Criticising the Board of Trustees

[Ken Falls]

I'm fed up hearing about pensioners who think criticising the Board of Trustees means that the integrity of member nominated Trustees is being unfairly questioned.  This is not the point.

Look first at the current composition of the Board, four company nominated directors including one paid professional (ex BHS) and only three member nominated directors (selected  and not elected by members).

Consider why the paid professional was added to the Board and how his specialist and legal knowledge is being used to overcome arguments from member nominated directors. Think about the fact that the main company nominated director has succumbed to CH2M's Project Fear believing that he is saving something that no longer exists. Sorry to say, it is CH2M now and HGL has only been retained to avoid CH2M taking pension scheme responsibility and for use in media spin.

Consider CH2M's Project Fear – yes what is in effect a part of CH2M appears financially insolvent but the balance sheet is under the control of CH2M. Now think about actually declaring it insolvent and the effect on CH2M's trading position and government contracts. Add in that if in administration, despite the pension deficit, this part of CH2M might still be very attractive to a competitor who would be able to agree a viable recovery plan for the scheme. Why would CH2M risk going down that route?

Now look at the Board's recent record.
1 At the sale to CH2M, they were invisible and did not listen to the pensioners.  They did not enlist help from the Regulator to ensure pensioner's rights were protected and ensure that CH2M did not avoid responsibility. If funds had gone into the scheme at this point its viability today would probably be so much better.

2 They fail to get CH2M to agree the 2011 valuation and do not get the Regulator involved to reduce the moral hazard. Again a new recovery plan here would have stopped the deficit spiralling.

3 They fail to get CH2M to agree the 2014 valuation and it is the same story as point 2.

4 They go behind our backs to try to get our benefits reduced at a secret court.

5 They go behind our backs to seek a RAA that will force us to accept a new scheme that is only ever so marginally better than PPF or to be placed in PPF. They avoid this being appealed by not informing HPA in the 28 day period. They have allowed CH2M to continue trading for very little in return.

6 After the 28 days, they tell us about the new scheme details and the Hobson's choice twist but avoid telling us about the RAA until six weeks later. They tell us they have negotiated hard on our behalf but forget to tell us that they accepted the measly uplifts by conceding that they were non-negotiable.
   
7 They have potentially agreed that a 75 year old widow's pension will be frozen as all her husband's service was pre-97. Good luck in her nineties.

8 They will not tell us financial information related to the current scheme or justify their assumptions in relation to the proposed scheme.
 
The member nominated Board directors are now outnumbered and being outflanked. Questioning the whole Board's performance in its prime duty of protecting pensioners' interests does not reflect on those directors'  integrity.

[Mort Deas]

Following Ken's much justified criticism of the Trustees I would point us in the direction of the followiing extract from Wikipedia.

Pension trusts[edit]
Main articles: Pensions in the United Kingdom and UK labour law
[show] v t e
Sources on pensions
Pension trusts are the most economically significant kind of trust, as they compose over £1 trillion worth of retirement savings in the UK.[118] Partly because of this, and also because occupational pension savers pay for their retirement through their work, the regulation of pensions differs considerable from general trust law.[119] The interpretation and construction of a pension trust deed must comply with the basic term of mutual trust and confidence in the employment relationship.[120] Employees are entitled to be informed by their employer about how to make the best of their pension rights.[121] Moreover, workers must be treated equally, on grounds of gender or otherwise, in their pension entitlements.[122] The management of a pension trust must be partly codetermined by the pension beneficiaries, so that a minimum of one third of a trustee board are elected or "member nominated trustees".[123] The Secretary of State has the power by regulation, as yet unused, to increase the minimum up to one half.[124] Trustees are charged with the duty to manage the fund in the best interests of the beneficiaries, in a way that reflects their general preferences,[125] by investing the savings in company shares, bonds, real estate or other financial products. There is a strict prohibition on the misapplication of any assets.[126] Unlike the general position for a trustee's duty of care, the Pensions Act 1995 section 33 stipulates that trustee investment duties may not be excluded by the trust deed.[127]


Every jobholder will from 2012 be automatically enrolled in an occupational pension, and can codetermine how their retirement savings are invested and their voice in company shares is used.[128]
Because pension schemes save up significant amounts of money, which many people rely on in retirement, protection against an employer's insolvency, or dishonesty, or risks from the stock market were seen as necessary after the 1992 Robert Maxwell scandal.[129] Defined contribution funds must be administered separately, not subject to an employer's undue influence. The Insolvency Act 1986 also requires that outstanding pension contributions are a preferential over creditors, except those with fixed security.[130] However, defined benefit schemes are also meant to insure everyone has a stable income regardless of whether they live a shorter or longer period after retirement.[131] The Pensions Act 2004 sections 222 to 229 require that pension schemes have a minimum "statutory funding objective", with a statement of "funding principles", whose compliance is periodically evaluated by actuaries, and shortfalls are made up. The Pensions Regulator is the non-departmental body which is meant to oversee these standards, and compliance with trustee duties,[132] which cannot be excluded.[133] However, in The Pensions Regulator v Lehman Brothers[134] the Supreme Court concluded that if the Pensions Regulator issued a "Financial Support Direction" to pay up funding, and it was not paid when a company had gone insolvent, this ranked like any other unsecured debt in insolvency, and did not have priority over banks that hold floating charges. In addition, there exists a Pensions Ombudsman who may hear complaints and take informal action against employers who fall short of their statutory duties.[135] If all else fails, the Pension Protection Fund guarantees a sum is ensured, up to a statutory maximum.[136]

[Mort Deas]

The link.

https://en.wikipedia.org/wiki/English_trust_law#Pension_trusts

[michael tordoff]

The idea of member nominated trustee appears to be a smokescreen.  I have never nominated anyone to be a trustee and neither have I been asked to vote on a nominee.  By comparison I have heard of a number of names that were put forward by members and rejected by the company.  As I see it, this means that all trustees are put in place either directly or indirectly by the company.

In order to stand a chance of becoming a trustee you would have to have demonstrated a willingness to put the interests of the company first.  That is understandable and in many instances necessary, but it can obscure the primary function of a trustee to the pension scheme, which is to protect the rights of the pensioners.

I do have some sympathy for the trustees.  The natural instincts of a trustee who used to be a main board director will be to think that the company must be protected to save the rights of the pensioners, but to help a friend who is a trustee to understand that is not necessarily the case I put it to him as an analogy.  I likened the trustee to a safety officer on a cruise liner called the SS Halcrow.  The SS Halcrow springs a leak and starts to sink.  The safety officer saves the captain of the ship in preference to the passengers thinking that the captain is needed to sail the ship and hence the passengers will not be safe if the captain drowns.

There is some validity in this line of thought, but not if it means sacrificing the passengers when the ship is doomed to a watery grave.

Far more sensible would be to transfer the passengers to a passing cruise liner.  Indeed there are a number of cruise liners on the same route and the safety officer decided to put the passengers on the SS CH2M.  Unfortunately the captain of the SS CH2M is not so kind hearted as one might hope for.  Instead he decides to cast the SS Halcrow passengers adrift in a life boat, even though the SS CH2M is still shipshape and the SS CH2M passengers are not similarly abandoned.

Admittedly the life boat from the SS CH2M is slightly better equipped than the life boat from the SS Halcrow (i.e. it has a few biscuits as well as bread and water), but it is still far from the luxury cruise that was promised and had been paid for in full in advance by the SS Halcrow passengers.

[philjohnson]

I have great sympathy with the sentiments being expressed by both Mike T and Ken F. I concur with most of them but a point of correction regarding member nominated trustees in HPS.
Yes I believe HPA committee members have in the past applied for the vacant member posts when they became available (2 in last 4 years approx). The reality is that whilst these posts are advertised and made freely open for staff to apply I am not so sure that retired or deferred members get to see these unless they have access to the HPS website.  Unfortunately without trying to allocate blame, the relationship at the time of the advertising some 4 years ago between the Trustee and HPA was not good and the Trustees it seems have the freedom to select someone who they think they can work with and would do an acceptable job if there are minimal applicants. The number of applications to these roles is normally minimal to the point that there is often just one or two or even one applicant sometimes. Being a pension trustee is not exactly top of people's wish list and reflects the general poor interest in pensions. An appalling state of affairs but that's due to a lack of pension education. I was a Trustee for the now closed Halcrow money purchase scheme that followed HPS closure to most future contributions when my application was the only serious application and I was accepted without need for a member vote. Enough applicants should generate a member vote.
I hope this helps.

[finneyb]

Ken

ref '  Look first at the current composition of the Board, four company nominated directors including one paid professional (ex BHS) and only three member nominated directors (selected  and not elected by members). '

And at least one of the member nominated, but not member selected, directors is a an employee - and thereby subject to potential 'pressure'.  CH2 could save at least £200 million if this restructuring goes through, I could well image there is 'pressure' about.

Brian

[Mort Deas]

Following Ken's post above I visited the Pensions Act 2004 (hugely long) and came across the appended section "262". It is also long and I am struggling through it. It does appear to throw light on the pensioners rights and the Trustees obligations. The pdf version does not give this information. Sub section 67 is of particular relevance.

Enjoy.

http://www.legislation.gov.uk/ukpga/2004/35/section/262

[leonegr]

In sub section 67B (4) it is stated that the informed consent requirement is satisfied in the case of an affected member if before the modification is made the trustees have given him information in writing adequate to explain the nature of the modification and its effect on him.

It should be argued that the effects have not been explained in writing as a comparison with the current HPS scheme have not been made. In actual fact in 'You questions answered' by HPS on 9 June 2016 in section 1.3 in response to the question 'Why do the factsheets compare the PPF and the new scheme ,but don't show members what they are losing in comparison to their benefits in the HPS' they state that 'The offer documentation that was sent to all members on 31 May is designed to help members to understand and assess the options that are available to them-i.e. the new scheme and the PPF' and 'The reason the factsheets don't show this is because there is no third option to stay in the HPS benefits. Unfortunately, the only two choices available to members are to transfer to the new scheme or move to the PPF; so the factsheets focus on the comparison between those two choices.'

I therefore am of the opinion that requirement set out in section 67B (4) (a) (i) has in part not been met.

I would like to know what is your interpretation.

Regards

Giovanni Leone
 

[michael tordoff]

Giovanni appears to have a good point.  Perhaps HPA could pursue this formally on behalf of members?

[Ken Falls]

I have used the reference to Section 67 in part when raising an appeal against an unsatisfactory response to one of my Internal Disputes.

I have also asked what happens if a response to my appeals is still outstanding at the time of the deadline. It took them about two weeks for the first response and much of that was waffle about the offer as opposed to specific answers.

[Tim SMITH]

One to watch:
BHS, BREXIT AND BRITISH STEEL - WHAT DOES IT ALL MEAN FOR PENSIONS?

Lane Clark & Peacock's annual pensions conference 2016
14 September 2016 8:30AM
Park Lane Hilton, 22 Park Lane, London, W1K 1BE

Guest speakers:
Journalist Paul Lewis - the presenter of Money Box on BBC Radio 4
Professional trustee Chris Martin - holds a number of high-profile trustee appointments to pension schemes including BHS, Uniq and Halcrow

Paul Lewis will share his views on the public perception of pensions in 2016.

Chris Martin "has a wealth of experience working on pension schemes with stressed employers and he will share some of those experiences."

Speakers "will focus on practical steps to help you position your scheme or company to be ready to take advantage of new opportunities as they arise."

https://www.lcp.uk.com/annualconference