A Barker (Beeston, MND), G Band (Deferred), M Elliott (Pensioner), R Hartt (Field Force), J McCrindle (Pensioner), S Radford (Liverpool), I Wood (Coventry).
It was noted that this was to be Roy Mills last meeting as a PCC pensioner rep, however he accepted an invitation to stay on the PCC to September 2007. Peter Dronfield gave thanks to his services as a rep, chairman and MND over the years. Roy said that we had been very lucky having the GEC Plan. It was well run, and he acknowledged the skills of the people involved with it.
Chris Holden, the recently appointed chairman of the Trustee, was welcomed to the meeting. Chris said he was a chartered accountant, having been employed by Arthur Anderson for many years. He had joined Marconi for the restructuring of 2002/3, becoming the Chief Financial Officer, until the appointment of Pavi Binning in 2004 and had retired from the company in 2005. He had then become a Director of Stanhope Pension Trust Ltd (SPT), and in June had been elected Chairman of SPT.
Chris then referred to the current company Strategic Review, although because of confidentiality, he could not say very much yet about the future. However, he thought an announcement was imminent. He did say that the Trustee has been intimately involved in discussions about the future, noting that the Pensions Act has strengthened the position of pension trustees. He suggested a further meeting on the 2nd November when the PCC should be able to be told a lot more.
Roy Mills thought that the purchase of bonds had secured the pensions in payment, so was the current plan deficit related to actives going forward? Chris said that the investment strategy was still driven by the profile of the members (bonds for pensioners, gilts and equities for deferreds and actives). He also noted that a change in pensions law meant that all categories of plan members had to be treated equally (previously pensioners in payment were favoured), so this has to be taken into account. Roy then asked in which direction the investment profile was moving. Vic Webster said that since the time when the SPT Board significantly reduced the equities holdings after the matter was raised by the then Finance Director of Marconi , John Mayo, it had not changed. The only reason for any increase in equities was in the value of those still held.
Sean Leahy asked if the Plan would continue as a final salary scheme. Chris said that this, and whether or not it became closed, was for Marconi to decide.
Peter Dronfield asked for clarification of the relationship between the Marconi Board’s Strategic Review and the pension plan. Chris said that the Marconi Strategic Review had started in February 2005, with Marconi looking at the options for the future. Vic added that a Joint Working Group had been set up to look at the future of the Plan. This group included a mix of Plan trustees (including two MNDs) and non-trustees. There was also a Covenant subcommittee of the Trustee who interfaced with Marconi management to discuss issues arising from the Marconi Board Strategic Review. This subcommittee included Pat Moloney.
Chris Walton wondered if it was conceivable that a new owner could walk away from a deficit. Chris Holden said that the new pensions law is aimed at preventing this, adding that similar legislation exists in the USA and the European Union, so reciprocal agreements would exist with a purchaser from those areas.
Sean Leahy was concerned that for current actives, if the scheme was closed to them, and they became deferreds, then they could lose the benefit of any future salary increases in real terms (i.e. over and above RPI increases) when their pensions were eventually paid. Chris Holden said that the pension scheme trustees are responsible for looking after what has been earned to date (accrued benefits) for all members. Pat agreed, noting that future benefits accrued from now onwards for current actives are a matter for Marconi. Ken Buckley noted that when the Plessey scheme was closed, the deferred pension accrued from Plessey was given a one off enhancement on transfer to make some allowance for this.
Roy Mills referred to the current deficit in the scheme, and noted that it would be even higher if the situation arose of handing over a closed scheme to an insurance company to administer. He then asked what would happen if Marconi went bankrupt now. Vic thought that if there were insufficient funds for the Plan to run itself, then it would apply to be admitted to the Pension Protection Fund (PPF). There would be an immediate cut in benefits for those under normal retirement age, and a freeze in increases.
John Leaney referred to the PPF web site, and others (see below), which he thought would answer many of these questions. He noted that the Pension Regulator web site was taking registration for an e-learning pensions course starting in January 2006.
Secretary’s note. The following web sites have been identified since the meeting:
At this point, Chris Holden left the meeting.
At Sean Leahy’s request, it was agreed that the following should have been included in these minutes, under Matters Arising from the Directors’ Report.
‘Sean Leahy asked if the PCC would get to know the outcome of the 18th July meeting (re. the Covenant subcommittee) soon after. Pat Moloney said that he was looking to give feedback to the PCC ASAP, and then the PCC chair may decide if an early PCC meeting was required.’
Roy Mills asked what was the Covenant? Pat said that following the 2004 Pensions Act, the Covenant subcommittee was set up to look at the obligation, ability and willingness of Marconi to support the Plan. Pat, as a member of this committee, said that he expected to be able to report from it at the meeting proposed for the 2nd November.
Sergio thought that employees had a false perception of the PCC role, perhaps expecting them to have more power than they really have. He thought a short document laying out the responsibilities of the parties involved in the PCC would help. Dawn agreed to produce such a brief. Recent pressures on PCC reps, because of confidentiality, were acknowledged by Pat and Vic.
Sergio thought that the PCC reps should have a systematic induction on the way pensions law is progressively changing, particularly those aspects relevant to the Marconi Plan. Dawn said that Pensions Office intend to produce a communications document on this subject as soon as possible. Vic added that we were in effect calling for a training agenda covering the effect of these changes.
Peter Dronfield said that Peter Harris had asked his opinion, as PCC chair, on what the reaction would be from the PCC members to Pat Moloney continuing in his current term as MND, now that Pat had become a deferred pensioner. Peter D said that he had replied saying that in his opinion, he did not think there would be any objection. Roy Mills thought that the PCC Terms of Reference should thus be amended to make it clear that an MND could continue to serve in these circumstances. However, Sean Leahy thought strongly that it was wrong that the PCC had not been consulted in this matter by the PCC chair.
At this point in the meeting Peter D apologised saying that he would have to leave the meeting due to a personal commitment. Roy Mills chaired the remainder of the meeting.
Ken Buckley noted an e-mail from John McCrindle, who had offered to resign from the PCC, in view of other commitments. Dawn voiced her thanks for his services, but noting that his term would in any event terminate on 30/4/2006, said that he was welcome to attend up to that date.
This was presented by Pat Moloney.
He noted that the current split of assets as stated in the SIP (Statement of Investment Principles) was unchanged at:
The annual Report and Accounts has been signed off by the directors (subject to any changes agreed by a sub-committee of three SPT Directors) and has to be issued by law by the 5th November.
Following the resignation of Peter Harris as a trustee in June, Law Debenture has been appointed as a professional independent Trustee. Law Debenture’s nominated representative on the SPT Board is Eddie Thomas.
The Investment Committee, which should be three persons, had also been one short following the departure of Chris Lewin. So David Felder, also of Law Debenture, has been appointed. He has a background as an investment manager (particularly in bond investment) and acts as an adviser and trustee to a number of other UK pension schemes.
Pat said that before the 2004 Pensions Act, trustees’ knowledge and understanding of their role was such that they were seen as ‘ordinary people’ who did their best. However, since the 2004 act, more responsibility had been put on them. They have therefore been on several training courses in the last year.
Pat then went on to talk about ‘Financial Swaps’. Trustees generally are now being much more specific in matching investments to the liabilities of schemes. The purpose of Financial Swaps is to minimise the risks and best match them to liabilities. Pat then gave examples of both an ‘Interest Swap’ and an ‘Inflation Swap’. He emphasised that nothing has actually been done on this yet, but it is being looked at.
Vic Webster noted that next year’s Credited Interest was unlikely to be greater than 2.5%.
John Leaney referred to the last PCC meeting when the 2004 Pensions Act requirement for reporting ‘Notifiable Events’ through an Events Committee had been highlighted. He said that both Trustee and Pensions Office reporting procedures have now been set up.
Pat said that today was thought to be the first time the chair of the board of directors has attended a PCC meeting. Chris had been very keen to come and has come up to speed very quickly. John also reminded us that Chris was originally appointed as temporary chair of the trustees, whilst the trustees looked at other options. However, the unanimous decision to appoint Chris as permanent chair was taken at the October Board meeting.
Roy Mills queried the implications on the Plan following government legislation limiting the maximum legally required RPI pensions increase to 2.5%. He was told that this doesn’t preclude the company paying more. Current Plan rules giving increases matching RPI up to 5% are not affected.
The following changes in the status of PCC reps were noted.
Also, Steve Radford is expected to leave Marconi soon.
Dawn noted that the above were still eligible to attend PCC meetings till the end of their term. The requirement for a new rep (or perhaps two) for the Chorley site would be put on hold till after any Marconi changes. In the meanwhile, it was thought Steve Radford could represent Chorley. (Post meeting note: Elections for two representatives, for a combined constituency of Liverpool and Chorley, will be held during November.)
This was reported as progressing, but was currently overshadowed by the Strategic Review. Future assumptions were still under review. It is not legally required till April 2006.
Dawn Hampton explained that changes were required in order to meet the requirements of the Disability Discrimination Act. As it is difficult to define the difference between Ill Health and Disabled, the Trustee had taken the following decision: ‘All restrictions on members Ill Health and Death in Service benefits are removed in respect of benefits accruing from 1 October 2004. Benefits accrued prior to this date will continue to be restricted in accordance with the original decision taken on entering.’ About 106 people were though to be affected by the changes.
Sean asked how Ill Health is determined. Dawn said that it was still based on the ability of a person, active or deferred, to do the last job performed for the employing company.
Dawn noted that if someone retires with a terminal illness, then at the Trustees discretion, the pension could be commuted to a lump sum. Roy said that an Ill Health pension is awarded for life, even if a person later goes back to doing a similar job. Dawn added that other schemes were awarding ill health pensions subject to review
Pat asked if there had been any progress with the United Biscuits Inland Revenue approved scheme for people retiring before reaching 65 (see AOB at the July 2005 meeting). Dawn said it was currently being considered.
Roy asked what was happening to communicate April 2006 pensions changes to members. Dawn said that Pensions Office intend to produce a communications document on this subject as soon as possible. Sergio was impatient to see something in writing. Vic said he was sympathetic with Pensions Office and thought we needed to be patient till after any Marconi changes. Dawn added that Pensions Office were always ready to attempt to answer questions by phone.
It was noted that Mike Symonds term as a PCC rep would be ending in December 2005. Therefore, with the approval of Pensions Office, the invitation offered to Roy Mills to continue to serve till September 2007 was also made to Mike, which he accepted.
An extraordinary meeting was provisionally scheduled for 2nd November 2005 at Coventry.
The next ordinary meeting was scheduled for Wednesday 18th January 2006 in Coventry.
Ken Buckley
27th October 2005
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