J Leaney (MND)
Peter Dronfield noted that this would be the last meeting of this committee, and he thanked the PCC reps for their service.
Peter Johnson (telent Pensions Office admin) introduced himself. He has been with the company for thirty years and has been in International Finance. His new role would involve him in a wide range of aspects associated with the Plan (excluding investment) and he would have primary responsibility for managing the Paymaster contract.
These were accepted without comment.
Re. section 7, para 1, Mick Elliott asked if the uncertainty in what was meant by full funding in the statement ‘whether to achieve full funding by 2021’ could be answered. Vic Webster said that this would be covered later by Peter Harris in his presentation.
Re section 7, para 2, Roy Mills asked about the monthly reduction in the fund value. Pat Moloney said that capital was reducing, but not as rapidly as assumed.
Re section 7, para 4, Roy had asked about the possibility of taking an SBS/AVC pension at a different time than the main pension. Pat said that he had raised this at the last Board meeting and a response was awaited.
Ken Buckley noted one item, the June 2007 Pensions Update leaflet.
Chris Walton said that he knew of someone who didn’t receive his copy as apparently Pensions Office had an incorrect address. Jackie Foulkes said that there were a small number of people for whom there was no known address. When benefits for such persons were due to be taken, attempts were made to trace them through the Department for Work and Pensions (DWP). Also an exercise is undertaken every two years on all pensioners through the National Fraud Initiative. The numbers of such persons was was believed to be small, and they usually had small benefits.
This was given by Peter Harris and covered the following topics. Copies of slides used were given to the PCC reps present.
The following points were raised during the presentation.
Roy Mills asked why a target of 2021 for ‘full funding’. Peter Harris said that by then about half of the liabilities would have been paid out, and virtually all members would be pensioners, with hardly any deferreds or actives left.
Roy noted that we now had 13 or 14 fund managers, a lot more than in the past. Mick Elliott thought that running costs would go up with the number of fund managers, so did improved performance outweigh costs? Peter Harris said that while some of the new managers did have high fees, the focus was on performance net of fees, therefore the improved performance was expected to outweigh additional cost.
Re slides 6 and 7
Roy noted that historically, property was always a good return. Had the amount changed in recent years? Peter Harris said that we had recently had good returns from property but that our manager was advising us that reduced returns were expected in the immediate future. The investment committee was currently reviewing the future of the property portfolio.
Roy asked if the 13/14 managers all had a benchmark to be measured against – answer yes. Peter Harris said that there were basically two things to be looked at – the overall performance of an asset and how a particular asset manager was performing in his market relative to the overall market.
Peter Harris said currently we were using spare cash to meet current pensioner payments, but when this was used up, we expected to sell bonds.
Mick Elliott asked when might we need to dip into the Escrow? Peter said that under the agreement between telent and the trustee, funds would be released from the Escrow to the Plan in the event that the Plan became underfunded on an IAS19 basis.
Mick then asked when SPT would let telent have money from the Escrow. Peter said this could only happen if the plan had more than 105% of the amount an insurance company would require to provide an individual pension for each member. This would be an extremely safe for the position for the plan to be in. Alternatively money could be released if telent and the trustee agreed, but as the trustee must always act in the interests on members, it would not and could not agree to such release to the detriment of members.
Vic asked about the 2021 ‘fully funded’ target. Peter said that this was not as high as the level needed for a full insurance company buyout, and we would still need some money in corporate bonds, rather than having all assets by then in gilts. The ‘fully funded’ target included the Escrow in the Plan assets.
Roy asked what would happen if telent folded? Peter said that the whole strategy was based on the Plan being able to stand alone. He added that the Escrow was secure as it was governed by a tightly drawn up legal agreement which meant that money could only be released when the plan was fully secure. It was also noted that the Escrow was managed in the same way as the rest of the Plan assets, by the same managers, hence controlling fees.
Re slide 8
Peter Harris noted that rising interest rates would normally be beneficial to the funding level of the plan.
Roy Mills asked where PV01 (re slide 8) had come from – it was not a strategy known to him from the past. Peter Harris stated that it was a standard measure of inflation and interest rate risk.
Re slide 9
Peter noted that over the last year, we were removing two fund managers whose performance was not acceptable.
Vic Webster asked who monitored the performance of Watson Wyatt? Peter said that the Board needed to consider how better to monitor our advisors. However, over the last year, we have compared our Watson Wyatt model with similar models from other sources, putting in our Plan figures, with apparently similar results.
Roy asked if our managers really met their target of outperforming the stock market by 2%? Peter Harris stated that only one of our managers had this as a target and that yes, that manager had outperformed.
Re slide 10
Chris Walton noted that Escrow was included in Plan assets – he was concerned that it was counted as an asset when it might not be. Peter said that the way in which the agreement worked, the Escrow funds would become plan assets if required. Equally if all pensions could be paid without using the escrow, it would not become a plan asset, but this should not be a concern because it would not be required.
Peter Harris said that our life expectancy assumptions are based on a combination of actual plan experience and standard industry tables (PXA 92). These included three sets of assumptions about how much life expectancy would improve.
Bob Hartt left at this point. Peter Harris left to rejoin later in the meeting.
This was presented by Vic Webster, and his summary of the key points raised at the last Board meeting is as follows:
It was noted that all telent employees in service as at the 1st April 2007 would still in the future be eligible to join the Plan. Steve Radford thought that it was unusual to leave a pension plan open to current employees in these circumstances, but Vic Webster said that as the numbers involved were very small, there was no big impact on the Plan.
Jackie Foulkes said that Pensions Office staff were so far pleased with their transfer to Paymaster.
Mick asked if there had been any comments on the demise of the SBS. Jackie said that there had been a lot of calls from confused existing pensioners in payment, but it did not affect them. However, regarding the actual persons affected, all calls received had been handled satisfactorily by Pensions Office, and any written correspondence had been answered by the SPT Company Secretary through Peter Harris.
Sergio noted that he was personally very satisfied with telent Pensions Office handling of getting his pension into payment. However, he (and others) were very unhappy with the performance of Mercer, who had held his pension money for four months. Pat said that unfortunately, we had no control over Mercer and Ericsson.
Vic noted that a ballot for PCC representation was looking very unlikely, based on the current number of PCC nominations (24 in all categories). However, there was disappointment with the lack of actives, particularly from Coventry, and one or two more were still hoped for. These could be accommodated without a ballot.
Mick Elliott wondered what would happen if an active became a pensioner? Would actives be replaced – hence growing the number of PCC reps? Pat thought that an Active should be replaced, but if a pensioner or deferred ceased to be a PCC rep, they should not be replaced.
The number of PCC reps nominated was as follows.
| North | South | Midlands | Field Force | Totals | |
|---|---|---|---|---|---|
| Pensioner | 4 | 3 | 8 | 0 | 15 |
| Deferred | 2 | 3 | 0 | 0 | 5 |
| Active | 0 | 0 | 5 | 4 | 9 |
(Note these figures include those further nominations received after the PCC meeting)
Peter Harris rejoined the meeting. He was pleased with the number of pensioners nominated, and ‘not unhappy’ with the deferreds (in fact unlike pensioners and actives, there was no legal requirement for deferred members to be included in the process for selecting MNDs, this had been a choice of the trustee). However, he was disappointed with the number of actives, particularly with the geographic spread and was proposing to take action to obtain more active nominations. He would be recommending that an election would not be required.
Pat Moloney was surprised that there were no nominations from the ranks of the Employee Forum.
Roy Mills believed that Standard Life had not performed very well with their SBS investments – were the Board reviewing their performance? Peter said there would be a review in September. Vic wondered if there would be a penalty if money was transferred out of Standard Life. Peter said this would need to be looked at.
A vote of thanks was given to the outgoing PCC reps – Mike Symonds and David Slack.
There was expected to be a PCC reps Training Day followed by a PCC meeting with MNDs election, probably on Wednesday 26th and Thursday 27th September, venue to be decided. (Secretary note. Later confirmed to be at Coventry, starting 10.00am Wednesday 26th).
Ken Buckley
23rd July 2007
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