| PS5PF | X | m | (No name, age unknown, no further information given) unspecified |
| PS5PG | X | m | (Ken, age unknown, no further information given) unspecified |
| PS5PH | X | m | (Jimmy, age unknown, no further information given) unspecified |
| PS5PJ | X | m | (David, age unknown, no further information given) unspecified |
| PS5PK | X | m | (Peter, age unknown, no further information given) unspecified |
| PS5PL | X | m | (Clifford, age unknown, no further information given) unspecified |
| PS5PM | X | f | (Jane, age unknown, no further information given) unspecified |
| PS5PN | X | f | (Appleby, age unknown, no further information given) unspecified |
| PS5PP | X | m | (Adams, age unknown, no further information given) unspecified |
| K77PSUNK (respondent W0000) | X | u | (Unknown speaker, age unknown) other |
| K77PSUGP (respondent W000M) | X | u | (Group of unknown speakers, age unknown) other |
| (PS5PF) |
[1] Ken, welcome back. [2] Could you introduce er the people, your team, particularly as I think one of them has a different name to the label in front of them. |
| Ken (PS5PG) |
[3] Yes, I'm afraid Mike Kirkham has been delayed in Prague for today, so Nigel Spackman, who's a member of our Committee and is a deferred pensioner is taking his place and Les Taylor is the Secretary of our Maxwell Pension Action Group. |
| (PS5PF) |
[4] And you are Ken Trench? |
| Ken (PS5PG) |
[5] I am Ken Trench, I am the Chairman of the ... Group. |
| (PS5PF) |
[6] Ken, we've you've given us er er er a document in re response to er the Good Committee and your views and so on. [7] We've got a number of questions we want to ask you, because er ... though you're pivotal to all of our erm activities in this enquiry, we are also looking to a report which is hopefully going to be influenced the Bill the Government brings forward. [8] So we will er if we may er not ask you to introduce your document we we'd like to get on with the questioning. [9] If at the end you feel there are points we haven't covered and I forget to invite you, would you say you would like to make a concluding statement. |
| Ken (PS5PG) |
[10] Yes, by all means. |
| (PS5PF) |
[11] Very good. [12] Jimmy? |
| Jimmy (PS5PH) |
[13] Well Ken, obviously everybody was abhorred regarding this national scandal of the ... the Maxwell er pension fraud that er the Committee who were making enquiries obviously were ... implementing the fact that we should have a report and Goodey was set up and the recommendations that have been laid down as far as Goodey is concerned in order to strengthen the pension scheme so that these frauds can happen again, now have you read the report? |
| Ken (PS5PG) |
[14] Yeah, I've read ... I don't think I've read every thousand pages of it, but I've, I've ... I've done quite a lot of [...] of it yes. |
| Jimmy (PS5PH) |
[15] Mm, having read the report and possibly being on the end of the complaints from the pensioners in the Maxwell fraud er what was your view regarding the proposals that are being made? |
| Ken (PS5PG) |
[16] Well, we feel that there's ... it's obviously quite a lot of points that are, are very good in the report, but we really feel that it's concentrated very much on the administration of pension schemes, rather than security and I think that whilst if everything that, everyone of his recommendations had been law, I think it would have made it more difficult for Maxwell, but I don't think it would have made in impossible for Maxwell and I think that what th what we see the problem is, is that in many ways the, the Maxwell problem was brought about by two ... major, major factors I think. [17] One was the failure of the self- regulatory body I M R O and the second one was really the fact that he was able to change his financial year end from April ninety-one to December ninety-one and during that period he was able to do things with those erm those funds in his accounts and er and really there was, there was no check on that, and I don't see that the that was in er Good would have changed much of that situation at that end. [18] It would have made it more difficult, but the way that Maxwell used to ... involve himself in bulk transfers, you know and move, move two hundred pensioners from there to there and er no money followed and this sort of thing, I think that er that he could of quite frankly done exactly the same thing and we really feel that the, that the role of the pension regulator and the and the opposing role with I M R O that, that you really if we're not careful, we're going to put in another layer of bureaucracy and have a pension regulator who's got the task of ... of checking a, a hundred and twenty eight thousand pension funds, when really there's probably out of those a hundred and twenty eight thousand, ninety-nine point five per cent of probably being very well ... well run and, and quite safe and what, what we can't really see in the report is a ... is a method of identifying the determined fraudster at a at a very early stage, you know and we're just terribly disappointed that er that Good has just thrown the whole of, of the matter back at I M R O who we feel have proved to tha that I don't think they're up to the task, I think that the that the whole question of er of the ... power of a self regulatory body which to us works on blowing the whistle, you know the whole the whole effect of a self regulatory body is ... that it's members that it, it's really like a club isn't it, you know and we're all members of this club and if one of us er is gonna do something wrong, then the rest of us are gonna have to pay for it. |
| Unknown speaker (K77PSUNK) | [cough] |
| Ken (PS5PG) |
[19] Well, in the in the question of I M R O as far as it's erm occupational pension scheme members are concerned, er there's no ... there's no compensation responsibility and I think that that means that you get no, no whistle blowing and in I mean there's, we've got, I mean one of the points that we, we heard of just last evening was that one of the of the banks involved ended up er in its arrangements with Maxwell of asking for a hundred and sixty per cent of shares for every hundred per cent of loans that it made to Maxwell. [20] Now to me ... that means that that, that city organisation must have been very doubtful about the whole future of the Maxwell organisation when it was getting to that stage, and if one looks through the, through the Writs, you know which now, now number about the same number of pages as the as the Good Report, you know you will get an er a feeling of what Maxwell was doing and how that was all ... all being happened and with leaving all of that with I M R O we just don't think it's going to er ... er we don't think it would have saved the position. |
| Unknown speaker (K77PSUNK) | [...] |
| (PS5PF) |
[21] Ken? |
| Ken (PS5PG) |
[22] Well I think if I M R O I think if I M R O members ... had ... had a compen ... a compensation responsibility or er then I feel that the members would have would have would have allowed certain things to happen. [23] I mean when one starts to, to scratch the surface, let me just give one example I mean we feel er I M R O fails on ... on its membership I mean the fact that you had Bishopsgate Investment Management ... which was the beneficial owner was an organisation in Liechtenstein. [24] Now I M R O asked er ... we understand for the be the management of that organisation to give accounts for that for the c for the senior company to I M R O prior to its membership about a I think was about eight working days before I M R O approved that membership. [25] ... We we've asked I M R O if they actually got those accounts and what they learnt from the er from the Liechtenstein company and they've told us they can't, they can't tell us it's er it's private correspondence. |
| (PS5PF) |
[26] Can we actually pause there cos you've done a good bit of digging on that one. [27] Er David Shaw on this very [...] I come back to you [...] |
| David (PS5PJ) |
[28] Ken erm y you've asked some questions, I've actually seen the I M R O letter and can I say that there are two questions in the I M R O letter to Mr Maxwell and Bishopsgate, which quite categorically asked for accounts and also details of the ownership structure coming out of Liechtenstein. [29] I haven't seen the re final reply that went from ... er the Maxwell organisation to er I M R O but I did see a draft reply. [30] The draft reply contained one threat to report I M R O to the Securities and Investment Board for excessive enquiries er and for an unreasonable attitude and the other er bit of the reply was effectively a form of covering up presenting full financial information and disclosure to I M R O. Those replies were drafted by people inside the Maxwell organisation and you may want to comment on er the position, although I should stress at this stage that I like you have not seen the final version of any reply and I do not know whether I M R O persisted. [31] What we do know is that I M R O asked for this information in June nineteen eighty-eight and not long afterwards I M R O granted recognition to B I M and other Maxwell Companies, all the more surprising perhaps having raised the questions whether the question must come about, did they continue with their investigation, or did they let the matter drop and perhaps you might to comment in that context. |
| Ken (PS5PG) |
[32] Well I think we can all, I mean I think just the fact that they were asking those questions I think literally days before they gave the approval worries me. |
| (PS5PF) |
[33] [...] Ken, but asking the question is rather good, isn't it? |
| Ken (PS5PG) |
[34] Oh, asking the questions is fine. |
| (PS5PF) |
[35] Cos they were actually on to something important. |
| Ken (PS5PG) |
[36] Yes, but I would have thought that you know I M R O sh should of then I asked, I write and asked them the question, I r really would have expected a reply to come back, yes, we found this and so and so, but we then scraped a little bit further and erm. |
| David (PS5PJ) |
[37] Can I just ask on that Ken? |
| Ken (PS5PG) |
[38] Yes. |
| David (PS5PJ) |
[39] Do you not think that almost regardless of the reply and whatever that reply contained, with what we now know with the benefit of hindsight about Liechtenstein, which was actually known by I M R O there's not for the benefit of hindsight that wasn't known at that time, shouldn't I M R O have refused immediately to license any organisation that was controlled out of Liechtenstein in those circumstances? |
| Ken (PS5PG) |
[40] Absolutely, absolutely, I think you know, I ... I mean I just ... feel there should be a total ban on anywhere where ... where you can't get the information that you require, you know. |
| (PS5PF) |
[41] So let's leave it there and you, but you were saying Ken, you've scratched [...] |
| Ken (PS5PG) |
[42] Oh, I think the story goes on from there, because I don't think though and this is a personal opinion and I I'd love the Committee to [...] I don't know tha that er I M R O ever did get accounts out of Liechtenstein because a year later ... B I M the m the ownership of it was transferred from Liechtenstein back to England ... but guess who the ... the, the owner was transfer to a charitable trust, so we've got erm a company that is handling the investment management of seven hundred million pounds worth of pension funds which is owned by a charity and the and the accounts that were given to I M R O and these accounts were given to I M R O a year later, were charity commission er type accounts, which evidently showed something like five hundred thousand pounds in that charitable fund and er ... and no transactions you know, so and that [...] company that was running that was the beneficial owner of our investment company ... where all the errors took place. |
| Unknown speaker (K77PSUNK) |
[43] Can I, can I just put some other bit of information in front of you as well. [44] You mentioned the accounts of the Maxwell Charitable Trust as having five hundred thousand of assets, I saw those accounts for the first time the other day and I found that they had five hundred and one thousand of assets of which er five hundred thousand consisted of a a purely hypothetical transfer of an asset from a Liechtenstein trust to the U K trust and that asset had no valuation done on it as far as I can make out a and no reference to any valuation appeared in the accounts, so we actually had B I M apparently owned by a charitable trust on the face of it with figures of five hundred and one thousand of assets, but in practical accounting terms and valuation terms, no evidence that those five hundred and one thousand pounds er of assets had any valuation approaching that figure. |
| (PS5PF) |
[45] Can now, can we actually move on a bit because, that has been very valuable what you said, but in fairness to Mr Maxwell it also has to be said doesn't it that up until he stole these assets er this process of throwing organisations, peoples monies into a spin dryer and pulling them out of different sort of sequences was something he regularly did and we've had witnesses [...] to say how well he did manage the funds and how they grew, whether when they should sell stock and when they shouldn't sell stock and so on. [46] So we're actually concentrating on the actual business of that in the final analysis, despite how he behaved, large amounts of funds were stolen and you b you've kicked us off to a very valuable start about whether that would be harder to do faced with a Maxwell-type character if all of Good was implemented. [47] So w we're grateful for that. [48] We'd also for those new pieces of the puzzle you've given us today over erm Liechtenstein. [49] But can I take the questions back to Jimmy please and continue. |
| Jimmy (PS5PH) |
[50] [clears throat] Well obviously the sad reality of the thing doesn't come home to, to our countrymen and a man comes up last week and tells me that he's been paid off by the Daily Record he's been working for them for thirty five years and he asked what how much pension will he have and says that he's getting four years pension. [51] Now that's a s er sad reality of this er national fraud that er Maxwell committed. [52] Now what I'm saying to you is that there's a big question mark as far as Goodey er report is concerned and they can talk about er the surpluses, they can talk about the trustees, but there's no majority as far as the employees are concerned and this was the question mark that we we were saying that one of the reasons why they were saying ... you know that the employee should be in the minority because in the end paragraph of the summing up of the Goodey report that states quite clearly that all the responsibility and all the [...] but the employer, now you yourself has said that er as far as the schemes and we're talking of something in the region of a hundred and twenty eight thousand. [53] Now say for instance that because of the minimum solvency er agreement the employers have got to pay whatever their loss is, and if and I asked this question of the T U C that if there was a situation of where the employees were in the majority and forget the pension regulator, because there was a regulator anyway, so you can add whatever name that y you liked to have, but the fraud still went on, but say the employees were in the majority as far as the trustees is concerned and they were in full control and the control was taken away from the employers and there was a a federation of the hundred and twenty eight thousand with a central fund paying off heavy loss of any minimum solvencies, then surely that would be the ideal situation in order to safeguard, because when I asked Goodey himself when he submitted his report, he said they could not give any categ categorical assurance that nobody could defraud in any scheme under the proposals he's made. [54] As far as I'm concerned personally, I think it's very, very weak, [...] take it back and re-draft it and allow the employees to be in the control of their own destiny, because after a national fraud and a scandal that's taken place that we could never trust any employer to carry out a scheme. |
| Unknown speaker (K77PSUNK) |
[55] If I can please er I think our comments on that er ... perhaps Mr Ray is being er using the grob global flays when he refers to employees. [56] In the pension scheme there are typically three groups of members, the existing pensioners er those people who are still working for the company, the employees and the third group of er members who work for the companies [...] generally referred to as deferred members. [57] They all have interest in the scheme so that we would believe the thing to do would be to have ... at least an equal number of employer appointed trustees and employee ... appointed trustees and the employee in this, I'm using it globally, so it does cover all three groups and we also believe it would be advisable because er inevitably the e er members er probably wouldn't know a lot about pensions themselves to have an independent trustee from an independent company who specialises in pensions and pensions laws and could a advise them on exactly what the law says and what they they're legal duties etcetera are. |
| Jimmy (PS5PH) |
[58] Yeah, but you know that the Goodey report makes it quite clear that the employer is responsible for starting the scheme, winding up the scheme and increasing or decreasing the contributions. |
| Unknown speaker (K77PSUNK) |
[59] Good d Good does in fact do what you said and his recommendation er for final salary schemes is er a third of the trustees ... should be or have the right to be er from the, the members and er ... er we've in our er comments to you have er looked at a global point of view and said no not are these proposals worthy in themselves, but using a different criteria that if they had been law as Ken said earlier, would they have stopped Maxwell and a situation where a third of the trustees were er were they members er would have made no difference er cos typically in our cases there were originally about four trustees er and unfortunately for us, three of them were named Maxwell. |
| (PS5PF) |
[60] [...] little further. [61] Peter? |
| Peter (PS5PK) |
[62] Well, yes, just to look at the wh the question of balance of power between the employer on the one hand and the members on the other hand and then between the different categories of members the active payers-in, the pensioners and the deferred pensioners. [63] How do you see the proposals in the er Good Report and what what exact proposals do you have yourselves? |
| Unknown speaker (K77PSUNK) |
[64] Well the proposals in the Good Report as I said for final salary schemes is that a third of the trustees should be elected from he actually says from the active members er we know and comments that in great length a about the difficulties that it would be to er actually er elect er er members who are pensioners or from the deferreds Er I find that er somewhat simplistic view point in that er ... er ... the pensioners at least get communications from the administrators of the scheme every month, they get a monthly cheque, so it sh shouldn't be beyond the wit of man to be able to er be able to contact the pensioners and organise pensioner meetings but pensioner trustees to be elected. [65] [...] postal balance easily enough. |
| Ken (PS5PG) |
[66] In fact I think ... oddly enough I think the way that the Daily Mirror Trustees are now organised with postal balance and representatives [...] classes, I think you know is almost a model now of how a set of trustees should run, you know, they [...] but they have got a very good scheme of how they do actually elect their trustees from various groups of ... of members. |
| (PS5PF) |
[67] But do you envisage the employers should be in a position of the minority on the scheme? |
| Ken (PS5PG) |
[68] Well I think the whole problem is erm is really we should some someone's got to ask the question are ... are final, final salary schemes going to last well into the next century. [69] You know because if you are going to ask an employer to enter into a contract between the between an individual employee, then really you've got to give him some advantages to do that and I think that er I don't know what the figures are or the number of final salary pension schemes that have been launched in the last couple of years, but I should think it be, be quite few and I think that there is a difficulty that if we go too far in taking power away from the er from the employer, erm then I, I can see the demise of final salary pension schemes, so I think one's got to keep a balance there of erm you know that i that you mustn't turn the employee off completely from this type of scheme. |
| (PS5PF) |
[70] That's very clear, thank you. [71] David Shaw. |
| David (PS5PJ) |
[72] Ken, if we could er look at what's actually happening out there to pensioners at the moment, I think of which we're all very concerned, but ... there has been a small item of good news to balance against the concerns we have for those pensioners that are still suffering from uncertainty and that is some money has started to come in as a result of legal actions and settlements out of court. [73] Can you tell me what the current position is as you understand it |
| Ken (PS5PG) |
[74] Yeah. |
| David (PS5PJ) |
[75] and what your views are on some of these settlements that have been ... made? |
| Ken (PS5PG) |
[76] Yes well, erm I think I mean I ... I did check with the various trustees last week and the current position is erm there was basically a four hundred and sixty million that er that was the original missing figure, to which now goes back over two years er recoveries have come to into over a hundred thousand now with the |
| Unknown speaker (K77PSUNK) |
[77] Hundred [...] million |
| Ken (PS5PG) |
[78] Hundred million, sorry er I got th I I missed off the nought on the end erm |
| (PS5PF) |
[79] It's [...] |
| Ken (PS5PG) |
[80] [laugh] erm and ... [laugh] yeah, er but that was his speciality er so it's so of that four hundred and sixty million er a hundred million odd er just over a hundred million has been recovered, but unfortunately we still have three hundred and eighty million of liabilities erm that is due in part to the fact that with low interest rates really the liability value has increased. [81] So you know there the recoveries are very good, very welcomed by us, but basically we're two years ... now since this happened erm pensioners have been suffering extreme mental turmoil for that period, quite frankly they're, they're utterly confused, they don't understand what's happening and to ask those sort of people to rely and put their s their, their whole future security on the outcomings of out of court settlements where claims are made for two hundred million and there's a thirty two million [...] you know they're getting totally confused and ... I think that ... that they just do not know what's happening, they, they want long-term security, we're now getting an increasing number of people who've retired since the schemes were wound up and are therefore getting a hundred per cent of their, their money from the company fund, which we're told is going to run out in two-and-a-half years time. [82] So we've got this group of people who are ... and just retired, they're sixty-five and have just retired, and they're looking forward to their pension le lo losing completely in two-and-a-half years time unless something's done about it. [83] I think that's a near suicidal situation. |
| (PS5PF) |
[84] Can I just make one point Ken, cos you were saying they're getting thirty odd million of er of a request of two hundred million. [85] It was actually thirty million wasn't it of a claim for fifty million, of which there was also a secondary claim which was dropped. |
| Ken (PS5PG) |
[86] Yes, yes I think |
| (PS5PF) |
[87] So that so that actual that particular settlement was rather a good one, because it was thirty odd million plus eight wasn't it? |
| Ken (PS5PG) |
[88] Oh yes, yes, no, I think I think that er and I think that you know that particularly the ... the Mirror Group Newspapers Trustees doing a doing an excellent job you know, but we haven't really got into the ... into the stock lending ... er arrangements, but the, the cases those I think are particularly you know important to us you see, because there is a there's another hundred and fifty nine or a hundred and fifty three million I think of, of writs out at the moment and those I think are the ones where we're going to really see whether the, the banks dig their heels in or not, you know, I think we've, we're rea very early stage, but basically I mean we've still got eighty, getting on for eighty per cent of the missing monies still missing and we're into our third, third year. |
| Unknown speaker (K77PSUNK) |
[89] Ken, would you say though that erm ... one or two recent announcements connected with these judgments, I think including the er [...] the judge in a recent M C C case which actually went I think against the administrators,b on [...] shares but actually [...] the judge said if the argument had been made that er these assets were held er on a trustee basis, then I might have made a different decision. [90] Er would you not say that this has shifted the onus of responsibility very much on to the financial institutions, the banks and others who had dealings with Mr Maxwell, and isn't the judge in effect saying in your interpretation er of that, that these institutions er really have got to show they were whiter than white in their dealings and actually went in and investigated him thoroughly? |
| Ken (PS5PG) |
[91] Well I think I, I mean I do agree and I think that the that er that pressure is now getting on to these, these ... city institutions, but erm, but I [laughing] still come back [] to the basic thing that, that really, you know what appears to me is happening is we've we're having literally millions of pounds taken out in, in issuing these massive ... massive writs you know, a hundred and seventy eight page writs are sort of being [...] and really the money for those is coming out of the remaining money in our pension funds and really I feel that what wou what is happening is this, as far as I'm concerned, is all due to the self-regulatory body being set under the Financial Services Act, and in a way I feel that you know we're being made to pay for sorting out a mess that somebody else is making. [92] I mean and I think it is the lack of the regulate the ... er the regulatory control of city actions, I mean one of the points that we've been recently been advised on is that one of the city institutions which has already been er fined, er from its London office on a technicality is in effect the New York and London offices are deemed to be one entity and I think that er what we've been advised is that erm I forget the phrase, I wrote it down here somewhere, that what we would be advised to do is to take action against that particular city institution in New York, because that er it is deemed that the London and New York actions are in fact one and that the that er what in fact the er and I think the f ... yes, there it is, that, that in a way though what we've been advised is that the basis of that action would be that the organisations London and New York operations are essentially the same operation and bound by a strict know your customer rule as mandated by U S Securities Law, you know. [93] Now I can see the sense of that, you know, we could probably go to a New York lawyer on a no ... no win, no pay basis and ... take action agai an and argue that case, but you know is this what, what really people who've paid pensions for thirty or forty years should be dealing with, you know. |
| David (PS5PJ) |
[94] It was, can I just bring you back to that point |
| Ken (PS5PG) |
[95] Yes. |
| David (PS5PJ) |
[96] that particular organisation I presume is, is the one that is known as the most profitable investment bank partnership in the world or in history and presumably the reason why you've been advised is because the advisor or the director to Robert Maxwell who was instrumental in dealing with Robert Maxwell business wherever he was in the world and I mean I've seen er faxes and cables to France where er that particular director, I believe Mr Shineberg was, I've seen faxes about Jersey business to Mr Shineberg er presumably er you're being advised to take that action because in effect it was operating as one operation with transactions routed through New York, routed through London as seemed to suit the circumstances, but not necessarily with any rational basis other than er to avoid perhaps regulation. |
| (PS5PF) |
[97] Er Ken, you don't have to answer that the David [...] sitting behind you a number of er representatives of legal firms representing interest and David's making sure it's worthwhile coming today. |
| Unknown speaker (K77PSUNK) | [laugh] |
| David (PS5PJ) |
[98] Chairman, I can't imagine how you could possibly contemplate that. |
| (PS5PF) |
[99] No, I think, I think [...] |
| Unknown speaker (K77PSUNK) |
[100] The interesting point is that, that I feel is, that this is, this, this, this all has a very heavy bearing on the regulatory system, because I think that really we're now being financial services is a global village and you know whether somebody picks up a phone and di I think in fact didn't you have somebody gave evidence here and said that they could not investigate one of Maxwell's transactions, because it had gone through the New York office. [101] Now if we're going to try and eliminate the prob the sort of problems, then really we've got to think of on an international regulatory basis, rather than just in the U K. |
| (PS5PF) |
[102] David? |
| David (PS5PJ) |
[103] Can I bring you erm back to the U K and what we can do in the U K, although I agree with you, we need to be looking with certain organisations at regulation on a Trans-Atlantic basis, but from a U K point of view, erm ... the Good Committee Report has suggested that a pensions regulator should er be brought into being. [104] Do you think that if we had a pensions regulator, er it might deal with some of the exploitations by Robert Maxwell er and some of the er aspects of where he breached the law and managed to take over pension funds. [105] I suppose in asking that question I've got to ask you to rule out er all transactions er which have sort of transacted through New York and London at the same, or, or at different times, because quite clearly the Good Committee would er all their suggestions would fail on that behalf [laugh] You've just destroyed the question I was going to ask you really before I got to the question. |
| Ken (PS5PG) |
[106] No I don't think so, no I don't think so. [107] I mean th there's one little phrase that I picked out of Good which o regarding the, the pension regulator and he actually used the word that he envisages the pension regulator and I now quote will be less pro-active than the F S A regulators. [108] How you can be less pro-active than I M R O I can't understand or I M R O at that particular time, but what it appears to be me is that erm that if we're not careful, we're gon th the pension regulator's just gonna be a rubber stamp factory. [109] You know, it's got a hundred and twenty eight thousand pension schemes, papers are gonna flood through the door and annual reports and that sort of thing and it seems to me that all of Goods th the way that this, this pension regulator is deemed to act is that he's expecting the auditors and the actuaries to whistle blow and |
| Unknown speaker (K77PSUNK) |
[110] [...] Well, well I think I would, I would rath ... it I mean i it [...] they've got the responsibility to whistle blow now, you know, professional ... they've got, er you know, they're they these are professionals and they should, they should whistle blow and I mean Maxwell is a perfect example of how nobody, nobody blew the whistle and if you read through the writs, those ... lots of these people knew what were what was happening an and the whistle should have been blown and I see no reason why the why the pension regulator is going to get any different, different response and also I mean really these people are being in many cases given by th given information by their clients, you know, and I think it's a very difficult situation to turn round to, to somebody like Mr Maxwell and say well look I'm terribly sorry Mr Maxwell, we're going to report you to the pensions regulator, you know and I think that, that er you will just find that that ... I just don't feel that the pension regulator in, in that respect, I mean I, I think that I might like to if Peter suggested a pension fraud squad that, that had a open telephone line and the same sort of er powers as the Serious Fraud Office you know, so that if er anybody in a pension fund could, could ring a number and er and people absolutely descended th that, I mean they ge they say somewhere in the report that the pension regulator is going to have er powers and monies to do spot checks. [111] Well how on earth do you start spot checking on a hundred and twenty eight thousand companies you know, the first ... nine hundred and ninety five that you do may be the ones that are running perfectly. |
| Unknown speaker (K77PSUNK) |
[112] Can I just put to you there that the pensions regulator may be able to handle aspects like audit reports and established ... well established documentation and procedures, but are you not really suggesting erm that in the circumstances of Maxwell where the Committee saw for example a transaction that actually had thirty different transactions and therefore unless one looked at the overview of those thirty transactions, one couldn't realise that the bank effectively was involved in a fraud. [113] They're a very well known bank, but nevertheless effectively involved in a fraud. [114] Now how is a pensions regulator going to ... look at those thirty transactions, therefore are you not effectively saying that the pensions regulator may work in areas where pensions regulation actually works now. [115] The problem is the pensions regulator won't work in the areas where regulation isn't working now. |
| Unknown speaker (K77PSUNK) |
[116] Absolutely. |
| Unknown speaker (K77PSUNK) |
[117] Yeah. |
| (PS5PF) |
[118] I think that's [...] |
| Unknown speaker (K77PSUNK) |
[119] I understand the point you're making about er self regulation and er I think it's brought a lot of the problems upon us and enabled the frauds to take place er and that's what de-regulation and self regulation leads to. [120] What would be your proposals for controlling pension funds? |
| Unknown speaker (K77PSUNK) |
[121] Well I think if er if what had ha if er I mean before what he had before self regulation was the D T I issued erm certificates to investment management organising, you know, and I think that if er if power had remained on that basis with the D T I, I don't I'd be sitting here now. [122] I don't think the ... I don't think the D T I would have issued a investment management certificate to Robert Maxwell ... you know because he'd done naughty things in the past, so he just wouldn't have got the certificate. [123] I mean it was what, what and if you go through all the papers you can see that, that Robert Maxwell really saw that self regulation ... erm legislation ... being that he could finally get control through an investment management company of his pension funds. |
| Unknown speaker (K77PSUNK) |
[124] Were the D T I open to erm pressure, suggestions, information from members of pension funds [...] |
| Unknown speaker (K77PSUNK) |
[125] I don't know, but I er, no I think I don't know I'm not [...] you know, my experience of pension funds is ... it's, it's you know is only in the last two years really, I'm er. |
| Unknown speaker (K77PSUNK) |
[126] You're an expert, expert over that bit maybe [giggle] |
| Unknown speaker (K77PSUNK) |
[127] The other thing that might contribute to er [clears throat] er improving matters would be if the compensation arrangements er were such that the er fund managers were involved in having to provide some of the compensa compensation if there were any to be paid, then there's obviously a very good incentive for them to police themselves more thoroughly. [128] Under the present compensation ... er proposals put forward by Good, it would all be provided by the pension funds themselves and there's no pain for the fund managers er no requirement really for them to blow the whistle. |
| Unknown speaker (K77PSUNK) |
[129] [...] Clifford? |
| Clifford (PS5PL) |
[130] No the erm none of your papers to the committee concentrated on the ... the compensation er proposals from the Good report, and as you know it's a scheme ... er which is proposed to be restric restricted to losses ari arising from fraud, theft and intentional misappropriation of assets ... and is just up to a limit of ninety per cent. [131] How do you consider that the proposals ... for that scheme offer adequate cover er to members of pension schemes? |
| Unknown speaker (K77PSUNK) |
[132] No we don't, erm we in principle obviously we are in favour of er there being some form of compensation scheme and that has to be regarded as erm a step forward, er it would be better if er whatever compensation scheme is gonna be introduced was introduced now and the committee recommended and not in nineteen ninety-six or whenever it may be that the legislation is enacted. [133] Er but in [clears throat] in terms of the proposals they actually make erm ... we find them somewhat contradictory in that erm it says earlier on in the in the committees report that erm accrued rights must be protected erm, it doesn't say accrued rights which have to be lost through misappropriation of assets must be protected. [134] Whereas the proposals that they're making is only those rights which may be lost because of misappropriation of assets er would be compensated by the compensation fund. [135] We feel it should be extended to all assets er all, all accrued rights that are not able to be provided. [136] Erm we believe that er where in cases of erm misappropriated or fraud, the compensation fund should be for a hundred per cent of what has gone. [137] In cases where it's due to er under performance in the case of insolvency for example or other situations, we can see the argument for having a smaller proportion, but it should cover both. |
| Clifford (PS5PL) |
[138] Does the compensation scheme cover that? |
| Unknown speaker (K77PSUNK) |
[139] No, not at present and we believe that it should. |
| Clifford (PS5PL) |
[140] Er you think you think it should be wider then, a wider scheme. |
| Unknown speaker (K77PSUNK) |
[141] Yes absolutely wide, yes. [142] In order to cover any er ... any rights which are lost and secondly er it's inevitably the case that we are particularly disappointed er that the proposals are not retrospective. [143] After all if it wasn't for the Maxwell fraud, the Good Committee would never have been set up. [144] Erm we feel that er in that circumstance the proposals should be retrospective erm and we find the Good Committees er comment on this singularly unhelpful, in that all they say is we do not accept that retrospective implementation of the compensation scheme is appropriate full stop. [145] Why not? [146] We think that it should be. [147] Er if for no other reason than er if the compensation scheme was to be made retrospective to include ... the victims of the Maxwell fraud, it would at least erm restore some public confidence in the in the pensions industry. [148] Er and after all, if all the efforts that have been made that we have discussed just at, just now, er towards getting the money back are successful, well then the compensation that had been paid would be repaid. [149] So those are our main concerns about the compensation. |
| Clifford (PS5PL) |
[150] Well I'm very interested in what you say er could you, could I ask you a couple of questions. [151] How do you think the retrospective scheme ... compensation scheme would actually work ... and if I could give you an example erm ... should it apply to all schemes which have been affected in the past er perhaps after a certain date or ... if you were going to make that decision, where would the cut-off date be, how far back would you go and what schemes would you look at Er if it's gonna be retrospective? [...] |
| Unknown speaker (K77PSUNK) | [...] |
| Clifford (PS5PL) |
[152] only look at er [...] er it's a scheme that really raised the whole problem that the erm ... er [...] |
| Unknown speaker (K77PSUNK) |
[153] Ken commented earlier that er er prior to the ... Financial Services Act coming into force which I think was some time in nineteen ... eighty-eight, the er D T I was responsible and there [...] come back to the D T I if these sort of things had applied and er compensation effectively by the D T I for mal-administration or whatever so that er say we don't pretend to be pension experts, so any retrospection that I would suggest might well be appropriate as at the date of the Financial Services Act becoming into force. |
| Unknown speaker (K77PSUNK) |
[154] After all it was suggested er by er Michael Howard in ... who was Corporate Affairs Minister in nineteen eighty-six in, in the House of Commons he said that the Government believe that members of a pension scheme are in effect investors in that scheme and that that they deserve the protection of the Bill will extend to investors and it never did. [155] So it would not seem unreasonable that you know, from the date of the Financial Services Act it might come in there. |
| Clifford (PS5PL) |
[156] Would be a wide ranging scheme covering all the aspects of the |
| Unknown speaker (K77PSUNK) |
[157] We believe it should be. |
| Clifford (PS5PL) |
[158] Could, could erm, I ask you then how you think it should be funded? |
| Unknown speaker (K77PSUNK) |
[159] Well the proposals that are made in the in the Committees er report for funding erm ... seem to us acceptable with the exception of the comment we have already made erm i acceptable in the sense that they would be borne by erm all pension funds in proportion to their the size of their assets and in relation to the size of the er compensation has to be paid. [160] We believe that it would be more sensible if a proportion of the compensation would be met by people like pension fund managers if for no other reason that it would encourage them to er keep their own house in order erm and you know [...] it's not a bad er principle to operate in these areas. [161] Now you know,wi with lots of experts in this field and so we 're we only simply put that forward as a, a general suggestion whether it should be one-third from them and two- thirds from the pension funds, you know, I don't think is a matter of great importance to us, but we do think that the [...] should perhaps be a bit spread, spread a bit more widely than just into the pension funds. |
| Clifford (PS5PL) |
[162] It's probably not [laughing] [...] [] to yourselves providing the compensation was paid and that's fine, but it would be a matter of great importance to those for whom that it would have to provide the money. |
| Unknown speaker (K77PSUNK) |
[163] Sure. |
| Unknown speaker (K77PSUNK) |
[164] And how would you envisage that er [...] was operated. [165] H how would you balance that out back ... to the date that you're talking about? |
| Unknown speaker (K77PSUNK) |
[166] Well |
| Clifford (PS5PL) |
[167] W w w we can see, you can visualise from now if we start it now, you'd say well, everyone now knows that if anything goes wrong, this is what they will have to pay, but how are you going to take it back? |
| Unknown speaker (K77PSUNK) |
[168] Well actually, no,I I I would disagree with you at the moment. [169] If something goes wrong, they don't know what they are going to have to pay because if I'm a pension fund manager now, I don't know what is likely to happen in the next year which is going call on me for compensation. [170] All I know is that probably during the course of the year something will happen and I might have to chip in you know, a thousand pounds or a million pounds or whatever, but I don't know how much it's going to be. [171] In this case, at least it is possible to calculate the total er total amount that is missing and that could be divided up between your pension funds and it would of course be a ... a one-off hit on those funds. |
| Clifford (PS5PL) |
[172] Tha that would mean that all pensioners ... who are drawing the pension from pension funds would be penalised back to the date that you're talking about. |
| Unknown speaker (K77PSUNK) |
[173] No, it's the employers ultimately who will be penalised because the employers are required to make up any shortfall in the assets of the funds not the pensioners. |
| Clifford (PS5PL) |
[174] So the pen employers pay |
| Unknown speaker (K77PSUNK) |
[175] Ultimately yes. [176] ... And that but al as we said, a proportion of it we believe should be met not from the pension funds, but from the er ... from, from managers. |
| (PS5PF) |
[177] But if you've got er four hundred and eighty million pounds missing and you're saying that pension fund managers should er pay a third of it and this is a pay as you go scheme rather than a funded scheme of compensation, how many pension fund managers do you think would be able to cough up their third? |
| Unknown speaker (K77PSUNK) |
[178] I don't have at the tip of my fingers the total level of funds managed, but |
| Unknown speaker (K77PSUNK) |
[179] Once again there is n not necessarily er anybody to write out a cheque for ... one million pounds o or whatever. [180] Most of these liabilities er inevitably aren't necessarily for pensions [...] payments they're back to the [...] active members, some of whom won't make any actual claim on this possibly for thirty years time, so there could well be a er a a scheme which is arrived at which is a pay as you go, which isn't any great liability o on, on any one pension scheme at any particular moment in time. |
| (PS5PF) |
[181] I thought you were trying to actually pin responsibility not to organisations, but to people that here was Mrs Thatchers philosophy really working and market was gonna discipline [...] pay out their own pockets. [182] Now if I'm the fund manager and you've gotta deferred member, nobody's gonna waste thirty years for me to pay up their pension, I won't be here probably in thirty years time er so they want the money up front. [183] They don't want me paying d you know like their pension deferred, so if you're serious about the fu pension fund managers paying, we're talking y you know earlier you said four hundred and eighty million whatever it is [...] lost, they're paying a third, pension fund managers have got to come up with that sort of sum. [184] Now I just don't think that's rea realistic, that's different from saying you may have a bail system, cos that's what I thought you were suggesting and for people to b come into the ring as pension fund managers, they would have to perhaps to put up securities of a million pounds each to o operate in this area and that if they behave badly, if funds went missing, if it was proved they were negligent, they would lose their million pounds bail, just as people lose bail when they don't turn up to court. [185] Now that seems to me, that might induce er slightly might do, but I could I I think that,wha I what I thought you were saying was different from what you ended up saying and I'm not sure which [...] |
| Unknown speaker (K77PSUNK) |
[186] I think the thing that sort of has really bugged me righ right from the start of this thing was that when this when the Financial Services Act was put before Parliament, everybody was told the Gower Report and everything said pensions are the same as assets, all your assets and must be protected as such. [187] Th th the House was told that and that was what the situation. [188] It then went into the City to set up their own self-regulatory [...] and we in fact went to see Mr Redwood and he was quite he was very quite blunt about it, he said well, they considered it when they were sid considering the investors compensation scheme, but the sum involved in pensions are so great, that they could not afford to underwrite a pension er a compensation fund for pensions, so therefore there's a pension fund for ... for private investment, but not a pension fund er compensation fund for, for occupation. [189] Now how ... how you work it on your scheme or whatever scheme comes up, it just seems to me that if you are going to have self-regulatory body, there's got to be responsibility for it and how you impose that responsibility, could I'm sure be in all sorts of different ways. |
| (PS5PF) |
[190] We've got to find, we're taking up all very well, er Jane? |
| Jane (PS5PM) |
[191] Er it's really is to follow on from this debate that we're having about what should happen if a shortfall occurs, erm and ... we've heard, I've been listening carefully to your views about er the way in which you agree with the Good Committee that a shortfall is an employers debt, the employers responsibility to meet that shortfall and we've been talking about that shortfall should be met, but the Good Committee also concluded that er pensioners ... should not be regarded as preferential creditors erm and you also agreed with that. [192] Could you explain for the record what your reasons were for arriving at that conclusion? |
| (PS5PF) |
[193] Could you take that [...] |
| Ken (PS5PG) |
[194] I think that [...] the I think the question of that really, I'm trying to, I can't quite frankly, I think that's Mike Kirkham in this who particularly investigated that one, but I think that basically what we were really saying was on what I was saying earlier on is that if you make it too difficult for the employers, you're going to take away the incentive to run a final salary scheme, you know that ... you know I think basically final salary pension schemes are good for the employee, you know, I think that was what our fundamental thinking of on that was. |
| Jane (PS5PM) |
[195] Do you think this er really goes back to the fundamental issue which the Good Committee didn't really address which was the issue of ownership of the pension funds and assets and that whilst pensioners and to an extent employers these days regard the pension fund as deferred pay and pensions payments as deferred pay, the ownership of those funds is still left ... erm ... neither still er an argument about wh wh who owns the funds and er a lot of this follows on from that. |
| Ken (PS5PG) |
[196] Yes, well I think that's why you that's why I keep on trying to come back to the regulatory system, because what you really in fundamental form a pension is a contract between an employer and an individual, you know ... you pay me so much money and when you get to a certain age I will pay you. [197] That's the fundamental as far as I see it of a pension fund. [198] The problem I think comes when you go when you become insolvent, you know, and I think that's and so therefore unless we're going to come up with some system where we do insure our pensions as we do our home, then you, you, you're still back to the basic contract between a company and an individual. [199] I think that's the ... the real sort of problem of trying to say the assets belong to the for the pensioner, you know I think there, there are great difficulties unless you're gonna rule out final salary pension schemes. |
| (PS5PF) |
[200] Great. [201] Ken I calculated you've actually given us nine major points in your submission. [202] Now are there from our questions, issues which we've missed that you just want to touch on before we conclude? |
| Unknown speaker (K77PSUNK) |
[203] Well I think ... er ... well we've gotta er I think we've gotta few points, there's, there's one on stock lending which we think needs to be looked at. [204] Do you wanna make a couple of comments [...] |
| Unknown speaker (K77PSUNK) |
[205] Yes. |
| Unknown speaker (K77PSUNK) |
[206] You make some comments [...] |
| Unknown speaker (K77PSUNK) |
[207] Er Good er concludes that er stock lending is er no different from other aspects of er ... the market in general er as I understand it, stock lending as far as pension funds concerned, usually works with pension fund has this collection of stocks and shares. [208] Er financial institution is sure to meet its position, it comes to the pension fund says can you loan me th this stock in the return of which I will er pay you the equivalent sum of money plus some interest. [209] That sounds all very well and good, the way as my reading of the at least one of the writs is concerned is that er Maxwell operated this in entirely the reverse. [210] He er wasn't the lender, he was the borrower, he went to the bank, says can I borrow this collection of treasury bonds, which he has to put pension fund assets to stock, so he's immediately er going against his duty as a trustee cos it's costing the pension fund money this er ... er ... excess of five to ten per cent. [211] Secondly he owes bonds were immediately sold to another part of the same part of the organisation again at a discount, so that cost the pension funds even more money, and to the final injury the payment of that cash for the er treasury bonds went to accounts which were not the property of the pension funds at all. [212] Hence we are four hundred and eighty million and whatever is out of pocket. [213] Er we would say that as, that as far as pension funds are concerned, stock lending in that way should be prohibited ... and the puerilely ca carrying on that er is that er it should be any account for a pension fund should carry the names of pension funds and any transactions involved with pension fund money whether it should be a duty of financial institutions to make sure that any account they were paying money into was a pension fund account. |
| Unknown speaker (K77PSUNK) |
[214] [...] if I may say so is a key point isn't it that a lot of the transactions you've discussed were off-market transactions, they were unusual transactions and the financial institutions that were carrying out those transactions whether they were acting as banker or acting as broker, they would have had knowledge that those transactions were not normal market transactions. [215] So if the law was clear that in those circumstances they should have been on notice and should have therefore watched where the money was going, there wouldn't have been a problem and are we not saying that legitimate stock lending, which I think is what Good is abou is suggesting, if carried on properly on market, would be all right, but if it immediately goes off market into the back doors and back rooms and people can't see what's going on and the financial institutions take part in that, then they are doing something that un undoubtedly is probably going to cause loss to pension funds and shouldn't there be a clear law which makes them liable in those circumstances. |
| (PS5PF) |
[216] [...] you were saying it was wrong anyway weren't you? |
| Ken (PS5PG) |
[217] Oh, I'd say it is w wrong anyway in that er I say it's the it's early er on it in the report Good defines what he determines a trustees duty and as I said to a sort of effectively ought enter into a tr transaction which immediately cost effecting kind of money rather than making money for the pension fund then it is against that duty in the first place, but it's to it should however be ma made explicit that it is against that duty [...] saying stock lending may be okay for a pension fund, but not stock lending where the er pension fund is acting as the borrower rather than the lender. |
| (PS5PF) |
[218] Right, Ken any other points? |
| Ken (PS5PG) |
[219] Er can I ... I started to comment on about the er, er bank accounts which are you know er my the reaction that I saw was [...] all round the table and I think we would go further that er any company handling pension funds should carry pensions somewhere in their names and all on all their paperwork etcetera so that everybody's totally clear that they are dealing with pension funds and er to agree with a comment that you made in one of your earlier reports that er designation of ownership of shares of pension funds should be clearly er marked on those shares er that also would of er at least alerted these financial institutions, as once again that they were handling stocks belonging to pension fund and they still have ignored it in the case that er they did, but er er they would ha not had the excuse that er apparently some of them have made that er they were not aware that these were pension funds assets. |
| (PS5PF) |
[220] I think [...] still claiming well it's not that I didn't know, but anyway [laughing] er Ken [] |
| Ken (PS5PG) |
[221] Er well we did, we were gonna raise a point on that, the clash of the regulatory rules and the [...] duty of under Trust Law, you know, and I, I think there, there was a comment tha that I picked up with Professor Gower you know in his report which I think, where he said the Government obviously have greater confidence than I in reliance on pristine Trust Law in relation to modern commercial developments such as unit trusts and occupational pension schemes, which its founding fathers never contemplated. [222] Now there was nothing in Good really that I think addressed this mismatch between those two types of law. [223] Now I think that, that Good did say oh well, there is a Law Commission Report expected, but I think that you know that Good should address somewhere tha that problem of Trust Law and regulationship and then I did in fact on going through the report and er you know and also your own reports erm there's the one about designation of assets you know, which I think was a very good recommendation of yours. [224] I think the actuarial responsibilities and the wider role of actuaries was important. [225] I think the inde independent corroboration for actuaries was another important factor, custody confirmation by the auditors, veto of transfer of assets, independent auditors for pension funds, independent custodian arrangements, in-house investment management, you made some comments, co-ordination or the various regulators, co-ordination of the professional advisors, establishment of a pension tribunal, you know, now as far as I was concerned or on my sort of looking through it, those were all recommendations that, that you've made over your two years and I couldn't really find any response to those in Good and I think that's a you know we, we personally found that disappointing. |
| (PS5PF) |
[226] Also I mean, we take your point and we've made it before Ken that there's a real danger of asking for a report from someone like Professor Gower and then cherry picking it, instead of actually taking the whole, because it does actually add together in some sort of coherence erm and had Professor Gower's report been accepted in its entirety, we may not have been had the pleasure of having you back again today, but thank you very much er all three of you for coming. |
| Unknown speaker (K77PSUNK) |
[227] Thank you very much. |
| Unknown speaker (K77PSUNK) |
[228] I would suggest is the timescale between these things happening and it getting to the regulator and being digested. [229] In the present |
| (PS5PF) |
[230] [...] didn't understand for two years I mean [...] told the regulator |
| Unknown speaker (K77PSUNK) |
[231] Yes, yes er ... whereas if there were independent trustees responsible to the regulator and they were properly trained, they would I suggest be able to smell out very quickly an malpractice and would have a group straight to the regulator, if only to call a stop for someone to have a look at it. |
| Jimmy (PS5PH) |
[232] [...] nothing recommended to Goodey in that particular cause is of any good. |
| Unknown speaker (K77PSUNK) |
[233] I don't think so. |
| (PS5PF) |
[234] Erm er Imperial? |
| Unknown speaker (K77PSUNK) |
[235] I M P A Cs belief is that er if you get the trustee balance right, that's the first place where the decision ought to be made, but there should be a fall back position which Good has given, which they they trustees could go to the regulator in the case of er not being able to solve things, but our feeling very much on surplus is that the money is there first for to pay pensions and until pensions are paid up to Inland Revenue levels whatever they are, then no money should go back to the company. [236] The question of taking pension holidays in between out of surplus is a sort of mid midway position, but er very definitely we feel strongly that money should not go back to the company. [237] We have suffered from the same thing as the other two er Abalance have said today of money being used from our surplus to provide for redundancy and erm it's been exacerbated by money being available from the people who were made, made redundant going to the company and swelling their balance sheets while all the cost side of it comes out of the pension fund and that has caused a lot of ill-feeling particularly from the older pensioners who have seen years of inflation, when their pensions were not made up to the same extent. [238] In the old days when there was a possibility of ... of erm ad hoc payments made er that sort of thing was taken care of, since the takeover of the company that hasn't happened to the same extent, so there's a very strong feeling with the older pay er pensioners that they paid money into a pension scheme which now shows a surplus, but other people are benefiting from it. |
| (PS5PF) |
[239] We need [...] we've got lots more questions to ask you. [240] Peter? |
| Peter (PS5PK) |
[241] Erm Mrs Appleby you mentioned briefly earlier the role of the regulator. [242] How do you see the regulator doing his job with a hundred and twenty-eight thousand schemes to, to monitor? |
| Appleby (PS5PN) |
[243] Great difficulty I would imagine. |
| Unknown speaker (K77PSUNK) | [laugh] |
| Appleby (PS5PN) |
[244] erm er ... well we welcome the erm er the proposal that there should be a regulator. [245] Somebody er to whom the erm ... er matters could be referred to er whom er could remove trustees er who are er not acting in er the best interests er of the fund er to whom er I understand that the erm beneficiaries could er appeal if they felt that their fund was being erm used i in the wrong way, which is something that we haven't got at the moment. [246] Erm I mean just going very, very briefly back to the question that you asked erm about this how would you stop what's happen happening is by having, we would have thought a pensioner trustee, because even the question has been asked how did it get through the union trustees, and the answer that most of them are employed and they are looking over their shoulder because jobs are going, redundancies are being made, you've got a pensioner employee er a pensioner trustee on there, and they're not looking over their shoulder for their job, they are going to do the job of a trustee and watch the fund and they would then be able to go to the regulator if they saw something that was amiss, but if somebody is employed by the firm might be very worried about doing because they're more bothered about keeping their job. |
| (PS5PF) |
[247] Though, the case you're putting that the, the pensioner trustee er ship is more powerful than you originally put, cos up to now you've been put it in grounds that it's the trust should be repr representative of it |
| Appleby (PS5PN) |
[248] Yes |
| (PS5PF) |
[249] Now you're saying er rather well, that in fact that person or persons could be more independent |
| Appleby (PS5PN) |
[250] Yes. |
| (PS5PF) |
[251] because they're actually not worried about being sacked |
| Appleby (PS5PN) |
[252] Yes. |
| (PS5PF) |
[253] either erm because redundancies are coming or as Imperial Trustees found, they were just got ridden of as a way of moving them off the trust. [254] Yeah, very good. |
| Unknown speaker (K77PSUNK) | [...] |
| Unknown speaker (K77PSUNK) |
[255] [...] large carrots being dangled in front of them. |
| Unknown speaker (K77PSUNK) |
[256] I mean we ought to say in our case [...] approved our the proposals of the company, they raise no objections in which only the [...] who raised objections, the employees didn't and in the High Court case we've just said, how can an employee be independent, when he depends upon his employer for his future work. |
| (PS5PF) |
[257] So really what you're saying is that if we're looking at trip wires to stop things happening, there's a power a really powerful case for a pensioner trustee, but you're looking for whistle blowers. |
| Unknown speaker (K77PSUNK) |
[258] Yes. |
| (PS5PF) |
[259] There's also a powerful case for having pensioner trustees that they will ... so there's far less chance of erm people twisting their arm, although they could have the carrot dangled in front of them. |
| Unknown speaker (K77PSUNK) |
[260] [...] that's [...] |
| (PS5PF) |
[261] But that's the problem we all face isn't it. |
| Unknown speaker (K77PSUNK) |
[262] And we're also saying that if you have a new pensions act, the work of the regulator will be much easier. |
| (PS5PF) |
[263] Why? |
| Unknown speaker (K77PSUNK) |
[264] You won't keep have to be going off to court to find out what is the law at that moment of time. |
| Unknown speaker (K77PSUNK) | [laugh] |
| Unknown speaker (K77PSUNK) |
[265] Touche. |
| Unknown speaker (K77PSUNK) |
[266] Could I, could I turn to one of the major contributors of erm of pension fund surpluses er and that is the plight of the deferred pensioner. [267] The person who leaves the company's employment er could I ask you, each of you in turn briefly for some comments about how you feel deferred pension rights can best be preserved, if they can be preserved at all er adequately. |
| Unknown speaker (K77PSUNK) |
[268] I suppose in one way as a pensioner I shall say what happens about you know I'm not worried about if you're a pensioner because every time one ... someone becomes a deferred pensioner, our surplus goes up |
| Unknown speaker (K77PSUNK) |
[269] Yes. |
| Unknown speaker (K77PSUNK) |
[270] because the liability is extinguished. |
| Unknown speaker (K77PSUNK) |
[271] Yes. |
| Unknown speaker (K77PSUNK) |
[272] I cannot see why the actuary having [...] a liability for an employee, if that employee becomes a deferred pensioner that the actuary having [...] a liability for the fund |
| (PS5PF) |
[273] But don't [...] |
| Unknown speaker (K77PSUNK) |
[274] Yes they are |
| (PS5PF) |
[275] Can I, you the example you did before to other people was that if you worked you know your normal scheme forty years and if you worked for ten of those forty years you become deferred. [276] Do you have a quarter of the right you would expect if you done the forty years. [277] Is that the sort of way one should underwrite the position as a deferred pensioner |
| Unknown speaker (K77PSUNK) |
[278] Yes ... Yes |
| Unknown speaker (K77PSUNK) |
[279] What I think my colleague is saying is that when the actuary is assessing the commitments of the funds, he is looking at the anticipated increased earnings until the person retires and I think when the calculation is made for somebody who is er a deferred pensioner of leaving er a pension fund to take his money elsewhere a similar calculation or the same calculation should be used, the one that the actuary last used in, in looking forward and saying what the commitments are. [280] That way the fi the surpluses left behind would be less, but the person transferring and we're going to see more and more of this today er takes a fair amount of money with him. |
| Unknown speaker (K77PSUNK) |
[281] But of course if salaries go up evenly throughout a forty year lifespan and the Chairman is given a forty year lifespan which is quite or pension lifespan which is quite a suitable one, if salaries go up and someone leaves their company every ten years, then the first three departures are obviously going to be at much lower salary levels and it's not going to be satisfactory the first three departures are just index linked to inflation, there is the problem of how does one index link them towards the final salary. [282] Otherwise that person having worked for four different employers during the forty years will not retire on two-thirds of final salary, but will retire on two-thirds er only perhaps the last employer for the last ten years. |
| Unknown speaker (K77PSUNK) |
[283] It isn't a question Chairman but ... it's easy to ask as it seems,we you said a ten year, but what about a thirty service of deferred pension, that could be an entirely different situation, because that is inflation put under the Post Office and B T ones it's inflation proofed every year, so for the ten years, if he's if he's got another ten years before he draws his pension at sixty, he would have that ... er deferred pension inflation proofed every year. [284] So a thirty year old service might be entirely different than a person with ten years service deferring his pension. |
| Unknown speaker (K77PSUNK) |
[285] Yes, the reason why we picked a forty year lifespan of work or working life er with four tens was because Professor Good himself told us that er on their research the common employment pattern today is in fact four employers over the working life and of course that is very different from the experience of many pensioners who are drawing today from their pension funds, because many of them were long-term, long-service employees throughout their lives with one employer. |
| (PS5PF) |
[286] But you were saying weren't you [...] you described this world which lots of us now have lost and somebody leaving school starting a job and retiring from that job, so the que the question David's asked you is more important isn't it because deferred pensions are probably gonna become more, not less common. |
| Appleby (PS5PN) |
[287] They are becoming a lot more common, yes when you look in the report and accounts there are far, far more of these deferred pensioners there than er than ever used to exist and it's something which I must admit we haven't given a lot of thought to yet, but it's something because it's growing that we will have to address erm in our federation, we will have to address that problem. |
| Unknown speaker (K77PSUNK) |
[288] And the danger presumably is that the surpluses we were having our discussion and debate about earlier on, those surpluses that and I do understand why you feel the pensioners should benefit from their surplus, but it the reality is that the employers and possibly the pensioners are currently arguing amongst themselves for the benefit of those surpluses, but in fact one of the significant contributors is often the deferred pensioners |
| Appleby (PS5PN) |
[289] Yes. |
| Unknown speaker (K77PSUNK) |
[290] and the deferred pensioners are not actually getting in on the debate, they're not often represented on the trustees in fact. |
| Appleby (PS5PN) |
[291] No, they're n they're not represented, erm but I think we would b you know, I mean I think they, they should get ... be considered certainly erm dependent upon the length of service which they have put in it's certainly something for the future. |
| Adams (PS5PP) |
[292] I was gonna make a point about the one you raised the practicalities of the situation. [293] I don't know enough actuarial work to be able to [...] and what settlements they should receive, but our own experience is that it's hard enough to round up pensioners to form an association ... and we embody deferred pensioners and they're even harder. [294] We just don't seem to be able to track them down or attract them in quite the same way, so there is a massive practical problem if you want them to have a voice in how things are done, there's no doubt about that. |
| Unknown speaker (K77PSUNK) |
[295] We have that same problem, but er it can be solved quite easily, the employer knows the addresses of pensioners, there's nothing to stop pensioner association [...] being formed. [296] We are unable to get addresses of our [...] so it's word of mouth how we, how we er include, but why should not the employer send to all pensioners and deferred pensioners notices about the associations. |
| Unknown speaker (K77PSUNK) |
[297] Could I ask you very quickly on that note, do you think the answer is to try and set up a voting mechanism amongst the deferred pensioners, or is the answer that one should actually appoint a professional independent trustee, specifically with the duties of looking after the deferred pensioners in the debates that you have identified often take place? |
| Unknown speaker (K77PSUNK) |
[298] We were told that that is impossible to take a vote because with big organisations like B T and the Post Office one example was to sell off a Girobank ... there are eight thousand people, but they were just told you can either defer your pension, leave it with the Post Office Pension Fund, transfer it to the Leicester and Alliance who bought Girobank, or take your money out and take up a personal pension scheme. [299] They were given no votes or erm opportunities and of course the same thing will happen ... if and when the Parcelforce is sold off from the Post Office er there's twenty thousand people there. [300] I doubt very much whether they'll be given any opportunity to voice what happens to them when they're transferred or what happens to the fund. [301] They'll be given the same three options I should imagine. |
| Unknown speaker (K77PSUNK) |
[302] So you would feel probably the best mechanism would be the appointment of somebody who is given that responsibility and solely that responsibility of reporting and looking after the interest of the deferred pensioners. |
| Adams (PS5PP) |
[303] Yes. |
| Unknown speaker (K77PSUNK) |
[304] You would agree with that? |
| Adams (PS5PP) |
[305] Yes I would agree, would favour that because I think it would force another issue, if, if the independent rule too often against the deferred pensioners I suspect they'd organise themselves. [306] You see in British Steel we ... we have seventy thousand deferred pensioners and er it is a group of people that I feel extremely sorry for, because er in nineteen eighty-six British Steel introduced into their pension scheme while it was still in the public sector, retirement at sixty where with a pension credit spaced on length of service, so if you had thirty-five years service in, you could retire at sixty as if you were sixty-five ... and there was nothing done at all for deferred pensioners and in certainly our submission to British Steel for seeking improvements, we ... we asked that they er they look at deferred pensioner with a view to paying their pensions at sixty, recognising that it was a very high-class plane that might have to be er achieved in stages. [307] We also recognise that there is a tremendous problem for deferred pensioners in achieving reasonable transfer values er er er it's a massive problem for them, even where they could find perhaps something to do with that money and a scheme that would do them better, not always, because there, there are people that give bad advice, but there are some that go into it very thoroughly and when it comes down to the bit the transfer value they receive makes it im practically impossible for them to do it. |
| Unknown speaker (K77PSUNK) |
[308] But we've got |
| Adams (PS5PP) |
[309] So we would like er to support what you're saying. |
| (PS5PF) |
[310] We've got six more minutes, David? |
| David (PS5PJ) |
[311] Er shall I combine my two found questions which the Committee would like to put to you ... please and, and that is there are two points that really do come out of Maxwell very much, but I think you've had some experience. [312] One is bulk transfers and the second is safeguarding of assets. [313] Er in the context of bulk transfers would you like to comment on the Good Committees conclusions on the bulk transfers of members between schemes and how they operate, and do you think that er there is widespread abuse or do you think er on balance your experience has been that where bulk transfers have taken place, they have taken place responsibly, but I would in that context ask you to comment whether there has been an unreasonable time delay where you have experienced bank bulk transfers between the transfer actually taking place in terms of employees being transferred from an undertaking to another undertaking and the actual transfer of their pension funds. [314] What happened in Maxwell's case was that enormous delays took place between the employees being transferred and the actual transfer of their pension. [315] Er and could you also comment perhaps on the safeguarding of assets and any er points you would like to make in relation to the present five per cent limit on self investment. [316] The er issue of stock lending if you heard the Maxwell pensions earlier on comment on stock lending, whether you think pension funds should do that er in the case of Maxwell as you're probably aware a lot of the stock lending was off market rather than on the market and perhaps you could also comment on the use of independent custodians in terms of the custody of investment. [317] Er I'm sorry to throw all those at you very quickly, but they are er obviously five minutes left and |
| (PS5PF) |
[318] B T th the question about bulk transfers. |
| Adams (PS5PP) | [...] |
| (PS5PF) |
[319] Sorry no not, British Steel, apologies. |
| Adams (PS5PP) |
[320] Well, I, I'd say one thing by illustration from our own situation er we were transferring bulk and I felt that was singularly unfair because the members were given a choice. [321] The existing members were told you can either join the new scheme with its improved benefits, reduced contributions, with certain rules that were operating in favour of the employer that were against them, but it was a balancing act, or if you don't want that you can stay with the old scheme and continue with exactly the same terms. [322] The third choice was the obvious one you can take your money and get out. [323] Er now we, the pensioners, had no choice, we were picked up and put into the new scheme having paid our contributions appropriately to the old scheme rules which were the higher contributions, but only to pick up the new scheme rules that were against our interest. [324] Now I can see no good reason for that being allowable, I'm not quite sure how you stop it, but I think it it's, it's a basic problem with bulk transfer, the individuals do not have a say. |
| (PS5PF) |
[325] Very good. [326] B T? |
| Unknown speaker (K77PSUNK) |
[327] Well I've already said about the bulk transfer Giro, I quite honestly don't know whether any other option can be given to people, they've given the option to defer their pension with the Post or ... their ... present scheme, transferred it [...] new company scheme or take out er the money and take out a personal pension fund er I suppose there might be a possibility of offering people after a certain number ... past a certain number of years the opportunity to remain within the fund they're in ... but er the contribution and who, who makes a contribution may be a problem, but that's the only other option I can see. |
| David (PS5PJ) |
[328] We don't believe that pensioners ought to be forcibly transferred, they should be given the choice. |
| (PS5PF) |
[329] And if that was in the Statute, there would could stop the [...] |
| David (PS5PJ) |
[330] Indeed, yes. |
| (PS5PF) |
[331] Can we then go back to the other one on safeguarding. |
| Adams (PS5PP) |
[332] Very difficult indeed er ... hearing the Maxwell people talking earlier I think er again and made that point very clear. [333] I think we can point to some of the things that can happen that worry us. [334] Er if you stand back from our situation and see it that er the contribution rate for employees was reduced from sixty five per cent for er a company i it became a balance of cost and that works out now at five per cent, so the total inputs of the scheme is ten per cent of earnings and that was down from eighteen per cent . [335] Er without being an actuary I say to myself that's a pretty magical thing you've done ... and then it causes you to start looking at the monetary background of all of that an and again I I'm, I'm speaking here largely on what actuarial advice we are beginning to receive. [336] I think the conclusion coming out of that is that as a result of what I've described and a few other things as well, not least the fact that the company has now capped its contribution rate to no more than ten per cent . [337] When it gets to ten, the members stay at five when the company gets to ten, the damage is picked up by either reducing members benefits or restricted index linking. [338] Now with a hundred and eighty thousand of pensioners and forty thousand scheme members and all of the trustees currently made up of employees and scheme members, it's pretty obvious where any correction of loss of funding is gonna come from isn't it. [339] There can only be one target, it's the pensioners. [340] So er ... when schemes by the good service of actuaries can be re-written in such [laughing] extreme terms I begin [] to worry about it and I think it needs an input for more than one direction on the actuarial fund ... in our case the trustees saw fit not to use actuaries to get away [...] |
| David (PS5PJ) |
[341] But on actual safeguarding of assets, erm do you for instance with separate custodians, do you have any views about the custody of your schemes assets? |
| Adams (PS5PP) |
[342] Not, no, I, I've really not given thought to that subject. |
| (PS5PF) |
[343] B T, anything? |
| Unknown speaker (K77PSUNK) |
[344] Well I was impressed by the erm ... the Maxwell erm peoples comments that the funds should be clearly marked pension fund accounts and ... and that er there would be regulations that this money couldn't be transferred without some [laughing] the regulator again [] or somebody making er agreeing to the transaction, but I erm fully understand that would be erm very time-consuming, but er that's the only way I can see that, that the fund should be clearly marked that they're pension fund and shouldn't be transferred without some ... some authority agreeing to it. |
| David (PS5PJ) |
[345] We have separate custodians, the Bank of Scotland are doing this and er I think er having a separate organisation outside is er an important first step, but you've then got to tie up who gives them instructions and that obviously needs careful thought, needs to be done through the trustees. |
| Unknown speaker (K77PSUNK) |
[346] [...] just one question that I wasn't able to put on the Committee's behalf, but I think it is something that we would be very grateful for a short written comment and that is the information that your members, that the members of the pension funds actually er rather than your annual members as well in that context actually receive annually and whether you feel that is satisfactory. |
| David (PS5PJ) |
[347] [...] We can send you that. |
| Unknown speaker (K77PSUNK) |
[348] Yes, I think also how you feel it could be improved would be very relevant and how you would feel in the context of a pensioners meeting, an annual meeting like shareholders have in companies and how you if you have any views on how such a meeting might be managed in relation to the deferred pensioners interests, the existing pensioners interests, the employees interest and obviously the company's interest being adequately reflected at such a meeting ... but I think we would welcome that aspect. |
| (PS5PF) |
[349] And also efforts you've made to organise yourself as groups and whether you've been encouraged or not encouraged by the owners of the scheme. |
| Unknown speaker (K77PSUNK) |
[350] Thank you. |
| (PS5PF) |
[351] That would be very helpful. [352] Can I thank you for coming today,th th the media often has lots of comments from the chattering classes, saying unhealthy, British democracies, cos they only concentrate on this place. [353] I, I'm not gonna comment whether I think that's right or not, but anyone viewing your contribution today would know that outside there in the big institutions of our society democracy is very healthy. [354] Thank you very much for coming. |
| Unknown speaker (K77PSUNK) |
[355] Thank you. |
| Unknown speaker (K77PSUNK) |
[356] Thank you. |
| Unknown speaker (K77PSUNK) |
[357] We thank you. |