R Mills (Pensioner)
Adrian Cushing and Paul Waterhouse, new members of the PCC, were welcomed to the meeting.
These were accepted.
It was noted that the significant points raised at this meeting were covered at the November 2005 meeting.
These were accepted.
These were covered later in the meeting.
The Pensions Update of December 2005 was noted as having been circulated to members. PCC reps thought, while there were some concerns about potential misunderstanding on the part of some members, generally it was well written and informative. Ken Buckley also noted that the HM Revenue and Customs web page http://www.hmrc.gov.uk/budget2004/revbn39.htm gave a useful summary of the new pensions tax regime.
The Report and Accounts for the year ending April 2005 was made available at the meeting. The related Salient Features summary document was included in the Pensions Update issued in December. Both documents will be made available on the external Pensions web site.
Andy Barker said that there had been a number of Board meetings concentrating on the Ericsson offer and the effect on future pensions arrangements. These had now reached a conclusion, having covered a number of possible variations. (Secretary's note. See para 10 later in these minutes for a summary). Part of the pensions consideration was looking at the secondary market (i.e. the possibility of a third party taking responsibility for the Plan), but that any proposal would be considered on the basis of the benefit to both company and member. The benefit to the company would be the removal of its long-term pensions liability, bearing in mind that the pension liabilities were huge compared to telent. Ken Buckley noted that a recent newspaper article had implied that such a deal to place the pension with an insurance company party ‘was close'. However, Peter Harris said that this was not so, being just press talk. Peter said that in any event, any such deal would have to be underwritten by the Trustee and the Pensions Regulator.
Peter reiterated the current situation with the Plan with regard to its future security, i.e. the immediate £185m cash injection, the £490m to be placed in Escrow, and the ongoing covenant from telent. However he gave examples of how apparently small changes could affect the Plan funding. A half percent annual lower return than expected could increase liabilities by £180m. A one year extension to life expectancy could cost the Plan £90m.
Andy noted that the Investment Strategy was now seeking to preserve benefits rather than looking for growth, so more equities had been sold to buy bonds. The distribution was now approximately Bonds 85%, Equities 10% and Property 5%. The Escrow investments are to be similarly spread, although in a separate fund.
In respect of members transferring to Ericsson, an issue which remained to be resolved was the Siemens NWOG (No Worse Off Guarantee for ex Plessey employees). There were difficulties in being able to calculate its value at the time of transfer to Ericsson. Siemens were still taking legal advice. Peter Harris emphasised that this was a liability on Siemens.
Vic Webster wondered what advantage there would be in ex Plessey actives transferring their deferred Plessey pension to Ericsson, as in both cases there would be a deferred pension plus inflation increases. Andy thought it could be an individual choice as to where it was thought to be most secure.
These were covered during the Directors' Report.
Peter Harris said that subject to final approval, those actives currently employed by Marconi and being transferred to the Ericsson company have two independent decisions to make.
The key features of the new Ericsson plan will be the same as the GEC plan. It will be a Defined Benefit Plan, calculating benefits as per the GEC Plan Basis 1 (but not Bases 2 or 3). Member contributions, Ill Health and Death benefits will be the same (subject to resolution of the 4 times salary death benefits for ex Plessey). Year for year service will be given on transfer. Where Basis 2 or 3 is currently better, the objective is to work out an appropriate number of years to be transferred. The Ericsson Plan will have its own group of Trustees. What happens to SBS, Merrill Lynch and Standard Life AVCs is still to be determined.
Peter added that there will be a detailed communication process in due course, including presentations by telent/Ericsson. People will have to ask themselves (1) where am I likely to get more benefit from my pension and (2) what is likely to be more secure. Vic Webster advised PCC reps to get any unanswered questions into Pensions Office ASAP. Peter Harris noted that the external Marconi Pensions web site can be used for questions and answers.
In response to a question from Adrian Cushing, Peter Harris noted that Ericsson are not taking on the additional death benefits which are available through the Marconi SBS, although there may be some transitional cover from the 23rd January. John Leaney emphasised to the PCC reps that they need to tell members in such a position, who have purchased extra benefits through SBS, that they need to review their situation urgently.
Sean Leahy had heard that Credited Interest was not relevant to the Ericsson plan, but he thought that it should be, as GEC Plan Death Benefits include total Plan contributions plus Credited Interest. Peter Harris agreed and said he was raising this issue with Ericsson.
Sean also had it confirmed that service transferred would be ‘Year for year and month for month'. It was pointed out that the question of salary at the time of transfer was irrelevant. Only service duration would be relevant.
Adrian Cushing was told that the money in the new Ericsson plan is ring fenced, with a new set of Trustees. It was also noted that there had been a rush of applicants to join the GEC Plan as only Plan members were being allowed to join the new Ericsson plan.
Ian Wood was told by Peter Harris that those employees transferring to Ericsson for just three months are eligible to join the new Ericsson plan. The target date for setting up the new plan was March, with a target of April/May for the transfer of past benefits. Adrian Cushing then asked about people who were with telent till the end of March and then transferring to Ericsson – would they be able to enter the new closed scheme? Peter Harris said he would have to consult with Ericsson. Mick Elliott asked what was the window for joining the Ericsson plan. (Post meeting note - the decision to join the new Ericsson Pension Plan has to be made by 6 March 2006.)
Peter Harris reported that the Trustee is anxious to get the Ericsson deal through first. The Triennial Review will be presented to the Board at the February meeting. It legally has to be issued by the 5/6 April 2006.
It was noted that Adrian Cushing (Chorley PCC rep) and the four active Coventry PCC reps were transferring to Ericsson, as was Andy Barker, the active PCC rep/ MND at Beeston. Thus the number of Directors on the Board will shortly be reduced to nine. John Leaney noted that it was not at the moment planned to appoint anyone into the ‘spare' positions. The PCC agreed that we should defer selecting any replacement MND for the moment. Peter Harris and Chris Holden said that historically, we had four MNDs (one for each of four regional PCCs), these being matched by four each Company and independent directors, but that the Trustee would like to reduce the number of Directors to nine.
Peter Dronfield asked what is the PCC situation after the five PCC reps transfer to Ericsson. Pat Moloney noted that they were still deferreds until such time as they may make a decision to transfer to the Ericsson Plan. Deferreds can still attend the PCC meetings as long as their employer allows.
The process of appointing MNDs was under review in the light of the Pensions Act 2004, particularly the requirement to include pensioner representatives. Mick then requested a précis of the legislation on PCCs and MNDs before the next meeting. Peter Harris agreed, in so far as the legislation is finalised. Mick also thought that a lot of pensioners and deferreds in the south were under represented, as the PCC was now largely drawn from ex Plessey and Marconi Communications employees.
Peter Harris stated his intention to work with the PCC over the coming months to consider how it could be as effective as possible.
Adrian Cushing asked if there would be a PCC for Ericsson. Chris Holden said that their thinking was that it would be too small to be viable. Sean Leahy asked how the new Trustees would consult with scheme members. Peter Harris said he would take this up with Ericsson. Ian Wood was told that the equivalent to Peter Harris at Ericsson would be Marcus Sheard.
Vic said that he had read that the new process affecting the appointment of directors and PCCs would not start till December 2006, and it was then a fairly lengthy period before it became necessary to implement. Peter Harris said he would be keen to get it sorted quickly after December 2006.
Adrian Cushing asked about what happens under the new pensions tax regime if someone has several pensions. Peter Harris said that they would all be added together and collectively looked at if taken at the same time. However, if they were taken separately, then a calculation of the effect need only be done when a second one was put in payment. In rough terms there would only be a problem when the overall pension exceeded £75k per year (excluding state pensions).
The next PCC meeting was scheduled for Wednesday the 29th March, 10.30am, at Coventry. The venue was to be determined by Sergio.
Ken Buckley
26th January 2006
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