Chairman Speaks at Pensions Trustees Circle - Oct 2009

Posted: 13 October 2009

Chairman of the Pensions Archive Trust, Alan Herbert, spoke to the Pensions Trustees Circle on the 6th July on the subject of 'Archiving the History of Pensions'.

A transcript of the speech can be viewed below;

I very much value the opportunity this afternoon of being able to tell you about the work of the Pensions Archive which The Pensions Archive Trust has been established to manage. 

The idea of creating a Pensions Archive came to me in 2001 after I had been to a reception and exhibition in Bristol to celebrate the 25th anniversary of a company which specialised in providing computerised pension administration systems.  Whilst reflecting on the progress that had been made in the systems and hardware used over those twenty–five years it caused me to think about the need to capture the story of the development of what was known as occupational pensions [now referred to as workplace pensions] before they disappeared in the form that we knew them. 

It is a remarkable story which forms part of the social history of this Country but was, I felt, in danger of being lost unless action was taken to preserve the records and papers recording the development of this type of pension provision. The possibility of locating the Archive in Bristol because of its connections with the Imperial Tobacco Pension Fund and its former pension manager the late George Ross Goobey, who had been so involved in introducing the cult of equity investment amongst pension funds, sprang to mind.

The occupational pensions’ movement has in the past been hailed by successive Governments as a great success story.  This story needed recording so that future generations could appreciate the part played by employers in retirement provision in this Country, assisted by legislation in the form of tax incentives, as well as the part played by many individuals, firms, companies, representational and professional bodies in advising and servicing the needs of occupational pension schemes. Even back in 2001 change in occupational pension provision was afoot with employers feeling the need to close final salary defined benefit schemes and switch to defined contribution schemes.  

As we all know this trend has continued and is gathering pace.  Last month we had Barclays Bank and William Morrisons both announcing the closure of their final salary pension schemes to future accrual and BP announcing the closure of its final salary scheme to new entrants.  

Significantly lessons can be learned from the past and it is important that the means of learning from both past successes and shortcomings are made available to future generations.  We hope in this way to give the public an opportunity of developing a greater understanding of pensions.

The archive project was announced in August 2002 after taking a number of soundings over the previous twelve months which established there was general support for the idea.  Towards the end of 2002 a Steering Group was established which held its first meeting in January 2003. This was attended by the late Alastair Ross Goobey (son of George) who subsequently became the Trust’s first President.

During 2003 discussions took place with several universities, Essex, Surrey and City University on a possible location for the Archive. Through these discussions a close relationship was established with City University and its Cass Business School which had become the home to The Pensions Institute under Professor David Blake, who now serves on the Advisory Committee of the Pensions Archive.  The possibility of constructing the Archive in part of City University’s library in Northampton Square was mooted.

In 2005 The Pensions Archive Trust was incorporated as a charitable company limited by guarantee and subsequently was registered as a charity. The Trust has a board of six directors which is supported by a President (Michael Pomery) and four Vice-Presidents (Chris Lewin, Tom Ross, Eddie Thomas and Jane Newell). We are very grateful to have such eminent pensions people supporting the work of the Trust.

An appeal was launched to meet the costs of establishing the archive and the running costs which was supported by the inaugural Ross Goobey lecture given by Alastair Ross Goobey at the Cass Business School on 27 October 2005 when he reflected on the changes which had taken place since his father, in the early 1950s, had introduced the cult of equity investment into the Imperial Tobacco Pension Fund.  He chose for the title
of his lecture “ Investment Practice – Full Circle?” 

We had been very honoured that the first papers to be donated to the Pensions Archive were those that George Ross Goobey had written to his Trustees in the 1950s encouraging them to sell gilts, debentures and preference shares and invest in equities which his son had recovered from rusty filing cabinets in the garage of his family home in Clevedon, Somerset. It is a fascinating selection of the papers written by him to his Trustees from 1953, through to 1956 and I would like to give you a little insight into them. It includes the draft of the speech he made to the Association of Superannuation Funds (the predecessor of the NAPF) at its Brighton Conference in 1956 on the subject of Pension Fund Investment.  It culminates with Notes by Sir James Grigg dated 23 August 1960 who was Chairman of the Trustees of the Imperial Tobacco Pension Fund.

In the notes Sir James says:  “There is no doubt that the balance of argument as we see it at present is in favour of Mr Ross Goobey’s thesis that the most fruitful policy for a large Pension Fund is to invest entirely in equities.  The basis of his case is that over a long period the value of money has fallen and is almost certain to continue to fall.  Investment entirely in equities therefore provides a long-term hedge against inflation and furnishes reserves against the uncompensated capital burdens thrown upon a Pension Fund every time there is a general increase in the remuneration of its members.  But his argument does not rest entirely on this anti-inflationary consideration.  He holds that with the progress of knowledge and invention, business earnings and therefore dividends are bound to grow, irrespective of what happens to the value of money, with the result of providing even more abundantly for increases in liabilities due to pay increases and somewhat more than possibly for enhanced benefits from time to time.

It is interesting to note in this connection that for nearly 200 years before the Kaiser’s War prices did not fluctuate by more than 30% from the average for the period and were not materially different at its end from what they had been at the beginning. Nevertheless this was a period of almost miraculous industrial growth due to invention, accumulation of capital, the earlier start we got over other countries and the superior enterprise of our traders and bankers.  At this point it is perhaps fair to mention that over the last decade Mr. Ross Goobey’s policy has been spectacularly successful but it is also fair to say that the circumstances have been running strongly in his favour.”   

The Chairman of the Trustees clearly was not going to heap praise on George Ross Goobey but was intent on giving a balanced view and I am not sure whether he would be making the same comments about our bankers today!

He went onto say:  “ ……. his investments are largely in the lesser known and smaller companies which might be expected to suffer more both in yield and market value in the event of a slump or gradually declining industrial activity.  On the other hand he has in the main confined his attention to securities where the dividend is abundantly covered by earnings and it must be borne in mind that earnings are in most cases are a better guide than dividends to the worth of ordinary shares to a holder.  Moreover, these more modest blooms are less likely to attract the attention of predatory or incompetent politicians than many of the blue chips.” [This was a reference to the threat at the time of nationalization of sectors of British industry]
He continued: “So far it can reasonably be maintained that Mr. Ross Goobey’s case has
been abundantly made out.  It remains to be seen if there is anything to be said on the other side.  The difficulty here is that we have to project ourselves into the future and further into the future than any of us is likely to see.”

Eighty years ago in 1929 when the Imperial Fund started the investment policy had been run on the then traditional lines. That is to say 86% was in Gilt-Edged securities, the main part of the balance in Debentures and Preference Stocks and the small remainder in Ordinary Stocks and Shares.

From 1949 the investment policy was gradually altered.  First of all no further Gilt-Edged securities were purchased.  Then in 1953 the decision was taken to invest new money wholly in Ordinary Stocks and Shares or in property.  From the beginning of 1955 the policy changed further by exchanging Gilt-Edged securities and other fixed interest securities which were on an uneconomic yield basis into first class industrial Ordinary shares.   George Ross Goobey’s aim was to earn a rate of interest on the Fund’s investments which exceeded the rate of interest of 4% guaranteed by the Company.  In January 1955 he reported that as a result of the change in investment policy the Fund had “tremendously benefited and the current rate of interest being earned on all investments now averages over 6%”.

But on that evening 50 years later in October 2005, his son Alastair who himself had developed a remarkable career in pension fund investment management as well as becoming a leader in the field of Corporate Governance made the following recommendation.

He said: “What would I recommend now? Despite everything I have said, for highly mature pension funds and following the dramatic recovery in equities since March 2003, I support the view that trustees should be moving more of their assets into bonds. This may not be the perfect time to do so, and I prefer conventional bonds to index-linked, but it is certainly a better time than two-and-a-half years ago. For trustees with a weak sponsor, this switch will be quite compelling. The equity risk premium has fallen back again, and there is no obvious reason to be a buyer of the market. My point this evening is that trustees should make these judgements and not simply ignore relative valuations.”

This indeed was a case of coming full circle!  It is sad that Alastair did not live to see how wise his advice had been.

I therefore found it interesting to read Norma Cohen’s article in the Financial Times of 15 June under the headline “Pensions pay the price for equity bias” in which some of the pension commentators were saying the reliance on equities was partly historical.  I suppose one’s age determines how you define “historical” but from what I have illustrated the historical base from which pension fund investment developed was from fixed interest.

In the late 1950s George Ross Goobey was regularly quoting to his Trustees from the Annual Reports of life offices to support the Imperial Fund’s move into equities as they reported on their successful diversification into ordinary shares.

In an article from The Times of 17 April 1957 under a heading “Historical Background” the Chairman of the National Mutual Life Assurance Society was quoting the success of their policy to invest in ordinary shares which at the previous year end had totalled 27% of their assets.  The subject had first been referred to at the annual general meeting held in 1922 by the then new chairman, one Mr. J M Keynes (later Lord Keynes). Their exposure to ordinary shares had grown from 3% in 1918 to 18% in 1927.  This compared with an average of 5% of life companies assets being invested in ordinary shares as shown in the Board of Trade returns for 1926.

The Ross Goobey papers can be studied in the Pensions Archive and copies can be obtained.

But turning back to the development of the Pensions Archive, we were extremely grateful to a number of founder sponsors who came forward to provide financial support.  Subsequently discussions took place with the City of London; London Metropolitan Archives (LMA).

In 2006 the board of The Pensions Archive Trust agreed outline proposals put forward by the LMA to work in partnership with them to preserve archives relating to pensions and to establish a centre of excellence at their existing facilities at 40 Northampton Road, London EC1R 0HB for the study of archival material, both historic and contemporary, covering the development of occupational and personal pension provision in the United Kingdom.

The LMA is managed and funded by the City of London and the Trust Funds the position of a full time archivist. The LMA is the second largest archive service in the UK (after the National Archives); all its collections are designated as being of national importance by the Museums, Libraries and Archives Council. It has 79km of existing collections which include the archives of many businesses (including railway companies), charities, associations, religious and cultural organisations as well as local authorities from the Metropolitan Board of Works in the nineteenth century to the Greater London Council and Inner London Education Authority in the twentieth.  These collections hold a large untapped source of information relating to pensions which will be added to the new material on pensions coming to the LMA through the Trust.

The LMA provides the infrastructure and management expertise to support the Pensions Archive through its professional archive and conservation knowledge and management and also in terms of an organisation which has collected, cared for and promoted archive collections since the nineteenth century.  

It has a long tradition of record keeping; the earliest document goes back to 1067 and is an early charter of William I.  The LMA has undertaken that archives deposited by, or on behalf of the Trust would be managed to the highest standards of professional care by archivists, conservators, librarians and interpretation professionals who work to national and international standards.

The archive collections are stored in the LMA strong rooms which are specially designed and run to national standards for archive storage from where they are produced for the public to see. They have been catalogued onto the LMA’s bespoke archive cataloguing software and are included in LMA’s general interpretation and outreach programmes.  LMA is regularly inspected by The National Archives and related professional bodies and has received excellent results over the last decade. 

The Trust and the LMA have set up a joint liaison committee with representation drawn from the two organisations which meets regularly to discuss the operation of the Pension Archive and the receipt of new collections.  The first major collection to be received was the archives of The National Association of Pension Funds.  We are shortly to take in the archives of the Society of Pension Consultants going back to its formation in 1958.  We already hold material from the Pensions Research Accountants Group, the Pensions Policy Institute and the Raising of Standards in Pensions Administration Group.   We also hold collections from Sue Ward, the freelance journalist and researcher who has written extensively on pensions and has close connections with the Trade Union movement together with tape recordings from the Northern Pensions Conference which she used to organize over a number of years.  We are due to take delivery shortly from Bryn Davies of Union Pension Services of his personal collection of pension booklets collected for his periodic guide “Pension Scheme Profiles” over the period 1993-2003 which will provide a very good record of scheme design at that time.

The two organisations feel that bringing together their respective experience in archiving and pensions has been of considerable benefit to the Pensions Archive.  They also feel their connections with the City of London are very relevant.  A large number of firms and companies connected with the City provide services to pension schemes and on the educational side the Lord Mayor is Chancellor of the City University.

It has turned out to be a very satisfactory arrangement and I would like to place on record our thanks to the LMA for their expertise and support in getting the Pensions Archive set up.  As mentioned the LMA already held the pension archives of some London based organizations. These included the former London County Council, its successor, the Greater London Council and the current London Pension Fund Authority.  These will form the basis of a collection around the Local Government Pension Scheme. In addition the pension records of the brewers, Whitbreads are held which will form the basis for a collection covering the brewing industry.  We hope to build collections appertaining to different industry groups.

Last year marked the centenary of the Old Age Pensions Act 1908 which introduced the State Pension from 1 January 1909.  However, the voluntary sponsorship of pension arrangements for employees by their employers, going back to the last part of the 19th century, should not be forgotten. 

It was in 1859 the civil service pension scheme, an unfunded scheme with a standard retirement age of 60, replaced earlier schemes for civil servants and became an influential model for occupational pension schemes for clerical and managerial staff in other sectors. 

In the 1860s the Victorian railway companies introduced pension arrangements for their staff.  In 1893 Reuters set up a pension scheme for its employees followed by W H Smith in 1894. The rules of the W.H. Smith & Sons Superannuation Fund, as it was then known, dated 1st May 1895 showed that employees joining at age 14 could earn a weekly pension of one shilling and nine and one half old pence for each one old penny contributed.  If the employee commenced contributing between age 39-40 years for every one old penny contributed a weekly pension of five and one half old pence was provided.  If the member died in service the members’ contributions were returned with 3% interest. The Fund was run by a Committee of Management.

Whilst far sighted employers had introduced pension schemes social reformers and trade unionists were campaigning for the introduction of a non-contributory state old age pension.  Before the passing of the Old Age Pensions Act, old people who were no longer able to work had to rely on charity.  For those unable to obtain support they had to turn to the workhouse in order to survive.

In December 1898 the Reverend Francis Stead, a Christian Socialist from Tyneside convened a meeting in Southwark at which Charles Booth, the Victorian social reformer and anti-poverty campaigner was the main speaker.  Further conferences in support of state old age pensions were held at cities across the Country.  In 1899 the National Committee of Organised Labour for Promoting Old Age Pensions for All was formed and it called a national campaign for non-contributory old age pensions at 65.  Nine years later these campaigners had secured a non-contributory pension of five shillings (25p) a week for men and women at 70 which was subject to means testing.

From the archives of The National Association of Pension Funds covering the period 1917-1998 it is interesting to read about the number of pension schemes which existed in the early part of the last century.

By the time of the First World War a number of Superannuation Funds had been established by employers.  At a conference held of representatives of some of these funds in July 1917, which was chaired by Mr John Mitchell of The Omnibus Railway & Equipment Companies Staff Superannuation Fund, reference was made to a conference held in 1916 and to the recent negotiations between The Railway Clearing System Superannuation Fund and the Inland Revenue.  It was considered that there was a prima facie case for some relief in respect of the incidence of income tax on Superannuation Funds.  It was resolved the Conference should form a standing Committee of five which should take the necessary steps to give effect to the resolution:
To form a register of Pension & Widows Funds which should meet periodically for the discussion of matters of mutual interest. The five employers and funds which formed the Committee were: Spillers and Bakers Ltd;  Bournville Works Pension Funds; The Royal Mail Steam Packet Company; Croydon Gas Company and The Omnibus Railway & Equipment Companies Staff Superannuation Fund. It was from this meeting that the Association of Superannuation Funds was formed in 1923 which subsequently became The National Association of Pension Funds. Mr Mitchell was its Chairman from 1923-1948 and then its President to 1956.

In March 1918 it was reported that 41 Funds representing 41,845 members with total assets of £4.9m had responded to be included on the register.

At that time the employers with Superannuation Funds involved in being active on the pension scene were the shipping lines, local authorities, railway companies, the gas companies and lighting companies besides names we know today such as Boots, The Times Newspaper, and Cunard Steamship Company.

The Government introduced a bill to consolidate the Income Tax Laws and it was agreed to communicate with the Chancellor of the Exchequer on the position of Funds in relation to the bill.  It all sounds rather familiar. 

In 1919 a Royal Commission was set up on Income Tax.

In 1921 the Committee was in communication with the Inland Revenue about the allowance of superannuation contributions for tax and the method of taxing refunds. The Finance Act 1921 was enacted giving Superannuation Funds the relief from income tax that had been sought, to those funds which had received the approval of the Inland Revenue. 

On the back of the Finance Act 1921 more employers were prepared to set up and seek approval of their Superannuation Funds. One of these was the LUCAS-C.A.V.- ROTAX
Staff Pension Fund which was established on 1 July 1928. Within months of the passing of the Act the Lucas board had begun to plan the setting up of a pension scheme.  In 1922 following the appointment of the company’s first qualified accountant, Lucas for seven successive years channelled around 6% of the company’s profits into an earmarked bank account for the eventual launch of the pension scheme.

The 1925 Pensions Act, piloted through Parliament by Winston Churchill, Chancellor of the Exchequer, placed added pressure on socially conscious employers to set up pension schemes for their staff employees.  The Act had extended the National Insurance scheme and provided a State pension of ten shillings per week for those earning less than £250 a year.  This meant that works employees would receive a State pension whilst staff, who earned just over the £250 limit, would get nothing unless the company set up a scheme.

One of these was the Lloyd’s of London Superannuation Fund which was established, in 1929, to provide pensions to staff of member firms.  The archives of this Fund were donated to The Pensions Archive by its Trustee, LSF Pensions Management Ltd at the end of last year when they were moving to new offices.

Subsequently Section 379 of the Income Tax Act 1952 took over from its predecessor Section 32 of the Finance Act 1921 and a further generation of pension schemes were spawned in the 1950s and 1960s. 

The W & A Gilbey Limited Pension Fund was one such scheme established in 1952 and sponsored by the company known for its Gilbey’s Gin.  The Fund was run by a Committee of Management with four company committeemen and four staff committeemen and a Chairman appointed by the Company. Like the Lucas fund 3% a year interest was added to members’ contributions which were refundable on death in service. Widows pensions were provided by members surrendering part of their final salary pension which was averaged over five years. It is interesting to see the level of member involvement more than fifty years ago.  An annual contributors meeting was also held. A separate trustee company held the investments.  It ran a property Unit Trust known as Wyvern Property Unit Trust. Coincidently, the other unit holder was the Imperial Tobacco Pension Fund and George Ross Goobey was its representative on the board.

The sponsorship of pension schemes by employers in the early years was driven not only by tax and pensions legislation but also by the religious beliefs of some of the founders of these well known companies that the relief of poverty in old age needed addressing.  Even in the 1920s the fear of such poverty was still very largely the scourge it had been in the nineteenth century. 

With further changes now taking place in occupational pension provision it is an appropriate time for the occupational pensions’ movement and those associated with it to support and use the Pensions Archive. It provides a central source of information to students and others making a study of the history of pensions’ provision in this Country and how it has evolved and changed as a result of legislation. In addition it gives them access to current practices and standards that have been adopted in relation to management and administration of occupational pension schemes.

In addition to its objective of recording the history and development of occupational and personal pensions the Trust also has an educational objective which is to widen the knowledge of pensions amongst the public. This fits in with the work of the LMA’s Interpretation team which has on its staff a number of trained teachers.  Their role is to run outreach programmes using material from within the archives to help develop people’s understanding of different topics.  With the public’s general lack of understanding of pensions and the need to save for retirement it was felt that the Trust’s educational efforts should be directed at schools.  In conjunction with the LMA we have launched two initiatives which are currently being piloted.  The first is a board game named “Futureshock” which is played in a similar way to Monopoly but relates purely to pensions and investment. It had a trial run recently at a south London School amongst pupils aged 15/16 years which went down well with both pupils and staff.  The second is for the next age group 16/18 years and is a national schools competition entitled “2020 Vision” aimed at AS and A Level students.  They are invited to present campaign ideas to encourage people in 2020 to prepare for the future through innovative savings and investment strategies.  The competition presents creative challenges and the opportunity to demonstrate knowledge and understanding of pensions, economics, media and communication as well as the roles of employers and employees.  Once established we hope that entry to the competition will become recognized date in the schools’ calendar. Capita Hartshead are putting up the prize money this year and we would hope the winning schools would be able to spend a day in the City visiting investment managers, actuaries and others involved with pensions to further develop their knowledge and interest in the subject.  If any of you or your organizations would like to get involved with this initiative do let me know and if you have relationships with schools we should also be pleased to hear from you with contact details.

Over the years, as a result of corporate re-structuring, a number of well known companies and their pension schemes and also well known names of service providers and advisers have disappeared.  It would be good to capture their history and old records in addition to providing further information about pension provision in the United Kingdom.

It is intended that the Pensions Archive should be readily accessible to everyone who has an interest in the provision of retirement pensions. As we build the collections we will be looking at developing a program of digitisation so that documents can be accessed electronically but this of course will cost money so we will be looking for further sponsorship of the work of the Trust.

I very much hope this has given you some idea of the work currently being done to archive the history of pensions and that you will encourage the use and support of the Pensions Archive.  We shall be pleased to hear from you if you have papers which will help record the history of occupational and personal pensions.  

This period of change and challenges that we as Trustees are currently facing are going to make some very interesting reading for our successors in fifty years time! 

I would just like to leave with some facts we prepared for our schools education programme last year and as the slide says – “Think about It !”