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Posts Tagged ‘Pensions’

Inequality and the Generation Gap. More Than Meets the Eye?

Tuesday, February 14th, 2017

Read any newspaper or magazine which focuses on economics and politics over the last few days and you will have almost certainly stumbled upon the idea of “intergenerational inequality”. The basic argument goes; for most of modern history in Britain every successive generation has enjoyed improved living standards compared to the generation that came before it. However, thanks to the economic crisis of the past decade there is a real chance that this will not hold true for the generation born between 1981-2000 (the so-called “millennials”). A basic tenant of our social contract and a fundamental aspiration for every parent, that our children should have a better life than we did, has been thrown into doubt in a way that is truly unprecedented.

Is that fear justified? I’d argue “Yes, up to a point”. It’s true that the figures don’t make for pretty reading. According to the Resolution Foundation, older millennials (around 30-35 years old) are the first workers to earn less than those born five years before them, and many of them entered work before the Great Recession. At the same time, it’s been reported recently that pensioner household incomes have overtaken those of working age equivalents for the first time.

Clearly something needs to be done, but the danger here is that we start seeing intergenerational inequality as a zero sum game, where making things better for young people can only be done by taking away from older people. Will, for example, will following the advice of some in abolishing the “triple lock” on pensions (where pension increase per year by the higher of the growth in average earnings, the Consumer Price Index or 2.5%) create good-quality, high-paid jobs for young people by itself? I’d argue not. Reducing inequality must come from lifting people up to the same level, not dragging them down.

I’d go further and say that treating entire generations like some vast amorphous block does nobody any favours. Take two young people born on the same day; one living in the countryside and another living in an inner city. Do they really have any similarities beyond the fact that they share a birthday? Do we miss any potential inequality in income and opportunity between these two because we’re more focused on how they’re doing compared to their parents? A few facts and figures can show what this means in practice. While some pensioners may be earning more than those in work, there are still 1.6 million pensioners (14% of the total pensioner population) living below the poverty line after housing costs. A higher income young person at age 20 has a greater income than a poorer member of their parent’s generation at any age.

We must resolve ourselves to fighting inequality wherever we see it, not setting up one generation against another. Fortunately, there are more than a few ways in which we can do this. Building more and better housing will benefit both young people looking to settle down and older people looking to move or downsize in retirement. Protecting pensions gives security not just to people on the verge of retirement age, but to young people who want to know that pensions will still be there for them decades from now. This is more than a dry debate about economics. If we accept that inequality both between and within generations is one of the gravest issues we face (and I believe it is) then how we deal with it says a lot about what kind of country we are.

I’ve had enough of the policies of scapegoating, divide-and-rule and “us versus them”. We need to be far more ambitious and far more progressive before we can even begin to put things right.

A Successful Year at GMPF

Friday, December 23rd, 2016

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Some of you might know that as well as serving as the Executive Leader of Tameside Council I am also the Chair of the Greater Manchester Pension Fund. I’ve written a little bit about pensions in this blog in the past, but as we come to the end of the year I want to take the chance to put a little more focus on what has been a truly momentous year in the world of local government pensions.

With 352,292 members and over £20 billion in assets the Greater Manchester Pension Fund is by far the largest local government pension fund in the country. Though as a fund with even higher ambitions, at the start of the year we reached an agreement to team up with fellow pension funds in Merseyside, Lancashire and West Yorkshire to create a £40 billion combined pension pool.

All well and good, you might say, but what does that actually mean? I’ve written a lot this year about some of the problems Tameside and Britain faces, the most relevant ones here being our productivity crisis and the fact that a small minority of businesses are still getting away with not meeting their obligations to their employees and society. Getting pension funds, in Greater Manchester and elsewhere, to combine their resources is the way we are starting to create our own solutions to these big national issues.

The way we’re going to do that is quite simple. £40 billion is a lot of money, and we can use that money to invest in projects that are good for the pension fund and good for our society and economy as well. Pension funds are uniquely placed to make this happen. We’re embedded in our local communities, we have the sheer financial muscle needed and we’re an investor for the long term. Governments and private companies will often not touch an investment that will only start providing a return years or decades from now, but that project is perfect for a pension fund which needs to find ways to pay out to members years and decades from now. We’re already doing this to a certain extent, but the plans that we have started to put in place this year will allow us to do this quicker, better and on a larger scale.

Investing in infrastructure is not the only thing we can do, we can also invest in businesses as well. That gives us the opportunity to influence their board of directors and management by exercising our rights as shareholders. If we think a company executive is being paid too much for the job they are doing, we can do something about it. If we’re unhappy with a business using zero-hour contracts and tax havens, we can do something about it. This is something that is already happening. To give just one example, companies that had to backtrack over pay increases for executives due to shareholder opposition in the last year alone include betting company Paddy Power, online gambling firm PlayTech and the Foxtons estate agency. Next year we’ll be working together on ways to make sure that the voices of pension funds are heard further in all the places in which we hold assets.

There’s no doubt in my mind that 2016 will go down as a milestone year in pensions. If you’re a member of the Greater Manchester Pension Fund, rest assured that your retirement is safe in our hands. If you’re a resident of Tameside, rest assured that we all supporting investment that will make the borough is better place to live, work and do business in. If you’re concerned with how some businesses run things, rest assured that those concerns are shared by us as well. Roll on 2017, and the next step.

On the Side of Good Business

Friday, July 29th, 2016

One of the paradoxes of the current debate about good business is that, for all we talk about it and support it, there is not a great deal of agreement as to what it actually means. In particular, the law has little or nothing to say once you go beyond the fundamentals such as the minimum wage and health and safety. For the vast majority of businesses and business owners, a basic sense of morality and an eye on the long term keeps them on the straight and narrow. Unfortunately, every so often a more unscrupulous character will go to the absolute edge of that legal void and commit acts that, while not illegal, would be considered by most to be utterly immoral.

In that vein, some of you may remember a month or so ago Sir Philip Green appeared in front of two Parliamentary committees to answer questions regarding the collapse of BHS. Their final report was released this week, and to say that it is damning does not begin to do it justice.

The highlights are as follows. After buying BHS in 2000, Sir Philip Green and his family took almost £580 million out of the company in dividends, rental payments and loans. The company’s pension funds went from holding a substantial surplus to a deficit that eventually reached hundreds of millions of pounds. Sir Philip Green and the BHS investors refused to address this, going so far as to sell the company for £1 rather than allow The Pensions Regulator access to the company’s financial records. The business was sold in a manner that ignored concerns about takeover regulations and the ability of the buyer, Mr Dominic Chappell (a man who no prior retail experience), to maintain BHS as a going concern. BHS went into administration at the end of the April, by which point Mr Chappell had also taken £2.6 million out of the business in fees and loans.

It should be noted that the payment of large dividends, which can be justified if the business is thriving, and the existence of a pension fund deficit, which can be caused by low interest rates and tough trading conditions, are not by themselves signs of negligence. The key difference in the BHS case is that Sir Philip Green took out dividends at the expense of investment and growth in the company, and did nothing to address a large and growing pension deficit when he had the personal wealth and capability to do so.

There is a very real human cost to this as well. BHS employs over 11,000 people across the country, many of whom now face an uncertain future through no fault of their own. The 20,000 current and future holders of BHS pensions could also face cuts to pay-outs that they worked for decades to earn. Almost without exception, it has been the innocent who have suffered while the guilty have walked away even richer than before.

I am proudly pro-business, and I am also the chairman of a pension fund. It is for these reasons that I consider what has happened to BHS to be nothing less than a national scandal. We need businesses that thrive and prosper for the benefit of all, not businesses that exist only to enrich a select few at the expense of their workers and the taxpayer.

As she entered Downing Street, our new Prime Minister promised a more responsible capitalism. She could make a start by using the power of her office to define, in black and white, what a good business is. If necessary, this should be backed up by law. That is only way to make sure that another Sir Philip Green never gets his hands on another BHS.

Making Pensions Work for Tameside

Thursday, March 3rd, 2016

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There was good news in the pension world as the Greater Manchester Pension Fund, of which I am Chair, once more showed that it is at the forefront of transforming pensions and investment in local infrastructure. Last month we presented to the government our plans work with pensions funds from across the country, including Merseyside, West Yorkshire, Lancashire and London to deliver a £45 billion “Northern Powerhouse” pension pool, with £1 billion specifically earmarked for investment in local infrastructure.

Those are some impressive numbers, but I want to take the time to explain what it means for the person on the street. There has long been an interest in using pension funds to invest in long-term infrastructure for two reasons. Firstly, the scale of investment required for such projects means that multi-nationals, large banks, national governments and pension funds are the only organisations that have the resources to hand to do so. Secondly, most investments in infrastructure produce stable and predictable cash flows over a very long period of time. Perhaps not ideal for investors looking for quick money, but perfect for pension funds who have to think about paying out to members 40 and 50 years down the line.

The Greater Manchester Pension Fund has been a long-term champion of investment in infrastructure to develop our area while also safeguarding our member’s pensions. We have a long history of backing local infrastructure projects in Tameside and throughout Manchester such as Matrix Homes, One St Peters Square and the £800 million joint venture in Manchester Airport City.

Our deal to create a Northern Powerhouse pension pool is bringing this appetite for large-scale investment onto the national stage. Through this we expect the creation of a £1 billion pot that will be available for infrastructure investment by September 2016. By pooling and reducing our administration and management costs we also expect to save around £30 million, money that can be put to far better use elsewhere. The £45 billion of the total asset pool is also bigger than the minimum of £25 billion recommended by the government, putting us in a position to stand toe-to-toe with global wealth funds and other big investors on projects such as airports, shipping terminals and railways.

The need for investment in our infrastructure has never been greater. The productivity of our workers and our ability to grow as an economy can no longer be held back by crumbling, out-of-date infrastructure. I’m happy that the Greater Manchester Pension Fund and its partners are going to be a big part of the solution.

Join the Fight Against State Pension Inequality

Wednesday, February 10th, 2016

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Imagine this scenario. You’re a woman in her late 50s to early 60s; you’ve worked, brought up a family and contributed to society from an early age. You’ve made retirement plans based on what you were told your pension age would be. Then, with little or no warning, you are told that it will be years before you receive your pension, ruining all of your plans and potentially leaving you in desperate financial circumstances.

Surely this can’t be fair? Unfortunately, for up to 500,000 women in the UK it’s a reality, a reality that is already happening to them. That’s why the Women Against State Pension Inequality (WASPI) campaign is so important, and why the work that our MPs; Angela Rayner, Andrew Gwynne and Jonathan Reynolds have put in to raise this in Parliament should be applauded.

A bit of backstory is necessary here. Back in 1995, the Pensions Act passed by John Major’s Conservative government included plans to raise the retirement age for women from 60 to 65, bringing it into line with the retirement age for men. This process, known as “equalisation”, was due to be completed by 2020. In 2007, the Labour government also scheduled an increase in retirement age for both men and women to 66, to take effect between 2024 and 2026. Due to the long timeframes involved neither of these moves was particularly controversial. However, the 2011 Pension Act introduced by the coalition government accelerated the entire process. The rise to 65 for women would now happen between 2016 and 2018, and then both sexes’ pension age would rise to 66 by 2020.

What does this all mean in practice? In broad strokes, it means that millions of men and women will have to wait longer before they can claim their state pension. That’s bad enough as it is, but look a bit closer and you’ll see that it’s even worse than it sounds for women approaching pension age. Over half a million women born between 6th October 1953 and 5th April 1955 will now have to wait a year longer to collect their pensions. Of those, 300,000 born between December 1953 and October 1954 will see an increase of almost 18 months. When you add in the 1995 rise in pension age for women as well, many women who expected to receive their pensions at 60 will have to wait three, five or even six years longer than they planned before they receive their pensions. In some cases, a difference of a few months in age between two women can result in a delay of years in reaching pension age. To make matters even worse, many of the women affected received little or no warning of the changes, leaving them scrambling to fill in the gaping holes that have been blown into their retirement plans through no fault of their own.

The WASPI campaign are calling for transitional arrangements for soften this blow for women across the country, helping them get their retirement back on track. I urge you to join your voice to theirs by signing the petition here. Together we make the government offer women a fair deal on pensions.

Tameside Nominated for Council of the Year

Wednesday, December 23rd, 2015

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Last week I spoke of the importance of continuing to invest in Tameside despite the onslaught of more cuts to our funding. Only a focus on growth and reform will provide a sustainable future for Tameside, and since the government have been proven to have little to no interest in it we’ve had to roll up our sleeves and do it ourselves.

I’m happy to tell you that our work has been recognised by the Local Government Chronicle, who have shortlisted us for Council of the Year in their annual awards. The awards, which are held in March of every year, shine the spotlight on councils that have achieved more with less in areas such as health and social care, the environment, housing and driving growth. The councils recognised by these awards are success stories, organisations that have bucked the dead hand of austerity to not just retain the quality of their services, but improve them for the sake of residents and businesses.

It’s both an immense vindication of our approach, and an appropriate recognition of the work the council and its partners have carried out in what has been very difficult financial circumstances. Looking back on the year, we can definitely be proud of some of the nationally-recognised achievements that have led to our nomination.

To name but a few: Ashton Market was voted by The National Association of British Market Authorities (NABMA) as Britain’s Favourite Market, and we now building on that by launching a £4.5 million redevelopment. Matrix Homes, a joint venture between local government and the (Tameside Council administered) Greater Manchester Pension Fund was described as “pioneering” by Housing Minister Brandon Lewis in a speech to a national housing conference. We were also the recipients of a Customer Service Excellence Awards after an assessment discovered that not only were we 100% complaint with customer service standards, we actually went above and beyond what was required.

I don’t think we have a divine right to win the award. Every council in the land is suffering under austerity and I am sure that the others nominated have come up with their own excellent and innovative solutions. Receiving a nomination in the face of such competition is an achievement in itself. Regardless of what happens in March when the awards are handed out, you can rest assured that Tameside Council will not rest on its laurels in fighting the good fight against austerity and making the borough a better place to live, work and do business in.

Honouring the Fallen

Friday, October 2nd, 2015

Unveiling the plaque in honour of Guardsman Tony Downes with parents Sheryl and Ronnie Downes and J.P Summerscales of the Grenadier Guards.

Some of you may not know that as well as serving as Leader of Tameside Council I am also the chair of the Greater Manchester Pension Fund. With £13.3 billion of assets, the Greater Manchester Pension Fund is the largest local authority pension scheme in the UK. Over 340,000 members look to us to provide them with security and dignity in their old age once their careers in the public sector end.

Since the Greater Manchester Pension Fund moved to Droylsden in 1988 we have made our home in the Concord Suite in Villemomble Square. It has served us well over a period of almost 30 years, but the time is right to move on to a more modern building to accommodate our expanding operations. However, we have not abandoned our commitments to the local area. The new pension building, larger but also more energy efficient, has been built a stone’s throw away from the old one, ensuring that jobs, skills and investment remain in Droylsden.

But as well as this we are also taking the opportunity to honour our local heroes as well. That’s why the new pension building is named after a young man who gave his life for his community and country. Guardsman Neil “Tony” Downes was 20 when he was killed in a landmine blast in Afghanistan in 2007. Tragically, his death came less than two weeks before he was due to return home. His parents continue to live in Market Street in Droylsden, and after receiving their permission and consulting residents and businesses the new Greater Manchester Pension Fund has been named “Guardsman Tony Downes House”.

Today saw the opening of Guardsman Tony Downes House. Members of the council, the family of Tony Downes and representativesfrom the Grenadier Guards and the British Legion will be in attendance. The word “hero” is often overused in this day and age, but by any standard Tony Downes was undoubtedly a hero. But we also must remember that in honouring Tony Downes were all also honouring all those from Tameside and elsewhere who have fought and died for their country; in Iraq and Afghanistan, in France and in lands and times further past. It is my sincere hope that immortalising his name in brick and mortar will be seen as a reflection of both our shared pride in their lives, and our shared grief at their passing.

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