Time for a Pension Revolt by Current Employees

In changed circumstances all stakeholders should look to rethink

High sponsor cash contributions have been the staple diet of DB schemes.  Now, higher interest and mortality rates have actually left schemes increasingly well-funded. The benefits should not be syphoned off by life insurers.

Sponsors and employees past and present have a mutual self-interest in running on and for a pension reset.  Get stuck in.  No need to wait around for regulatory battles.  Action now.

Current employees can be the trigger for change.  

DC pension provision is not a patch on old DB pensions.  But what was shut on one basis can be reopened on another.  Excess cash in legacy DB schemes can fund a new DC tier.  With discretionary powers exercised by trustees, pensioners can have temporary uplifts while funds are added to DC pots.  Fair to all stakeholders.

The sponsor needs to enable trustees to have long term but low risk investment plans (able to dial up productive, ESG aligned asset allocations as funding strengthens).  Then they can agree (ahead of surplus returns) scheme money is used to fund pensions and add to them for the current and past employees (including the company contributions). The plan follows the original purpose of the trust.  So better cash and profits for the sponsor and better off employees.
With increased contributions into their pots, DC members can reassess what they want to pay.

Sponsors and employees have left the pension sector to its own devices for too long.  Now employees should revolt to start a pensions rethink.

DB schemes become ESG Flagships able to benefit all stakeholders.  Ask about C-Suite and its partners about how.

“Current employees like institutional investors have been strangely passive during the DB derisking years.  Some activism is called for to set a long term run on strategy.  ESG aligned trustees and sponsors are ready to join in.”  
William McGrath

​Questions for Current and Former Employees on the Final Salary Scheme Surplus

The current employees ask Head Office

• The closed final salary scheme is in surplus.  Will the Board propose a new DC tier within it to upgrade pension provision and (part) fund employee and employer contributions – as part of a wider package to benefit all stakeholders?

The former employees ask Head Office

• The closed final salary scheme has a surplus.  The cost of living crisis has reduced the real value of pensions.  will the trustees and Board agree to use discretionary powers to make temporary payment increases as part of a wider package to benefit all stakeholders?

Both current and former employees can ask employers and trustees

• Are your respective ESG strategies are aligned on pensions?

Current DC Employees to Ask Directors and Trustees about DB Schemes

Follow up questions:

• Do the Board see the DB pension scheme as integral to their public ESG commitments in financial statements and Sustainability Reports on the environment and about their employees?
• If the DB scheme runs on with no more investment derisking and mortality trends continue, will the scheme generate large surpluses over and above the Regulators idea of low dependency on the sponsor?
• Will the employer consider a new DC tier within the DB pension scheme?  (Shut for being too expensive on one basis, now open on a modernised, financially manageable basis)
• Will the employer prioritise better pensions for present and past employees over repayments of surpluses?  (Recognise the financial benefit to sponsors and employees if their contributions are funded by DB surpluses)
• Have directors and trustees considered discretionary payments for DB and DC scheme members?   Given the C-Suite Pension Strategies know how on exercising discretion will they let me know if they will reconsider them now?

Message to sponsors:
Don’t let past bad governance experiences; tough regulator discussions; admin and time requirements; and one time accounts and contribution volatility set the agenda.  Move on.  There are new, addressable opportunities.

Is it time for employees past and present to revolt to start a pensions rethink?