How many more pension fund disasters will it take before the Government acts to protect the hundreds of thousands of people whose savings are at risk?
The row over the BHS scheme and the obligations of Sir Philip Green is only the tip of the iceberg. The collective shortfall in pension funds across the FTSE 100 was £17 billion last year, according to the well-regarded annual study by experts LCP.
That’s an alarming figure in its own right but all the more so because there is no one, leaving aside campaigners such as MP Frank Field and Baroness Altmann, doing an effective job of standing up for employees’ and pensioners’ interests.
Fighting talk: There is no one, leaving aside campaigners such as MP Frank Field (pictured) and Baroness Altmann, doing an effective job of standing up for pension interests
The Pensions Regulator, which is supposed to do this, has been asleep at the wheel. In the case of Carillion, it was involved for a decade while there were serious doubts about whether the company was paying enough into the pension fund.
It took no effective action, and disaster struck anyway.
Pension fund trustees are supposed to be there to look after the interests of members, but they are not tough enough.
Too often they have links with the company and conflicts of interest, when they should be completely independent.
The upshot: executives carry on dishing out huge dividends and paying themselves enormous bonuses, even as the pension shortfall swells.
Billions of pounds are invested in final salary pension schemes on behalf of current and former employees. Yet there seems to be little or no attempt at pre-emptive supervision, in order to head off problems before they turn into disasters.
Members are at the mercy of the good offices of management. At Capita, chairman Ian Powell and chief executive Jon Lewis are doing the decent thing: they have made it a priority to plug the pension gap and have risked unpopularity with shareholders by suspending dividend payments to do so.
But it should not be left to directors’ sense of duty.
In the same way that certain banks were identified as so important to the system as a whole that they merited intense monitoring, large pension funds should be subjected to close scrutiny as a matter of routine.
Trustees and regulators should have powers to demand to see internal accounts that might show up red flags – not just the published reports which are by their nature out of date.
They should also have the power to force directors to make adequate payments into a scheme. Top managers tend not to see the pension shortfall as their responsibility, but as a millstone they have inherited from the past. It’s rare for directors to be a member of the staff final salary scheme themselves. Fewer and fewer current employees are scheme members either. Those in traditional funds are ageing, retiring and becoming less relevant in the eyes of the management.
Chief executives only perk up and get interested when, as with GKN and its attempts to fend off a bid from Melrose, a predator is sniffing around and a pension fund deficit might be a deterrent.
Although bosses like Green have been vilified over pension funds, it isn’t all their doing. Some of the blame must be shouldered by central bankers who slashed interest rates and introduced QE money-printing as supposedly temporary measures after the financial crisis.
Whoever is at fault, the red ink is alarming. At RBS, for instance, the staff retirement fund’s liabilities were nearly 170 per cent of its stock market value in 2016 – or just under £45 billion. That’s another Government bailout.
The Pension Protection Fund is a safety net for members, though they will still end up with a significantly poorer retirement. If it is problematic for companies, it is a minefield for employees, whose interests are forgotten and ignored. It’s the members’ money – they deserve better.