A Barker (Beeston, MND), R Hartt (Field Force), J McCrindle (Pensioner),
This meeting was called to enable the PCC reps to hear first hand the situation with respect to the GEC Plan following the announcement made on 25 October 2005 regarding the proposed sale of part of Marconi to Ericsson.
It was noted that there were in effect four groups of Plan members to be considered, namely pensioners, deferred pensioners, actives remaining with Telent and actives transferring to Ericsson.
Sergio noted the current anxiety of the workforce. It was suggested that a face to face meeting with members at the three sites be held ASAP. However, Steve Radford emphasised that such a communications meeting must be by Marconi representatives, it being a Marconi responsibility to do so. He warned against PCC reps saying something which might be incorrect or ambiguous, and then being held liable.
Chris Holden, the Trustee Chairman, then addressed the PCC reps. He said that what has been done so far for the GEC Plan is only part of what has to be done, in particular for the actives. He also noted the difference in the responsibilities of Marconi and of the pension scheme Trustee.
Chris said that he regarded the deal that Marconi had negotiated with Ericsson as good, with much of the £1.2 billion which Marconi will receive being set aside for the GEC Plan. Without this, the pension fund and the ongoing Telent company could have been in some difficulties.
The Trustees had done their best, using reasonable assumptions for the future, but it had to be borne in mind that the liabilities would be ongoing for perhaps another fifty years. As a result, the sum of £675m for the pension scheme had been allocated out of the £1.2b. The pension Plan Triennial Review indicated that an immediate £185m of this should be paid into the Plan funds, sufficient to cover the whole of the ongoing deficit of the Plan as of April 2005. The remaining £490m would be placed in Escrow, to be administered by a third party, with the Trustee having the ability to draw on this as required. It should also be noted that the money in Escrow could only be repaid to Telent on the authority of the Trustee. The intention would be to invest the Escrow in a similar manner to the main Plan fund, either by mirroring it or being compatible with its overall aims.
For all members, this deal will go a long way towards securing their accrued benefits to date.
The most significant reason for securing funds now is that Telent will be a small company compared to the size of the GEC Plan and the deal will thus minimise the need for the Plan to be an oppressive burden on the Telent sponsor in the future.
As regards actives, if they stay with Telent, then there is absolutely no impact as of now, but future changes cannot be ruled out. If they transfer to Ericsson, the Trustee’s principal role is to make sure that any funds transferred give a fair balance between those members transferring and those remaining. Also, the Trustee will attempt to influence the Ericsson pension arrangements as much as they can. Peter Harris is in discussions with his opposite number in Ericsson to see what these might be.
Vic Webster noted that for transferees to Ericsson, their backstop would be to have a deferred pension with The GEC Plan.
Peter Harris talked in terms of three possibilities for actives transferring to Ericsson.
It was noted that there were four parties involved in transfer discussions: the Ericsson company, the Telent company, the Ericsson Trustees and the GEC Plan Trustee.
The respective Trustees would have to agree to any money transfers proposed by the companies, taking cognisance of the needs of members remaining and those transferring.
Peter Harris stated that the objective was to get a full transfer of service and benefits, but this was not guaranteed.
Sergio asked if an active transferring to Ericsson, aged over 50, could draw their Marconi pension now, and start contributing to a new pension. Peter Harris said that members aged over age 50 who were transferring to Ericsson could draw their pensions from April 2006, if the ‘Gold’ situation was not reached. This follows only because of recent pensions law changes.
Steve Radford was concerned about employees who were pending redundancy in Jan/Feb/March 2006 whose business was transferred to Ericsson in January. He thought they could be disadvantaged, if they become redundant as Ericsson employees. Vic thought this unlikely, as he didn’t expect any pension changes before the end of this period. Peter Harris added that this situation was on the table for discussion with Ericsson. (Pat Moloney later wondered if someone in this position actually needed to transfer to Ericsson).
Peter Dronfield presumed that Telent would be responsible for any ongoing Plan deficit. Chris Holden confirmed this, but said that this would only become a burden if things got worse than the Escrow provisioned.
Sean Leahy asked if there was any indication the ‘Gold’ was an Ericsson objective as well as a Marconi one. Peter Harris said he could not comment on another company, although there were some promising vibes.
Roy Mills was told by Peter Harris that Ericsson have a UK defined benefit scheme.
Peter Harris told Mick Elliott that current Marconi Plan deferreds and pensioners would stay in the GEC Plan, with the added security given by the £675m.
Peter Harris noted that any SBS/AVCs would be transferable to Ericsson.
Graham Band asked how long the Escrow fund would sit there. Chris Holden said that if the annual FRS 17 assessment showed a Plan deficit, then this would be dealt with by taking money out of Escrow, so over a period of time there would be a drip. Conversely, if at any time the Plan was shown to be significantly overfunded, money could be returned to Telent.
Chris Holden told Sean Leahy that Telent will still be making ongoing contributions for actives.
Chris noted that even with the £675m set aside, the deal still leaves Telent with the pension scheme responsibility, so Telent will consider how this could be decoupled at some time in the future. This would have to be by purchasing pensions on an individual basis through an insurance company policy. The insurance company would underwrite and administer the pensions rights for individual members. However, as insurance companies want to make a profit, then even with the £675m, there is still a funding gap for such a buyout, so it is imaginable, but not a racing certainty.
Mick Elliott and Ken Buckley were told that in the case of a buyout, our fund would not be ring fenced within an insurance company. Individuals’ pensions would not be protected by the PPF, but they would be protected by an equivalent insurance company scheme, giving a 90% guarantee. Before any such buyout deal happened, the Trustee and the Pensions Regulator would have to be sure about security. If it went through, the role of the Trustee (and PCC) would then disappear.
Roy asked if the Trustee could run the Plan independently if it became closed. Pat Moloney said that if the Trustee saw that the Plan was 100% funded on a buyout basis, then they would have to take a look at what was best for the members, taking professional advice. Chris Holden cautioned about the Trustee running the Plan themselves, if an insurance company would take it on. Why would the Trustee want to take any risk on themselves?
Roy asked what would be the situation if the Plan closed without being 100% funded? Pat said that the PPF guarantees approximately 90%.
Mike Symonds asked what happened to the Plan if Telent ceased trading. Chris said the Escrow would still be there.
Roy asked how the balance of Trustees between MNDs, company and independents would be affected by new legislation. Chris said he wondered what the balance should be bearing in mind the small percentage of actives. Perhaps the PCC would like to make representation to Marconi/Telent. Peter Harris said that Marconi/Telent was addressing these issues, and also the PCC composition. A paper would be put to the SPT Board in December.
Pat Moloney later added that perhaps having a deferred MND should be reconsidered. Peter Dronfield thought that previous difficulties still existed in identifying such a person, as well as whether they would have the time if they were now in other employment.
Steve Radford asked if there was any timescale for the Ericsson scheme details to be declared. Peter Harris said there wasn’t as yet, although a meeting he was at today might disclose this. Steve asked for a PCC meeting once the details were known. Peter Harris thought this was a good idea.
Vic asked how many UK Ericsson employees there were. Peter didn’t know.
Vic asked if Telent would be paying the PPF levy. Chris said it would, but it should be lower as the Plan is now low risk, although how the Escrow will be viewed by the PPF is not yet clear.
Mike Symonds was told that the Pensions Office will be run by Telent.
Chris Walton had seen an article in the Times, which suggested that the Plan had £3.6b liabilities. Chris Holden said someone had made a stab at the liabilities. The Trustee believes that it is currently reasonable to run the Plan with the £3.2b assets (£2.5b Plan fund as of now + the proposed £0.2b injection and £0.5b Escrow).
The meeting concluded with Vic Webster giving a vote of thanks to the subcommittee of Trustees in doing a superb job in protecting the members’ benefits. Pat Moloney added that this was in no small measure to what the Trustee Chair, Chris Holden had achieved. He gave a vote of thanks to Chris, saying it was unquestionably a real achievement. Chris added that the members of the Trustee Board had been very helpful to him.
Roy Mills thought this was a lesson to other schemes and their Trustees. Chris agreed, although noting that the decreasing size of the sponsoring company meant that this was a specific case where a specific solution was required
The next ordinary meeting is scheduled for Wednesday 18th January 2006 in Coventry. This will be in the Private Dining Room Coventry New Century Park Restaurant (left side of the NCP Restaurant). It was noted that Sergio is away till the 17th January, so Amanda would see to any necessary arrangements.
Ken Buckley
5th November 2005
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