volume 10 number 1
2010 Spring Edition
federation news
FE DE R ATI O N NE WS GF TU /I E R
The Institute of Employment Rights 50-54 Mount Pleasant Liverpool L3 5SD tel: 0151 702 6925 fax: 0151 702 6935 email: office@ier.org.uk www.ier.org.uk
General Federation of Trade Unions 4th Floor Headland House 308/312 Grays Inn Road London WC1X 8DP 020 7520 8340 (24hrs) fax: 020 7520 8350 email: gftuhq@gftu.org.uk www.gftu.org.uk
The Institute of Employment Rights was launched in 1989. As a labour law ‘think tank’, supported by the trade union movement, its purpose is to provide research, ideas and detailed argument. In 1994 the Institute was granted charitable status.
The General Federation of Trade Unions was founded in 1899. It provides services and benefits, mainly in the fields of education and research, to affiliated unions. The education work of the Federation is administered through an Educational Trust, which was established in 1971. Federation News is a series of short articles in the subject areas of labour law, labour economics and industrial relations, which are of interest to industrial relations practitioners and students.
The results of the work of the Institute are published in papers and booklets and developed at conferences and seminars. Our aim is to provide the tools of analysis and debate for the trade union movement in the area of labour law.
We welcome the submission of articles for consideration for publication in future editions. Please send articles to the Institute of Employment Rights at the above address or electronically to cad@ier.org.uk. The views expressed in Federation News do not represent the collective views of the Institute of Employment Rights or of the GFTU, but only the views of the authors. The responsibility of the Institute and the GFTU is limited to approving this publication as worthy of consideration within the labour movement.
Editor Michael Bradley Executive Editor for this edition Carolyn Jones Advisory Editorial Board John Bell Richard Beresford Stephen Cavalier Bill Dewhurst Rosie Eagleson Keith Ewing John Fray Dan Gallin John Hendy Judith Jackson Carolyn Jones Joe Mann Aileen McColgan Doug Nicholls Roger Seifert Dave Spooner Roger Welch Frank Wilkinson ISSN 0014 9411
VO LU ME 10 N UM BE R 1 SP R I N G 2010
Contents Editorial: The politics of pensions
Carolyn Jones
2
It’s not fair
Nigel Stanley
3
Capital Stewardship: taking control of pension investments
Colin Meech
5
What is happening to Defined Benefit pension schemes? Bryan Freake
7
IER events catalogue
Centre Page Pullout
Money Purchase Pensions: making the best of it
Bryn Davies
9
When the pension scheme runs the business
Ivan Walker
11
Defending public service pension schemes: the need for balanced debate and fair solutions
Glyn Jenkins
13
Who pays?
Mark Serwotka
15
Protecting pension funds from corporate fraud: lessons from America
Tom Dubbs
16
1
FE DE R ATI O N NE WS GF TU /I E R
Editorial: The politics of pensions During the production of this edition of Federation News, a general election has taken place and a Lib-Con coalition government has taken office. Clearly this is not the progressive outcome trade unionists would have liked. Nor, however is it a mandate for the programme of swingeing cuts in public services, pay and pensions proposed by the Conservatives in their pre-election statements. Nevertheless, cuts are on their way with the public sector in the eye of the storm. The media and the government portray such cuts as inevitable, with the government already announcing an independent Commission to ‘investigate the long term affordability of public sector pensions’. Political and media commentators point to unstable international financial markets and the UK’s domestic deficits as reasons for the cuts, while allowing the “markets” that created the economic crisis to dictate the path to recovery! It is timely therefore that the focus of this edition of Federation News is on pensions. Not just the legal and technical aspects of pensions – important though they are – but the wider political context within which pension provision is provided. In the opening article, Nigel Stanley focuses on two key themes – fairness and affordability. After a much needed sober analysis of pension provision across the public and private sector, Nigel rejects the notion of levelling pensions down, arguing instead for improved pension provision in the private sector and a reduction of the ever growing gap between boardroom benefits and those offered to frontline workers. The article by Colin Meech outlines a UNISON programme aimed at influencing how pension funds are used. Capital Stewardship promotes member representation on occupational pension schemes to ensure the £15 trillion worth of public sector investment funds are invested in ways that are accountable, responsible and secure. Pension fund members are increasingly both providers of capital and workers in companies which receive equity finance. By demanding a seat at the pensions table, that power can be used to reform corporate governance, expose excessive executive pay and prevent bad labour relations and poor environmental standards.
2
The next two articles highlight the benefits and weaknesses of defined benefit and defined contribution pension schemes. Bryan Freake begins by highlighting the benefits of maintaining defined benefit pensions schemes before explaining how such benefits are being undermined by employers, expecting workers to pay more and receive less. For those workers forced off defined benefit schemes and into negotiations around defined contribution schemes, Bryn Davis highlights some key negotiating points for consideration. Ivan Walker’s article highlights examples of companies transferring company assets to the pension scheme as a way of generating profits which are then used to reduce the pension deficit. Intriguing! Glyn Jenkins then provides some initial thoughts on what he believes should form the terms of reference for the proposed Independent Pensions Commission. He exposes and discredits many of the more common myths spouted about pensions, offering bullet-point facts on costs and affordability before concluding with a call for a balanced debate and fair solutions. Mark Serwotka rounds up the political debate by measuring the myths of cosy public sector jobs and gold-plated public sector pensions against the reality of intensification of work, pay freezes and job cuts. He warns against expecting public sector workers to pay for an economic crisis not of their making and points to mass demonstrations in Greece and Portugal as examples of resistance. Mark offers alternative policies to ease the national debt including a Tobin Tax and a well resourced HMRC to prevent tax evasion. The final article by Tom Dubbs brings good news in the battle to protect pension funds from corporate misconduct. The US government is supporting a case which would, for the first time, give overseas investors – including pension schemes – the right to sue American companies involved in fraudulent behaviour which threatens the pension funds of millions. Disappointingly, the UK government argued against this protection. A decision in the case is expected very shortly. Carolyn Jones
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federation news
Bryn Davies is Director of Union Pension Services Ltd and coauthor of Pension Promises and Employment Rights (IER, 2004).
Tom Dubbs is a Senior Partner at Labaton Sucharow, a leading investor law firm based in New York. Attorney Dubbs specializes in the representation of institutional investors, including pension funds, in securities fraud and other types of litigation, securing record recoveries against corporate offenders in high profile, high stakes securities class actions. These settlements also seek to require corporations to adopt progressive corporate governance reforms to prevent further occurrences of wrongdoing – a new paradigm for legal settlements Bryan Freake is Pensions Officer at Unite the Union. Glyn Jenkins is Head of Pensions at UNISON.
Carolyn Jones is Director of the Institute of Employment Rights
Colin Meech is a National Officer at UNISON, responsible for UNISONʼs Capital Stewardship Programme.
Mark Serwotka has been the General Secretary of Britainʼs largest civil service union, the Public & Commercial Services Union (PCS) since 2000. PCS represents over 300,000 members employed on government contracts in the civil, public and private sector. Nigel Stanley is head of campaigns and communication at the
TUC.
Ivan Walker is a pensions lawyer and consultant for Thompsons
Published by the GFTU Educational Trust 4th Floor Headland House 308/312 Grays Inn Road London WC1X 8DP in association with The Institute of Employment Rights 50-54 Mount Pleasant Liverpool L3 5SD
Produced by IER Printed by Upstream Cover pic of Brendan Barber speaking at a TUC organised pensions lobby of parliament, Westminster, London © Jess Hurd/reportdigital.co.uk Price £8 to IER subscribers and members (£30 others)
Solicitors. He is also co-author of Pension Promises and Employment Rights (IER 2004)