David Weeks discusses key questions following the Pensions Ministers' address at the quarterly AMNT conference.
The Association of Member Nominated Trustees* (AMNT) held its quarterly member conference, entitled "Pension trustees: Have your say" last week, and followed two key political initiatives; The Government publishing its Green Paper: "Security and sustainability in defined benefit pension schemes", and The House of Commons debating the committee stage of the Pension Schemes Bill.
Pensions Minister Richard Harrington MP addressed around 90 members at the conference, referring to both political events.
So what did AMNT members have to say about each of them?
The Green Paper raises six questions for consultation, and AMNT members honed in on three of these:
- Question 1 asks "Are the current valuation methods the right ones for the purposes for which they are now intended?" AMNT members want to see debate take place on how an appropriate balance is struck between flexibility and firmer guidance. They think that valuation methods may need to vary in order to take into account the strength of the employer covenant, together with the investment strategy and the risk management arrangements that have been put in place.
- Question 4 asks if there should be different regimes for employers who can afford to pay more compared with sponsors and schemes that are stressed. The Minister said that the Government has not yet taken a view about RPI or CPI as suitable factors for indexation. AMNT members plan actively to take part in the ensuing discussion.
- Question 6 raises the idea of "consolidation of smaller schemes into vehicles with greater scale and better governance". It asks if the Government should "encourage, incentivise, or in some cases mandate"? AMNT members think that it is probably inevitable that some scheme consolidation will have to happen. Cost reduction will be an important aim. The experience of local government pension schemes may prove to be useful. Protection of the rights of individual pension scheme members will be paramount.
And what about the Pension Schemes Bill?
Members also noted the debate on the Pension Schemes Bill at House of Commons committee stage. They are particularly concerned about the governance of defined contribution Master Trust schemes, and are hopeful for some cross-party accord.
Richard Harrington said: "We are all in favour of more people getting involved in their pension scheme". Shadow Pensions Minister Alex Cunningham MP said: "The mantra for the Bill should be: 'members at the centre of everything that we do'". He added: "I remind the Committee that all the investment risk lies with the members, and not with the provider. They should therefore have representation at the decision making level".
AMNT members hope that codes of guidance will spell out that good practice for defined contribution Master Trusts requires adequate member representation on trust boards.
*The AMNT now has over 700 members who represent more than 500 pension schemes, which together have combined assets under management of just under £700 billion. That is around one third of the UK occupational pensions sector. Members split between DB and DC interests on a 60:40 basis.
Written by David Weeks, Co-chair AMNT.