All outstanding SBS balances have recently been transferred out to external Additional Voluntary Contribution (“AVC”) funds, managed by either BlackRock or Standard Life.
Since the transfer took place a number of members have contacted telent Pensions Office to express their concerns.
Below is a set of questions and answers intended to address the concerns raised:
Following an announcement in the June edition of Pensions Update and a consultation period, during which no material objections were raised:
The principle is the same. You make additional contributions which are invested and when you retire the resulting fund is used to buy an additional pension from an external provider.
The difference is the way the funds are invested. SBS was invested with the rest of the plan assets and the return was credited interest, at a rate set by the trustee on a year by year basis. AVCs are invested in your own fund with an external provider and the returns are those generated by that fund.
It depends on how you personally view risk. The key points are:
The fund invests money with leading banks and building societies and seeks to gain a return in excess of prevailing short-term interest rates. This is a very low risk fund which broadly speaking can expect to gain a return (after taking account of fees) in excess of the 2.5% expected rate of credited interest when interest rates are on average, 2.9% or higher. At the time of writing, short-term interest rates are more than 6% per annum.
Stanhope Pension Trust Limited, which was, before the recent changes, the sole trustee of the G.E.C. 1972 Plan.
The trustee believes it is in the best interests of SBS members. Funds invested in SBS increased year on year in line with credited interest, which is set each year by the trustee. Because of the need to protect the overall funding level of the plan, the trustee does not expect credited interest to increase above 2.5% in the foreseeable future. On the other hand the returns (after fees) from the BlackRock DC cash fund are expected to be well above 2.5%.
The June issue of Pensions Update sent to all members contained full details of the proposed transfer.
Yes. The June edition of Pensions Update invited consultation. A significant number of members took the opportunity to raise queries.
Yes, provided that
i) consultation takes place (which has happened as described above)
ii) the Plan Actuary certifies that funds are (at least) of the same value before and after the transfer. (He has done so).
Yes, from the Plan Actuary, who helped the trustee to determine that the transfer was in the interests of members, from the trustee’s legal advisers and from the investment advisers who assisted in the selection of the AVC funds.
There is no option to transfer your funds back to SBS. However, there are several different AVC funds you could choose to transfer your money to as an alternative to the BlackRock DC cash fund. Please see the AVC Investment Guide for more details.
No, the trustee announced the proposal in June 2007 and made the final decision in September 2007, before it was even aware of the offer by Pensions Corporation to acquire telent. The decision was taken purely in the interests of members.
No, absolutely nothing.
BlackRock is a significant global investment management company based in the USA but with offices in 19 countries. It manages more than £ 600 billion across a range of asset classes for institutional and retail clients worldwide. The firm was founded in 1988 and in 2006 merged with Merrill Lynch Investment Managers. Merrill Lynch retains a 49% holding in the combined firm. The Plan has a long-standing relationship with Merrill Lynch, who are currently employed to manage the Plan’s UK equities.
No, the funds, whilst designated to individual members, remain assets for which the trustee is responsible and the trustee will continue to monitor the performance of the AVC funds.
No, SBS was, and AVCs are, separate from your main Plan pension.
Since 2002 all SBS and AVC monies have been used to purchase pensions with an external insurance company. Although your retirement will be dealt with through the telent Pensions office you will therefore receive payments of your pension from two sources.
Yes, there is a management fee charged on all AVC funds. For the BlackRock DC cash fund this is 0.4% of the fund value per annum. However:
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