What's the problem with the Ensign Retirement Plan?

At a January meeting of the Merchant Navy Pensions Employers' Group, Nautilus general secretary Mark Dickinson, was invited to speak about the Ensign Retirement Plan (ERP). He called for employers to support the scheme, recognise the shared benefits and to fully commit to its future success. An edited version of his speech is published here.

Writing in the Union’s journal 'The Reporter' in 1938 of his elation at having secured agreement for the creation of the Merchant Navy Officers Pension Fund (MNOPF), the general secretary of the Mercantile Marine Service Association Mr A N Wilson remarked on the support and cooperation from shipowners, describing the agreement as 'a triumph of cooperation and a success attributable to all'.

That support which has underpinned the success of the MNOPF in the past two decades has been reinforced by a consensus on the response to the challenges and risks that the MNOPF has faced in maintaining the pensions of MN Officers.

That consensus is now imperilled. Industry commitments have been made, but not delivered.

Some employers show utter contempt for the MNOPF and have failed to support the ERP – to ensure it has a long-term sustainable future – to ensure decent pensions now and in the future for MN Officers.

As a Union, we will not tolerate this continued disregard for the commitments given by the industry to maintain an industry wide scheme to provide decent pensions for our members and of all British Merchant Navy Officers.

Running into danger

Morse code teaches us that 'dit dit dah' means imminent danger. It is what we flash at oncoming vessels, off course, at risk of running aground.

Many in the industry appear to have a problem with the ERP and we need to urgently understand what that is if we are to avoid imminent danger.

Some employers say they dislike Ensign because of its link to the MNOPF. They consider Ensign 'toxic'. It wasn't toxic when we resolved a significant part of their S75 exposure which would have left them exposed to funding buy-out debts running into millions for many.

Some behave like scolded children who sulk because they got old off – forced to pay their debts to the fund.

Some just ignore Ensign altogether, they've moved on, they want to do their own thing even to the detriment of their staff, simply not interested when considering the pensions of their sea and shore-based employees.

I want employers to stop making excuses and back the ERP as they agreed they would. Get behind the new industry scheme, fulfil their commitments, never mind the excuses.

After all it is an exceptionally well governed, high quality, not for profit, master trust pension scheme with a very strong Environmental, Social, and Corporate Governance (ESG) commitment. It has very competitive member charges and a strong investment strategy. But none of that really matters. The shipping industry said it would support the ERP, the rest is just the icing on the cake.

Structural changes

From the outset of the very first deficit producing triennial valuation, around 17 years ago, Nautilus has fully supported the strategies implemented by the Trustee to put UK Merchant Navy Officer pension provision on a stable and secure footing. We did this believing that the industry commitment to decent pensions for our members now and in the future was firm.

We resolved a collective Section 75/buy out debt liability of £336 million. Some employers seem to have short memories about the seriousness of that situation. I recall one senior shipping executive presenting to a meeting the full horror of that exposure and its potential impact on the UK shipping industry and the jobs of our members.

Some might recall that following the 2015 valuation, the MNOPF was staring down the barrel of joint contribution rates of 41% with the prospect of further increases at future valuations. But we have worked hard to make it sustainable for all.

Some £1.5m of employer contributions was avoided by not backdating the increase between 31 March 2016 and 1 April 2015 and the Trustee did not collect new deficits in 2015 of £5m nor the £9m deficit in the 2018 valuation.

The Fund has weathered more than one major economic shock not least the impacts of the financial collapse of 2008 and now Covid-19. That's in no small part to the agreed investment strategy and journey plan, overseen by a Delegated Chief Investment Officer (DCIO).

This approach continues to drive the Fund towards the agreed funding goal by 2025. As of January 2021, it is 100% funded.

To protect the pensions of the members and support all participating employers, the Fund has pursued a robust debt recovery plan that has recouped over £1bn from employers.

The Fund now has less than £25m debt to be collected – and every single penny of that will be collected however long it takes.

Governance of the Fund has been overhauled with a simple, efficient, cost effective structure – a board with three trustees on each side. Three nominated by the employers' panel and three nominated by the officers' panel of the Joint Officers Pensions Committee (a remnant of the old National Maritime Board).

The fund has consensus driven decision making. The Trustees listen to their professional advisers, they take those decisions mindful of the Funds' Strategic Objectives, because the Trustees believe in them and wholeheartedly support them.

The industry must also support those objectives.

Investing in the future

I must, once again, warn my fellow employers of the dangers that lie ahead.

The winding up of the MNOPF and at that point the removal of any residual risks will only happen when Nautilus is satisfied that all the Strategic Objectives have been met.

I cannot foresee that will happen whilst questions persist over the long-term sustainability of the ERP.

Maritime employers must reflect on that spirit of consensus the next time they consider their sea and shore staff pension provisions or tender for employees' pension provider. The next time employers palm off their so-called valued employees with a pension plan that only meets the minimum requirements for automatic enrolment. At contribution rates that offer no prospect of a decent outcome in retirement.

Mr Wilson said this about the creation of the MNOPF: 'It will, more than anything else, unite the owners and officers in one common endeavour to maintain British shipping on a sound and healthy basis. It will remove from officers the spectre of impoverished old age and allow owners to fulfil their obligations towards retired employees.'

As we begin the reflection on the impact of Covid-19 on our key workers, one of which I feel will very likely be a recruitment crisis in the years ahead, what better way to reward and motivate than to recommit to the provision of decent pensions for all our MN officers.

We can best do that together in the Ensign Retirement Plan.