One of the most amusing stories that has arisen in the past week (although it has a serious purpose) is the proposal that Diageo, the drinks conglomerate has come up with to try and solve its Final Salary Scheme funding deficit. As readers may know, when an actuarial valuation reveals a deficit, the law requires that the Trustees and the Employer get together to try to agree a cunning scheme to repair that deficit over a period of time. This is called a Recovery Plan.
Posts Tagged ‘pension funding’
Who’d have thought it…?
Although it is really something of a statement of the bleedin’ obvious, PwC have recently issued a report which after extensive (and no doubt extremely expensive) research has concluded that Final Salary Pension Schemes will have ceased to exist within 10 years. This is not exactly ground breaking news to those of us within the Pension Industry who have been watching the death throes for several years now.
That’s Fuggin Brilliant…
Best news story of the week has to be Mohammed Fayed’s rant at the Harrods Pension Scheme Trustees for not allowing him to ‘raid’ the scheme of his company dividend before paying up for the deficit as the law requires. The full report in the Evening Standard is simply hilarious. I was convinced at first that it had been written by Ian Hislop. The shareholdings in Harrods are opaque in the extreme as any reader of Private Eye will know, with various offshore ‘Fayed Family Trusts’ hiding most of the true picture.
Robbing Peter to pay Paul…
This weeks’ items – another massive bailout (potentially) and a oopsie by a pension industry ‘good guy’
First, the Coalition Government has announced it’s intention to sell off part of the Royal Mail. So far so predictable. The kicker in this particular tale is that the Royal Mail is currently sitting on an £8BILLION (yes you read that correctly, £8 BILLION!!!) deficit and that’s just what’s been revealed in the company accounts. The Actuarial Valuation results due soon are expected to show an even bigger deficit. This will not ordinarily make it a particularly attractive proposition for any potential buyer.
Hard to Digest…
So, Readers Digest (or rather the pension scheme of course) has now entered the PPF Assessment process as was almost inevitable following the calling in of the Administrators in February. Readers of my blog will know that RD had been in discussion with the PPF prior to this in relation to its multi million pound deficit and came a cropper when TPR refused to accept a negotiated deal that would have seen an innovative resolution including a significant cash injection and a large equity stake in the US parent company being taken by the scheme trustees.
It seemed like a good idea at the time…
Sometimes, its not just what you know…it’s who. The Pension Regulator has just found this out having been sent off with a flea in its ear by both the US and Canadian Courts in its attempts to enter the ‘world domination’ market by thinking – completely wrongly as it turns out – that it had jurisdiction in those countries.
The background is it’s attempt to make the overseas parent companies of the Nortel UK Pension Schemes to pay an additional contribution to cover the significant deficit. The US and Canadian courts have given permission for the overseas parent to ‘ignore’ the demand for £2.1 billion. Nortel is bankrupt by the way.
It’s Just Money….
A small article in that must read magazine for all lovers of …er….furniture – Cabinet Maker – (and with thanks to ‘My Company Pension’ for pointing it out) really sums up the current parlous state of Defined Benefit pension provision in the UK today.
HJ Berry a Preston based furniture manufacturer, has gone into administration with the £9 million black hole in it’s pension fund being a major contributory factor in its insolvency. It’s 85 staff members are likely to find themselves without a job soon and while of course, there is the possbililty that their pensions will be protected to a large extent by the Pension Protection Fund, (assuming the scheme is eligible) nevertheless, the situation is symptomatic of the state not only of the pension universe but also of manufacturing industry in the UK in 2010.
The Eagle has Landed…
Well, it’s not been the most exciting of weeks in the pension universe but I suppose the big story – well big for us pension junkies – is the announcement made by Angela Eagle that the Guaranteed Minimum Pension element of a pension will have to be equalised for men and women.
In fairness, she did state that this would only apply in respect of schemes falling into the Governments ‘junior’ lifeboat, the Financial Assistance Scheme, but there are few of us who believe that the principle will not be extended to the ‘big’ lifeboat, the Pension Protection Fund and from there to all schemes that carry GMP’s for their members, that is, those who contracted out of the second limb of the state pension arrangements.
Viking Sagas
I was reading the latest edition of Saga Magazine at the weekend (look – it was lying around on my parents’ coffee table alright – I am obviously far too young to have a subscription myself!!), and began reading the main article.
It contained various interviews with some of the great of the pension and age industry about what they would like so see as the next development in legislation or societal planning.
Great Talk, Hard Message
I went to an excellent talk by Lindsay Tomlinson the Chairman of the NAPF last night. The man talks a lot of sense. The main thrust of his speech was concerning the now certain death of the the DB scheme and the rise of DC and with it NEST eggs.
It is now an acknowledged truth I think (and so does he) that DB will be a creature of history within the next 10 years or so except within the public sector. That is not to say that there won’t still be legacy schemes in run off of course but the writing has been on the wall for them for several years, accelerated perhaps by recent economic events but certainly not helped by overregulation, poor investment choices and increasing longevity.
Jennie advises large multi-employer schemes as well as smaller single employer arrangements and has wide experience of both Defined Contribution and Defined Benefit schemes. Jennie qualified in 1986 originally as a criminal prosecutor. She sits as a Magistrate in her local justice area and is an Approved Chairman and Deputy Chair of the Bench Training and Development Committee. Jennie was formerly Legal Director of the Occupational Pensions Regulatory Authority. When her busy practice allows, Jennie likes to indulge her passion for travelling. To consult Jennie on any corporate Pensions matter, please call her on +44 (0)20 7749 2700 or send her an email by clicking below: