I noticed the positive announcement this morning that Signature and Care Support is to merge with Choice Support to create more jobs.

This is clearly good news but from a pensions perspective the change does highlight a major issue for any bodies changing status (e.g. incorporating or merging) where they participate in multi-employer pension schemes such a those run by local government, the Pensions Trust or similar. Such a change in status can trigger the unwelcome pension consequence of terminating the participation of one (or both) bodies in the scheme with the requirement to pay a very significant debt contribution to the scheme. The level of debt can be many times the size of that disclosed in the organisations accounts and can frequently impact on the organisations future success. It could also be levied even where there is no change to the numbers of staff continuing to participate in any scheme post the change.

This is an area where great care is required and early engagement with the pension scheme is essential as problems can frequently be overcome but only if arrangements are made in advance of any change. I’m not suggesting that this is the case here as I’m unaware of the pension background but it is a general note of warning to be prepared where any change in corporate status is contemplated.

This article also appeared on Civil Society where David Davison is a regular contributor on the subjects of finance and governance.

Posted in: Blog
Tags: Charities, governance, Not For Profit, Pension deficits

Our regular blog author and industry commentator David Davison has now won a place as a fully commissioned blogger for Civil Society website. With extensive experience of pension and finance issue affecting the charitable and not-for-profit sector David will impart his wisdom (and hopefully some wit) on the subjects of governance and finance.

David explaines “Clearly I’m delighted to have been selected by Civil Society to provide topical comment of their site. The Civil Society site brings together wide ranging issues that affect the charitable sector and I hope to provide some valuable insight, informative content and encourage debate on subjects I think the sector should be talking about.”

Read the blog that secured David’s success – “Between a rock and a very hard place – the looming pension crisis“, and keep an eye out for his further installments.

David Davison is a director of Spence & Partners Actuaries and specialises in providing pensions advice to charities and not-for-profit organisations, especially those who run their own final salary schemes or who participate in the LGPS and multi-employer schemes.

Posted in: Blog
Tags: Charities, Not For Profit

The reality of the Irish Budget at the end of 2009 was much better than the expectation as many of the ‘rumoured’ changes to pension provision failed to materialise as the Irish Government sought to plug close to a 12% deficit in their GDP. What was announced was:-

• Final salary provision would be ended for all new public sector staff from 2011 when a new CARE Scheme would be introduced.
• Retirement ages would be increased from 65 to 66 with future increases linked to state pension age.
• An announcement that pension increases being linked to CPI rather than earnings was actively under consideration.

The public sector therefore bore the brunt of the changes with the private sector remaining relatively unscathed. The move to CARE will over time produce cost savings although with a recruitment freeze in the public sector these are unlikely to be seen in the short term. The decision to move from final salary to CARE may also encourage a similar move in the private sector. I also await the impact of the proposals on industrial relations with interest.

It’s unlikely these changes will be the end of it however. Whilst not changed in this budget the taxation of ‘tax free’ lump sums and pension contributions was firmly on the future agenda with the current status quo considered unsustainable, especially as a taxation commission had proposed taxing lump sums in excess of 200,000 Euro.

The size of the Irish market also means it is difficult for it to benefit from economies of scale, something which could be addressed by more flexible financial practices throughout the EU and an increase in the number of industry wide schemes – although as commented previously in this blog the ownership / responsibility issues these types of arrangement present are difficult to overcome other than on a DC basis.
Whilst suffering from similar high level financial economic and public sector pension issues as the UK the market is much smaller which limits options however the trends are inescapable.

Posted in: Blog
Tags: Ireland, Public Sector Pensions

A major new accounting standard says your pension liabilities need not be valued by an independent actuary. So does this pave the way for companies to carry out their own valuations? Our guest contributor, David McBain of Johnston Carmichael, Chartered Accountants and Business Advisers, investigates. Fortunately he is concluding there is still a role for actuaries!

Defined benefit pension schemes are something of an irritant to finance directors. Annual valuations of the assets and liabilities are required and the resultant deficits (and occasional surpluses) introduce a high degree of volatility to the annual accounts. Pages of disclosures also result, many of which are largely unintelligible to the average reader.

So it’s little wonder that the same FDs will be hoping to find some simplification in the new International Financial Reporting Standard for Smaller Entities (IFRSSME). But will they find it?
Read more »

Posted in: Blog
Tags: Accounting, Corporate, FRS17, IFRSSME, Pension deficits

In July 2009 the Pension Trust made the announcement that the Scottish Voluntary Sector Pension Scheme (SVSPS) would close to all future accruals from the end of March 2010. This caused great consternation among the membership and most have been grappling with the difficult issues associated ever since.   Read more »

Posted in: Blog
Tags: Not For Profit, Pension Funding, Pensions Trust, Scheme Closure, Scottish Federation of Housing Associations (SFHA) Pension Scheme, Scottish Pension Schemes, the Scottish Voluntary Sector Pension Scheme (SVSPS)

Chancellor Alistair Darling slipped another gem in to his pre-budget report which will further hasten the demise of already beleaguered final salary pension schemes as reported in Times Online. 

How is any lay person expected to keep up with all this? The level of complexity which needs to be understood is just mind boggling. Having just returned from a trustee meeting covering revisions to actuarial assumptions, trivial commutations  and anti-forestalling it was all I could do to keep the attendees from throwing themselves out of a 3rd floor window – and  for once I don’t think that was down to my presentational style!!

You’ve got to think that high earning directors who have effectively been persuaded to keep their schemes running to ensure their own benefits will shortly have absolutely no reason to do so.

Posted in: Blog
Tags: Actuarial, Tax

So Robin Ellison has launched the U Party  with the objective of getting pension provision back up the political agenda. Given that he’s running a totally virtual election campaign the policy of decriminalising drugs will get the website hit level up and I can only hope that having arrived on the site the happy googlers take the time to look at some of the common sense proposals on pensions Robin is advocating.

It’s hard to disagree with his statement that “we have a dysfunctional state pension system, a dysfunctional private pension system and a dysfunctional tax system.”

We have more complexity in our system than anyone could manage and decisions taken “on the hoof” for short term populist objectives without thinking through the medium to long term implications – the main reason we’re already leaving our children and grandchildren a legacy of quite mind-boggling debt.

I’m all in favour of anything that can promote a rational debate on the future of pensions and the wider social implications and can only wish this venture well. I could almost be persuaded to provide more direct support but I think Robins chances in Hampstead are slightly higher than mine might be in Lanarkshire!!

Posted in: Blog
Tags: Pensions

In earlier posts we addressed the issue of GMP equalisation.  Just to be clear – eliminating inequalities as a result of GMPs is not complicated or difficult or indeed costly when considering a member with a new pension coming into payment or a transfer value being quoted unless you are operating:

• Administration software that is not capable to making a monthly comparison between the benefit paid to a male member and on the other hand the benefit that would have been payable to a female comparator.  Our P3 pension administration software is capable of handling this.

  OR

• Actuarial software that projects only to the point of retirement and then applies an annuity factor. By definition an annuity factor cannot capture potential cross over between a male say and his female comparator.

We have developed our own in-house actuarial software that can handle this.

There are however two areas which can present genuine challenges:

(1) The period that has elapsed since the Barber Judgement on 17 May 1990. The data required to be able to identify underpayments is often difficult and in some cases impossible to obtain. In theory you need to be able to reconstruct a set of pension payments back to retirement and a comparator set of cash flows for a notional female to identify cumulative underpayments. This should act as a further spur to trustees to grasp the nettle and sort out their data.

(2) When annuitising (e.g. on buy-out or buy-in) the annuity providers cannot currently take on board equalised benefits because they do not have the systems to support this. For this reason in some recent cases where we have been involved we have used workarounds and made a broad brush allowance for GMP equalisation.

We do not think the Government is going to come forward with a single particular method. Any such method would not fit all schemes and would inevitably result in some members getting a higher benefit than “equality” would require. Schemes that have inadequate data or who are unwilling or unable to fix their inadequate software will have to adopt a “method” which will inevitably have a cost associated or they could appoint administrators and actuaries with the capacity to deal with the problem.

Posted in: Blog
Tags: Actuarial, Administration, Data

Alan Collins has become the latest recruit to leading actuary and pensions administrator Spence & Partners. Alan, a qualified Scheme Actuary, joined the actuarial team in Glasgow from Mercer HR Consulting on January 5.

This further strengthens the team following the appointment of Ian Campbell as Actuarial Director in May 2009 as reported at: http://www.spenceandpartners.co.uk/archives/ian-campbell-becomes-latest-significant-recruit-at-actuaries-spence-partners/

Brian Spence, managing director of Spence & Partners, said: ”This is a great appointment and we are really pleased to have Alan on board. His broad experience and enthusiasm will add quality and depth to our actuarial team and provide invaluable support to our graduate recruits and part-qualified actuaries, as well as creating a skilled new resource for our clients. We are all really looking forward to working with him.”

Alan is a graduate of the University of Glasgow, where he attained an M.Sci First Class in mathematics and physics and the University of Edinburgh, where he attained a post graduate diploma in financial mathematics. Alan qualified as an actuary in December 2006 and obtained his practising certificate in November 2008.

Alan has particular expertise in buy-outs/buy-ins, accounting for pension costs, risk reduction exercises and mergers and acquisitions.

For further information please contact David Davison at consulting actuaries Spence & Partners on 0141 331 1004.

Spence & Partners are a firm of Actuaries, Consultants and Pensions Administrators with offices in Glasgow, London and Belfast and experience of operating pension schemes in England & Wales, Scotland, Northern Ireland and Ireland.

Issued on behalf of Spence & Partners by Karen Milne at Blueprint Media tel 0141 353 1515
Date:   January 2010

Posted in: Blog, Media, Media Releases
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