Delegates at this week’s TUC Pensions Conference will convene to map out the future strategy for workplace pension schemes.
The annual retirement conference, hosted by the U.K.’s Trades Union Congress, takes place in London on Tuesday, amid increasing investor scrutiny of how companies treat their staffs.
Speakers include the U.K. pensions minister Guy Opperman, TUC deputy general secretary Paul Nowak, and Luke Hildyard, policy lead for stewardship and corporate governance at the Pensions and Lifetime Savings Association (PLSA).
Hildyard told Institutional Investor that asset owners are increasingly interested in the culture of the companies in which they invest and consequently want to better define how to measure this.
“We have identified four key themes where we would like to see more reporting and concrete data relating to the composition, stability, skills/capabilities, and motivation levels of a company’s workforce,” Hildyard explained.
Workforce composition can be assessed through metrics that measure the number of agency staff, pay brackets, staff training, pay ratios between employees and management, and staff turnover.
Hildyard said investors are aware that poor scores on these metrics will directly impact the ability of a company to meet its financial goals. “A company which has high staff turnover suggests a demoralized workforce and poor people management, which might be a red flag for the company’s long-term performance,” he said. “We have done quite a bit on how pension funds engage with the human capital for the companies in which they invest.”
Discussions at the conference will also be closely linked to the problems being faced by defined benefit schemes and the ambitious proposals that the U.K.’s Royal Mail put forward for a hybrid retirement option, known as a collective defined contribution scheme.
CDC schemes pool members’ investments but model the asset allocation towards a longer-dated target return. Employers have more predictable payments than with defined benefit schemes because the amount they pay in never changes.
Last week, the U.K. Parliament’s Work and Pensions Select Committee heard evidence from members of the Communication Workers’ Union and representatives from Royal Mail about the postal company’s plans to switch to a collective DC scheme. For the Royal Mail’s scheme to be possible, it requires the U.K. government to make legislative changes. Such schemes are already in operation in Canada and the Netherlands, but do not yet exist in the U.K.
The idea has captured the interest of British trade unions, politicians, and employers, according to Steve Webb, the former pensions minister.
“The fact that you have an employer and a trade union taking it seriously, to the extent that the Royal Mail is writing to the postal workers explaining how it works, even before laws have been passed, is quite striking,” Webb told II. “The audience is likely to be most interested in is the collective DC stuff.”