New governance arrangements will be in place by 2015. These include 50% of the pension board being pension scheme members – you!
The changes are the result of the Hutton report identifying that the transparency of the current schemes is poor, resulting in schemes which do not perform as well as they could.
The current pension schemes vary widely in running costs – North Yorkshire £25 per person per annum, City of London £357 per person per annum. The main reason for this difference is that investments are made in house in the North Yorkshire scheme. In house investors are making decisions in the interest of scheme members, whereas private financial advisors are making decisions which maximise their fees.
The LGPS is a statutory scheme, but this does not mean your benefits are guaranteed; the law can be changed, funds can perform badly and governments can fail (Greece!). Also, your money is invested without you having any say over how this is done – there is a risk you are being ripped off.
Investment returns have halved between 1996 and 2014. When investment returns go down, the employer has to pay more, which may mean redundancies – not something UNISON members want!
Lots of funds are under pressure due to increasing number of redundancies, and decrease in investment returns and contributions. In 2006-7 the LGPS had enough assets to pay all benefits for the next 20 years without any further contributions. Now, it only has enough for 3 years.
The membership of pension fund committees and their voting rights varies, but generally scheme members have no say over how their money is used. For the West Midlands Pension Fund, there are three TU reps that have no voting rights. In 2006 when UNISON raised concerns over the running of funds it was told it was not their concern as the money belonged to the pension funds … they are talking about your pay!
UNISON has worked since 2006 for a legal separation between the fund sponsors and the fund board to ensure the interests of the members are protected. The Department for Communities and Local Government has been forced to agree.
The Public Services Pension Scheme Act 2013 will implement this. All local funds will have a pensions board with 50/50 member representation by 2015.
It is essential for the financial success of the funds that members participate in this change. It’s their money, and if they don’t get involved they could get ripped off – that’s what was happening before. There is a danger that their seats on the board will be stuffed with placeholders, particularly from members of CIPFA (Chartered Institute of Public Finance Accountants), whose interests are more allied to the fees to be made from managing riskier investment types. GMB and Unite have not pursued this issue – UNISON has. Please contact Chris Burrow – 02476 521126 or email firstname.lastname@example.org for further info about how to get involved.