Paul Watchman
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TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom ...

TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom

TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.

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Paul Watchman Presentation Transcript

  • 1. AGEING POPULATION, PENSION FUNDS AND SUSTAINABLE INVESTMENT: EMERGING PRESENT AND FUTURE LEGAL ISSUES Paul Q Watchman TBLI European Conference November 2011
  • 2. FAILING TO ACT IN THE BEST INTERESTS OF ALL BENEFICIARIES
    • Core Fiduciary Duty of Pension Fund Trustees to act in the best interests of all beneficiaries
    • Structural conflict between present and future contributors and beneficiaries
    • Exacerbated by ageing population
    • Need to preserve the pension fund and investment industry
    • Need for long-term investment sustainability
  • 3. STATE AND PUBLIC SECTOR PENSIONS
    • Status Pensions: MPs and Judges
    • Public Sector Non-status Pensions: NHS, Armed Forces, Police, Firemen, Teachers, Local Authority
    • Hybrid Pension Funds: USS
    • Funded by general taxation not pension pot
    • Auto-enrolement
  • 4. PRIVATE SECTOR PENSION FUNDS
    • Defined Benefits
    • Defined Contributions
    • Funded by pension or employer/employee contributions
    • Fiduciary Duties of Pension Fund Trustees
    • Asset Management
  • 5. RESPONSES TO PENSION CRISIS
    • Reduce benefits
    • Move to average earnings from final earnings
    • Increase contributions
    • Involuntary contributions
    • Increase age entitlement
    • End discrimination by forcing up retirement age for women
  • 6. Challenging the State and Public Sector
    • Limited remedies: judicial review and human rights complaints
    • Remedies very limited
    • Not based on merits but procedural default or irrational exercise of discretion
    • National Courts and Human Rights Courts regard their role as being very limited in respect of policy, particularly taxation and state benefits
  • 7. Recent human rights challenge to state pension cap
    • Kalkov v. Bulgaria [2011] ECHR 1806 unsuccessful European Court of Human Rights challenge by retired air force based on Articles 1 and 14 of the ECHR Protocol
    • Statutory pension cap on the amount of pension to be paid in public interest not unlawful deprivation of possessions
    • Pension cap exemption discrimination for status groups not unlawful
  • 8. RECENT LEGAL CHALLENGES TO PENSION MANAGEMENT AND REFORM
    • DWP Pensions Ombudsman (6.11. 2011) s successful apeal to Court of Appeal action re. irrational rejection of Pensions Ombudsman finding of maladministration and injustice in treatment of 125,000 misled occupational pension fund scheme members
    • Prudential Staff Pensions Ltd. v. The Prudential Company 2011: employer discretionary power not fiduciary duty but good faith duty implied but irrationality or perversity must be proved
  • 9. MORE RECENT LEGAL CHALLENGES
    • Trade Unions JR challenge switch from RPI to Consumer Prices Index (2011)as being unlawful (ultra vires) being beyond the statutory power of the Minister
    • Saving estimated by Lord Hutton for unfunded pension schemes £1.8B. By 2015-16 and effectively cutting unfunded pension scheme expenditure by an estimated 20% by 2060.
    • BA pensioners switch from RPI to CPI
  • 10. PENSION FUNDS US SHAREHOLDER DERIVATIVE ACTION
    • bp
    • RBS
    • Wells Fargo June 22 two US pension funds file derivative actions for $15B based on failure to address mortgage documentations issues properly
    • Goldman Sachs: CDOs and no duty far less fiduciary duty owed to clients
  • 11. PENSION FUNDS, PENSION FUND TRUSTEES AND US CLASS ACTIONS
    • Detroit General Retirement pension fund trustees sued by class action on behalf of over 9000 pension plan participants and beneficiaries for £100m losses (6.11.2011)
  • 12. PENSION FUNDS SUE ASSET MANAGERS
  • 13. PENSION FUND BENEFICIARIES SUE PENSION FUND TRUSTEES