Increased Pensioner Representation on the RO Trustee Board
The Company has frequently advised us that trustees "are not there to represent particular interests but are there, together, to act in the best interests of the beneficiaries of the pension scheme". We are therefore asked to believe that Company nominated trustees, be they the Personnel Director, Finance Director or whatever, act totally independently when wearing a Trustee hat. Similarly, a Trade Union nominated trustee forgets his/her shop steward background when sat at the Trustee Board table. This is the theory but for evidence of the practice see our Pensions Surplus Scandal page. It shows that £215 million were spent to the benefit of the Company and current employees. Pensioners, who did not have a representative on the Board until 1997, received nothing.
The Trustees' solicitors further advise us that "when interests diverge then there is an obligation to hold the balance fairly between those competing interests, within the power available to the trustee company". Pensioners may think that "fairly" suggests "fair shares". Not so, say the solicitors "fairness and equality are different concepts in legal terms". A judgement in 1997 found that under the current legislation the trustees have "no duty to be impartial as between members in service and member pensioners".
RO pensioners who remember the establishment of the scheme in 1984 will recall that Ministers and managers advised us that the Pension Fund would be independent of the Company and run by independent trustees. What was not made clear was that the trustees must act in accordance with the powers given to them by the Trust Deed and that in many instances it is the Company that has the power to designate a course of action. In the case of surplus funding the trustees had the power to improve benefits (including those for pensioners) but only at the request or with the consent of the Company. Our enquiries and researches have shown that they always adopted the Company's proposals and never made any recorded suggestions of their own. We have questioned whether they even knew that they could make proposals.
Given that we are told that the trustees have prescribed powers, why does ROPA want additional pensioner trustees on the Trustee Board? Primarily because we believe that the member nominated trustees should be more representative of the demography of the scheme's membership. In 1984 it was decided that the Trade Unions should nominate 5 employee trustees. At that time there were no pensioners but now the position is as shown below
In spite of these massive changes, the TUs still nominate 5 and pensioners nominate 1. Now that the scheme is closed to new entrants the number of employee (or active) members (at the end of 2006, 1598 members) will inevitably reduce as the number of pensioners increases.
Eventually the TUs will not have 5 members to nominate. In spite of this neither they nor the Company want to make changes. They fear that pensioner representatives would solely represent pensioner interests but if we are to believe the Company view that trustees cannot do this why not have more of them. Is it that the Company simply prefers its longstanding cosy arrangement with the Trade Unions?
It is interesting to note that ROPA has always regarded the pensioner trustee as independent and has never sought to instruct them on particular issues or seek information from them about confidential Board affairs. Do the TUs and the Company take a similar view?
We also believe that, even if a more representative Trustee Board is bound by rules and is limited by the powers conferred upon the Company, it could still have a restraining and modifying influence and it could promote the moral arguments for fairness rather than meekly accepting the legal arguments.
What is ROPA doing to pursue increased representation?
We had hoped to mount a campaign to have the Board's constitution amended when it was reviewed during 2003. Under the 1995 Pensions Act constitutions were to be reviewed every six years. Sadly, the government gave in to pressure from companies and decided that since they intend to make changes to the relevant sections of the Act they would allow companies to defer reviews, if they wished to do so. BAE Systems has taken advantage of this chance to delay but other companies, having given a commitment to review, have gone ahead. Fortunately however, the Occupational Pensioners' Alliance (of which ROPA is an active member) succeeded in persuading the government to amend the new 2004 Pensions Act so that pensioners will in future be involved in the selection of Member Nominated Trustees. The act came into force in April 2005 and the new regulations are also now in force. These state that "in considering the use of constituencies, trustees should have regard to the principles of proportionality, fairness and transparency. For example it would not, in general, be fair for a Constituency of 100 members to nominate two MNTs and a constituency of 10,000 Members to nominate only one".
Council has therefore raised a formal complaint using the Internal Disputes Procedure.