Publications

Bulletin 14 Winter 1997/1998

Same Sex Partners

A recently reported preliminary ruling in the European Court of Justice concerning same sex partners' rights to employment perks could have implications for pension schemes.

The Advocate General's opinion in a case involving a lesbian employee (Grant v South West Trains) was that the company had sexually discriminated against her by denying her partner perks (a rail pass) which would have been made available to an unmarried partner of the opposite sex.

The relevance for pension schemes is that it would appear that the arguments used could apply equally to dependents' pensions paid in lieu of widows' pensions. There is an increasing trend for trustees to be look sympathetically on 'non spouse partners' to them as equivalent to widows or widowers in the event of a member's death and to award a dependent's pension. Whilst such benefits generally discretionary, trustees may not wish to be forced to do the same in respect of same-sex relationships and may award benefits only in accordance with scheme rules - generally restricted to legal spouses.

The Advocate General's opinion is not binding. It is subject to confirmation by the court, although such opinions are only rarely overturned.

Trustee Professionalism

At the Pensions Management/PMI Awards presentation at the end of October, Pensions Minister John Denham spoke of the need for professionalism by trustees to receive proper training. We have long argued that the ever-increasing complexity of pension regulation requires more attention than can be devoted by four-day-a-year lay trustees, however enthusiastic. The presence of a professional independent on their team can ensure that better quality decisions are taken.

An interesting contrast to the UK's stance on member-nominated trustees is that taken by the Isle of Man whose Insurance and Pensions Authority has recently rejected the MNT route with the comment "the idea in the UK was to encourage companies to do better in their scheme management, but we are not sure that people coming on to trustee boards with no experience would achieve that".

Congratulations

We were delighted when Rank Xerox Pensions, a longstanding client of BESTrustees, was awarded the coveted Pensions Management Large Scheme Award, with what one of the judges, Alan Herbert, called "a splendid entry".

Rank Xerox aims to be at the forefront of best pensions practice and, as Alan Herbert said: "Everything about its entry for the large scheme award, from the documents accompanying the entry explaining its pensions policy to examples of communications with its members, fully lived up to this objective".

Our congratulations go to Tony Phillips and all the team at High Wycombe.

New OPRA Guide

"A copy of the Occupational Pensions Board's booklet, entitled Pension Trust Principles, has been made available to each of the Trustees".

Just as we have become used to seeing this sentence in all our pension scheme reports, it is now no longer required. This is not because it is not important for trustees to absorb correct principles of operation, but because the Occupational Pensions Board (OPB) no longer exists!

The OPB's successor, the Occupational Pensions Regulatory Authority (OPRA), has produced its own guide "A guide for Pension Scheme Trustees". This authoritative and informative guide is certainly required reading for all trustees, but it is unnecessary to state that they have all had a copy in the Annual Report!

Moreover, the booklet is free and copies can be obtained from OPRA at its Brighton headquarters, tel: 01273 627600.

Asian Markets in Turmoil

What caused the Asian crisis?

Structurally weak banking/finance systems
Excessive credit growth
Over-exposure to real estate
Weakening export competitiveness

The countries of South East Asia have expanded enormously over the past decade with annual growth rates often approaching 10%. Banking industries have grown rich on easy pickings, but have become ever more exposed to geared real estate developments. In countries where corruption is endemic, some of this investment has been squandered or mis-managed. As a leading global strategist has commented: "Having high savings and investment rates are not fine if they are wasted on golf course capitalism and do not generate exports and other productive returns".

How serious is it?

Growth rates have been revised downwards but, with the exception of Thailand, will remain positive
Certain prestige projects will need to be postponed or cancelled
Further collapses are to be expected in the financial sector
China should be unaffected

Projections of annual growth have already been reduced and further downgradings are to be expected. But these should be kept in perspective - long-term growth rates of 5% may be disappointing compared to the previously expected 7%, but they are still good in a global context. Of more concern short term is that growth in 1998 and 1999 may be restricted to as little as 1% or 2%, particularly in Thailand where it may be negative.

To quote another commentator: "The region can, and indeed will, emerge fitter and stronger from its problems -provided deregulation is speeded up, banks tighten their risk controls, excesses are corrected and companies start focusing more on shareholder returns".

China is of less concern as it reined in its economy two to three years ago and growth rates are now in a manageable 8%-10% range with strong currency reserves.

What will be the impact on world markets?

"Major markets will provide a safe haven" -the optimist
"It's their turn next" -the pessimist

As ever, the truth probably lies between the two. Of significance is the change in sentiment for world markets as a whole. Some may escape the Asian flu, but if Wall Street catches a cold, world markets will surely sneeze.