Matthew Pinsent told us how Olympic Gold medals were won (and lost). One of Pinsent’s messages was about how for a team to win you need to subsume, to some extent, your individual character and personal priorities for the common good. Well done to the NAPF for finishing on this note – it was subtle and all the more impactful for that.

As a Trustee I am expected to work not as an opinionated individual (which I admit I can be) but as a team player. That’s fine. But if we seek the Pensions Fund equivalent of Olympic Gold I would argue that for a Trustee uncritically to accept the status quo, or blindly to agree with the conventional wisdoms, would be an abrogation of our duty. And at Manchester there was plenty of food for thought in this regard. Let’s take, as an example, the debate about Defined Benefit versus Defined Contribution. Overwhelmingly the view at the Conference was that DB in the Private sector is dead – or dying – and that DC in its various guises is the future. And to help us come to terms with this many speakers from the Platform encouraged us not to give voice to the slogan “DB good DC bad”. This cry, to eschew the quasi-Orwellian, was, in my view, wishful thinking. After all one of the featured selling points of “The Deal” for the Public Sector in Lord Hutton’s report was that Public sector workers would continue to have a Defined Benefit pension. If DB isn’t better, even somewhat watered down à la Hutton, then why did he stress that workers in the public sector will still be in a DB scheme?

It can be helpful to cut through the confusion caused by technical descriptions like DB, DC, Hybrid and the like. Hutton can help us through this quagmire. He says that a good pension in retirement for those below median income should deliver, taken together with the full state pension, “…more than two-thirds of pre-retirement salary…” This is a useful checkpoint for the private sector as well. In the main DB schemes still deliver this and any changes that they make should not alter their ability to continue to do so. But all too many DC schemes build in huge uncertainty about take up, investment performance and then delivery. Private sector DC schemes should have “Manchester United” level quality – which means delivering wide take up (auto-enrolment will help), robust and secure asset performance and certainty that an individual, on retirement, won’t suffer because of the vicissitudes of the investment or the annuity market. Until this happens it will still be “DB good DC bad”.

Paddy Briggs is a Member Nominated Trustee of the Shell Contributory Pension Fund. He writes in a personal capacity.

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