1. The BP Pension Fund is a large UK defined benefit pension scheme with over £20 billion in assets and 60,000 members. It currently has a surplus of around £6 billion.
2. BP recently rejected the trustees' recommendation to increase pensions in line with inflation, raising questions about conflicts of interest as mature defined benefit schemes reach surplus.
3. If the BP scheme were to be wound up as some indications suggest, the process sets members up to be victims as they have little involvement in deciding the fate of their pensions, while commercial interests will influence the financial outcome. Stronger protections for members are needed governing the transfer of schemes to insurers.
Accounting For Pensions And Postretirement BenefitsStephen Faucher
The document discusses accounting for pensions and postretirement benefits. It begins by distinguishing between accounting for an employer's pension plan versus a pension fund. It then describes the nature of pension plans, including defined contribution plans where the employer contributes a set amount each period, and defined benefit plans where the employer promises a specified pension benefit. The financial crisis negatively impacted many pension plans by reducing their asset values, creating funding deficits. The chapter will cover accounting for defined benefit pension plans and other postretirement benefits.
This document discusses defined benefit pension plans. It provides definitions and explanations of key terms related to DB plans, including funded status, accumulated benefit obligation, projected benefit obligation, plan surplus, total future liability, retired lives, and active lives. It also discusses factors that influence a DB plan's investment objectives and strategies, such as tax concerns, legal/regulatory issues, time horizon, plan features, and workforce characteristics. The document then provides an example of the primary objective, funding objective, investment objective, and return objective of a specific DB pension plan in Kenya.
The Pension Protection Fund (PPF) agrees with the assessment that typical closed corporate defined benefit (DB) pension schemes in the UK are not well aligned with the government's objectives of preserving the gilt market and increasing investment in UK productive finance. Most DB schemes are focused on reducing risk and volatility to reach self-sufficiency and buy-out as soon as possible. This has resulted in sales of productive finance assets in favor of gilts and bonds. The PPF believes a consolidator focused on long-term objectives could better achieve the government's goals through its scale, diversification, and professional management while providing security for members. As an existing consolidator, the PPF has demonstrated success investing 30% of its portfolio
This document provides information on the consultancy services offered by KD's Enterprize Consultancy Services. It discusses various services such as pension plan management, financial planning and counselling, document preparation, and metal works. The company assists with tasks like drafting investment policies, administering pension plans, advising trustees, and providing financial advice. It also discusses welding and metal fabrication services offered through an associate. The document aims to outline the full range of services available to clients.
Paul Maynard , the Pensions Minister spells out his intent on open DB schemesHenry Tapper
The letter from the Minister for Pensions responds to concerns raised by the Work and Pensions Select Committee about the proposed new defined benefit pension scheme funding regime. The Minister agrees that open schemes should not be forced into inappropriate de-risking. As a result, the new regulations will explicitly allow open schemes to consider new entrants and future accruals when setting funding plans. However, the Minister believes a separate regime for open schemes is unnecessary and could enable gaming of the system. The new regulations will link de-risking requirements to scheme maturity and employer covenant strength on a scheme-specific basis.
Accounting For Pensions And Postretirement BenefitsStephen Faucher
The document discusses accounting for pensions and postretirement benefits. It begins by distinguishing between accounting for an employer's pension plan versus a pension fund. It then describes the nature of pension plans, including defined contribution plans where the employer contributes a set amount each period, and defined benefit plans where the employer promises a specified pension benefit. The financial crisis negatively impacted many pension plans by reducing their asset values, creating funding deficits. The chapter will cover accounting for defined benefit pension plans and other postretirement benefits.
This document discusses defined benefit pension plans. It provides definitions and explanations of key terms related to DB plans, including funded status, accumulated benefit obligation, projected benefit obligation, plan surplus, total future liability, retired lives, and active lives. It also discusses factors that influence a DB plan's investment objectives and strategies, such as tax concerns, legal/regulatory issues, time horizon, plan features, and workforce characteristics. The document then provides an example of the primary objective, funding objective, investment objective, and return objective of a specific DB pension plan in Kenya.
The Pension Protection Fund (PPF) agrees with the assessment that typical closed corporate defined benefit (DB) pension schemes in the UK are not well aligned with the government's objectives of preserving the gilt market and increasing investment in UK productive finance. Most DB schemes are focused on reducing risk and volatility to reach self-sufficiency and buy-out as soon as possible. This has resulted in sales of productive finance assets in favor of gilts and bonds. The PPF believes a consolidator focused on long-term objectives could better achieve the government's goals through its scale, diversification, and professional management while providing security for members. As an existing consolidator, the PPF has demonstrated success investing 30% of its portfolio
This document provides information on the consultancy services offered by KD's Enterprize Consultancy Services. It discusses various services such as pension plan management, financial planning and counselling, document preparation, and metal works. The company assists with tasks like drafting investment policies, administering pension plans, advising trustees, and providing financial advice. It also discusses welding and metal fabrication services offered through an associate. The document aims to outline the full range of services available to clients.
Paul Maynard , the Pensions Minister spells out his intent on open DB schemesHenry Tapper
The letter from the Minister for Pensions responds to concerns raised by the Work and Pensions Select Committee about the proposed new defined benefit pension scheme funding regime. The Minister agrees that open schemes should not be forced into inappropriate de-risking. As a result, the new regulations will explicitly allow open schemes to consider new entrants and future accruals when setting funding plans. However, the Minister believes a separate regime for open schemes is unnecessary and could enable gaming of the system. The new regulations will link de-risking requirements to scheme maturity and employer covenant strength on a scheme-specific basis.
Small business owners have several options for establishing a retirement plan for their employees. The document discusses the need for retirement planning and outlines various plan types including defined benefit pensions, 401(k) plans, SEP-IRAs, and SIMPLE IRAs. It provides details on eligibility requirements, contribution limits, tax benefits and administration considerations for small business retirement plans. UBS Financial Services can help business owners evaluate their options and set up a plan that meets their needs.
The document summarizes key pension issues and actions for July 2013 as outlined by advisors Eversheds LLP. It discusses: 1) The regulator raising standards for DC governance with a new code of practice that schemes must meet; 2) Common investment funds needing to comply with an EU directive by appointing a corporate trustee or face penalties; 3) Steps trustees and providers should take to prevent pensions liberation fraud and protect members.
This document provides an overview of pension law in Kenya. It covers the following key topics:
1. Types of pension plans/schemes in Kenya, including government sponsored plans, personal plans, annuities, and employer sponsored plans.
2. Pension benefits for government employees in Kenya, established under the Pensions Act. Benefits include service pension, gratuities, and dependents pension.
3. Sample pension clauses for inclusion in employment contracts and letters of appointment, covering private sector and government pensions.
4. Judicial perspectives on construing pension clauses based on 5 case precedents, focusing on practical interpretation of scheme rules.
5. Essential characteristics for designing a pension trust deed
Pension plans provide income for retirees. There are two main types - defined benefit plans where employers promise specific payments, and defined contribution plans where payments depend on contributions and investment returns. Pension regulation aims to ensure adequate funding and protect benefits, as some plans have failed to pay full benefits. The future of pensions may include growth in variety of plans and influence of large pension funds as major stockholders.
Chapter 21
Capital Formation
Learning Objectives
1. Explain the differences between debt and
equity financing and the sources of each.
2.Explain the factors that influence the
desirability of alternative sources of
financing.
3.Explain what an investment banker does.
4.List the major bond rating agencies and
explain their role in the debt market.
5.List some of the pros and cons of retiring
debt early.
Two Key Questions
These questions will inform our discussion
of capital formation in the healthcare
industry:
1. How much capital is needed?
2. What sources of capital financing are
available?
1. How much capital is needed?
2. What sources of capital are available?
Two Key Questions, cont.
Distribution in Hospitals
How is the financing structure changing?
Courtesy of Cleverley & Associates
Three Ways to Generate
New Equity Capital
1. Profit retention: using net income to increase
equity (topic discussed extensively in GRIE
discussions)
2. Contributions: using philanthropic gifts to
increase equity
3. Sale of equity interests: using the issuance
of new ownership interest to increase equity
Contributions/Philanthropy
Giving USA 2016: The Annual Report on Philanthropy for the Year 2015. Researched and written by Indiana University Lilly Fami ly School of
Philanthropy.
Contributions/Philanthrop,
cont.
Giving USA 2016: The Annual Report on Philanthropy for the Year 2015. Researched
and written by Indiana University Lilly Family School of Philanthropy.
Contributions/Philanthrop,
cont.
• KEYS TO SUCCESS
1. Case statement: Defines why you need money
2. Designated development officer: Does not need to
be full-time; incentives should relate to giving
expectations
3. Trustee and medical staff involvement: People give
to people, not to organizations
4. Prospect lists: Know who in the community are prime
prospects for giving
5. Programs for giving: Variety of methods and means
to encourage giving
6. Goals: Define realistic targets for long-range planning
Issuance of Equity
• Taxable firms have relied heavily on equity
issuance to raise capital for years
• Interest in not-for-profit firms has been
generated by raising capital through using
restructured organizations and taxable
entities to raise capital
(Example of not-for-profit organizational structure on
next slide)
Issuance of Equity, cont.
FIGURE 21-1 A Parent Holding Company
Long-Term Debt
Financing
• KEY CHARACTERISTICS
1. Cost
2. Control
3. Risk
4. Availability
5. Adequacy
Long-Term Debt
Financing, cont.
KEY CHARACTERISTICS
1. Cost
• Interest rates are the most important
characteristic that affects the cost of alternative
debt financing.
Key term: coupon rate: fixed return of a long-term
debt instrument
Key term: basis point: 1/100th of 1%
• Issuance costs are simply those expenditures
that are essential to consummate the financing
• Reserve requireme ...
Diane Fanelli follows up her last article on rebalancing with a summary of reshuffling. Brian Wurpts discusses the basics of distributions, then presents some options for funding benefit distributions and the implications of benefit funding decisions on repurchase obligation.
CHEMAY Treasury Retirement Phase of Super Submission FINAL February 2024.pdfHenry Tapper
This submission provides comments on supporting members to navigate retirement income. It notes that retirement planning is complex, with retirees needing to navigate government systems, legislation, and income sources. The submission outlines the multiple potential sources of retirement income for Australians, including the Age Pension, superannuation, non-super investments, home equity, and part-time work. It emphasizes that superannuation is not necessarily the dominant income source for many retirees in APRA-regulated funds. The submission stresses the need to consider all pillars of the retirement system and how different income streams may change over time when supporting retirees.
This document discusses the potential effects of reclassifying withdrawable shares as liabilities instead of equity for the St. Lucia Civil Service Co-operative Credit Union (SLCSCCU) in accordance with revised IAS 32 standards. The reclassification could significantly impact the SLCSCCU's financial statements and ratios by increasing liabilities and debt ratios. It may also negatively affect the SLCSCCU's ability to attract new members and access lending as the financial statements would indicate lower equity. While the cooperative movement disagrees with the standards, strategies to increase permanent share capital could help mitigate some impacts in the interim.
The document proposes creating a new optional system for well-funded defined benefit pension schemes in the UK. The key elements of the proposal are: 1) Increasing Pension Protection Fund coverage to 100% of member benefits to fully protect members, and 2) Allowing schemes to extract surpluses on an ongoing basis with protections, in order to fund improved defined contribution savings, invest in UK businesses, and boost defined benefit member benefits. The proposal argues this could generate hundreds of billions of pounds in surpluses to be shared among defined benefit members, defined contribution savers, and investing in the UK economy, while incentivizing schemes to invest for growth rather than complete de-risking of investments.
Work and Pensions report into UK corporate DB fundingHenry Tapper
The document summarizes the findings of the Work and Pensions Committee on defined benefit pension schemes in the UK. Key points include: concerns that the new funding regime may require some open schemes to de-risk inappropriately; replacing the Pensions Regulator's objective to protect the Pension Protection Fund with a new objective to protect both past and future benefits; ensuring scheme members' reasonable expectations for benefit enhancements are met from any surplus; and addressing ongoing concerns about governance standards in some schemes.
This document summarizes a presentation by Polsinelli PC on managing withdrawal liability risks for employers participating in troubled multiemployer pension funds. It discusses changes made by the Multiemployer Pension Reform Act of 2014 that allow pension funds to reduce benefits, including for retirees. It provides an overview of evaluating a fund's status, collective bargaining strategies for either remaining in or withdrawing from a fund, and risk mitigation options. The presentation aims to help employers understand options and determine the best course of action regarding multiemployer pension fund participation.
The document discusses provident funds in Bangladesh. It defines a provident fund as a mandatory retirement savings scheme jointly established by employers and employees to provide long-term savings for employees upon retirement. Both employees and employers must contribute a percentage of the employee's monthly salary to the fund. The statutory contribution rate is 10% as prescribed by law. Upon retirement, employees can access the accumulated contributions and interest in their provident fund account. While provident funds provide an attachable and non-withdrawable source of funds for retirement, they may not generate sufficient returns to cover an individual's full post-retirement needs on their own.
This document discusses the importance of developing an education policy statement for 401(k) plans. It notes that the shift from defined benefit plans to defined contribution plans has increased the responsibility of employees to manage their retirement savings. An education policy statement can help plan sponsors meet their fiduciary duties to provide participants with sufficient education and tools. It should include objectives like describing investment options and performance, key investment concepts, asset allocation, and retirement goals. The policy statement also specifies how education will be delivered through meetings, media, and interactive tools.
The document discusses trustee duties and the role of the actuary regarding member options in pension schemes, particularly cash commutation which allows members to exchange accrued pension for a tax-free lump sum. It notes that trustees must exercise discretion reasonably by considering all relevant factors, such as scheme funding, and act impartially between member classes. The actuary confirms the reasonableness of factors like commutation rates, considering actuarial values and other relevant factors. Both trustees and actuaries should aim for fairness between interested parties when setting factors for member options.
The document summarizes key points from a pensions conference discussing the future of retirement. It provides an agenda for the day-long event covering topics like managing pension liabilities, smoother investment strategies, and the impact of scrapping the default retirement age. Historical context is given around how pensions were previously used and factors affecting their future like longevity, regulations, and the need for past liabilities not to dictate future strategies.
The document summarizes the evolution of America's pension system from defined benefit plans to defined contribution plans. It discusses the early history of defined benefit plans and the emergence of ERISA in response to failures to provide promised pension benefits. It also examines the current financial issues facing the Pension Benefit Guarantee Corporation and alternatives to traditional defined benefit plans that have emerged, including defined contribution plans and hybrid plans. Social Security reforms are also discussed.
Seven case studies of live Pension SuperFund transactions (27 April 2021)Jason Kenny
It is helpful to note that Pension SuperFund (PSF) see SEVEN drivers of deals, as follows:
1. M&A situation – removing DB pension consideration from the transaction.
2. Business restructuring/refinancing – the DB pension is preventing corporate actions.
3. Overseas parent – an opportune time to take DB pensions off the UK P&L.
4. Active sponsor – worried about increasing pension risks and the new financial and criminal sanctions from TPR.
5. Concerned trustees – worried about weak or volatile sponsor covenant which is underpinning the security of members' benefits.
6. Pre-insolvency – trying to save the sponsors' business in addition to protecting members' full benefits.
7. PPF+ situation – PSF are likely to provide far better member outcomes than a buyout.
Here are seven case studies, one of each of the drivers.
Each case study is typical of many other cases that share the same drivers. Where applicable, we have also added a section at the end to bullet point the more interesting variations and flexibility that PSF has developed.
For confidentiality reasons, we have altered some details and figures.
1 M&A - drivers 1, 2, 5
2 Normal case - drivers 4, 5
3 Overseas parent/business restructuring - drivers 2, 3, 4, 5
4 “Brexit casualty” - drivers 2, 3, 5
5 "Pandemic Shock" but closer to PSF entry price than they realised - drivers 3, 4, 5
6 Removing pension risk and volatility (PE-owned) - drivers 4, 5, 6 (+ private equity)
7 PPF+ - drivers 5, 7
jay.kenny@thepensionsuperfund.com
Coordination of Benefits and its implications to Health PlansCitiusTech
Coordination of Benefits (COB) allows plans that provide health and/or prescription coverage with Medicare to determine their respective payment responsibilities (i.e. determine which insurance plan has the primary payment responsibility and the extent to which the other plans will contribute when an individual is covered by more than one plan). Member’s primary plan has the responsibility of paying claims first, followed by coverage by remaining plans. This process of splitting the costs across multiple coverage is called COB. This document introduces COB and how health plans and members benefit through COB regulations.
Small business owners have several options for establishing a retirement plan for their employees. The document discusses the need for retirement planning and outlines various plan types including defined benefit pensions, 401(k) plans, SEP-IRAs, and SIMPLE IRAs. It provides details on eligibility requirements, contribution limits, tax benefits and administration considerations for small business retirement plans. UBS Financial Services can help business owners evaluate their options and set up a plan that meets their needs.
The document summarizes key pension issues and actions for July 2013 as outlined by advisors Eversheds LLP. It discusses: 1) The regulator raising standards for DC governance with a new code of practice that schemes must meet; 2) Common investment funds needing to comply with an EU directive by appointing a corporate trustee or face penalties; 3) Steps trustees and providers should take to prevent pensions liberation fraud and protect members.
This document provides an overview of pension law in Kenya. It covers the following key topics:
1. Types of pension plans/schemes in Kenya, including government sponsored plans, personal plans, annuities, and employer sponsored plans.
2. Pension benefits for government employees in Kenya, established under the Pensions Act. Benefits include service pension, gratuities, and dependents pension.
3. Sample pension clauses for inclusion in employment contracts and letters of appointment, covering private sector and government pensions.
4. Judicial perspectives on construing pension clauses based on 5 case precedents, focusing on practical interpretation of scheme rules.
5. Essential characteristics for designing a pension trust deed
Pension plans provide income for retirees. There are two main types - defined benefit plans where employers promise specific payments, and defined contribution plans where payments depend on contributions and investment returns. Pension regulation aims to ensure adequate funding and protect benefits, as some plans have failed to pay full benefits. The future of pensions may include growth in variety of plans and influence of large pension funds as major stockholders.
Chapter 21
Capital Formation
Learning Objectives
1. Explain the differences between debt and
equity financing and the sources of each.
2.Explain the factors that influence the
desirability of alternative sources of
financing.
3.Explain what an investment banker does.
4.List the major bond rating agencies and
explain their role in the debt market.
5.List some of the pros and cons of retiring
debt early.
Two Key Questions
These questions will inform our discussion
of capital formation in the healthcare
industry:
1. How much capital is needed?
2. What sources of capital financing are
available?
1. How much capital is needed?
2. What sources of capital are available?
Two Key Questions, cont.
Distribution in Hospitals
How is the financing structure changing?
Courtesy of Cleverley & Associates
Three Ways to Generate
New Equity Capital
1. Profit retention: using net income to increase
equity (topic discussed extensively in GRIE
discussions)
2. Contributions: using philanthropic gifts to
increase equity
3. Sale of equity interests: using the issuance
of new ownership interest to increase equity
Contributions/Philanthropy
Giving USA 2016: The Annual Report on Philanthropy for the Year 2015. Researched and written by Indiana University Lilly Fami ly School of
Philanthropy.
Contributions/Philanthrop,
cont.
Giving USA 2016: The Annual Report on Philanthropy for the Year 2015. Researched
and written by Indiana University Lilly Family School of Philanthropy.
Contributions/Philanthrop,
cont.
• KEYS TO SUCCESS
1. Case statement: Defines why you need money
2. Designated development officer: Does not need to
be full-time; incentives should relate to giving
expectations
3. Trustee and medical staff involvement: People give
to people, not to organizations
4. Prospect lists: Know who in the community are prime
prospects for giving
5. Programs for giving: Variety of methods and means
to encourage giving
6. Goals: Define realistic targets for long-range planning
Issuance of Equity
• Taxable firms have relied heavily on equity
issuance to raise capital for years
• Interest in not-for-profit firms has been
generated by raising capital through using
restructured organizations and taxable
entities to raise capital
(Example of not-for-profit organizational structure on
next slide)
Issuance of Equity, cont.
FIGURE 21-1 A Parent Holding Company
Long-Term Debt
Financing
• KEY CHARACTERISTICS
1. Cost
2. Control
3. Risk
4. Availability
5. Adequacy
Long-Term Debt
Financing, cont.
KEY CHARACTERISTICS
1. Cost
• Interest rates are the most important
characteristic that affects the cost of alternative
debt financing.
Key term: coupon rate: fixed return of a long-term
debt instrument
Key term: basis point: 1/100th of 1%
• Issuance costs are simply those expenditures
that are essential to consummate the financing
• Reserve requireme ...
Diane Fanelli follows up her last article on rebalancing with a summary of reshuffling. Brian Wurpts discusses the basics of distributions, then presents some options for funding benefit distributions and the implications of benefit funding decisions on repurchase obligation.
CHEMAY Treasury Retirement Phase of Super Submission FINAL February 2024.pdfHenry Tapper
This submission provides comments on supporting members to navigate retirement income. It notes that retirement planning is complex, with retirees needing to navigate government systems, legislation, and income sources. The submission outlines the multiple potential sources of retirement income for Australians, including the Age Pension, superannuation, non-super investments, home equity, and part-time work. It emphasizes that superannuation is not necessarily the dominant income source for many retirees in APRA-regulated funds. The submission stresses the need to consider all pillars of the retirement system and how different income streams may change over time when supporting retirees.
This document discusses the potential effects of reclassifying withdrawable shares as liabilities instead of equity for the St. Lucia Civil Service Co-operative Credit Union (SLCSCCU) in accordance with revised IAS 32 standards. The reclassification could significantly impact the SLCSCCU's financial statements and ratios by increasing liabilities and debt ratios. It may also negatively affect the SLCSCCU's ability to attract new members and access lending as the financial statements would indicate lower equity. While the cooperative movement disagrees with the standards, strategies to increase permanent share capital could help mitigate some impacts in the interim.
The document proposes creating a new optional system for well-funded defined benefit pension schemes in the UK. The key elements of the proposal are: 1) Increasing Pension Protection Fund coverage to 100% of member benefits to fully protect members, and 2) Allowing schemes to extract surpluses on an ongoing basis with protections, in order to fund improved defined contribution savings, invest in UK businesses, and boost defined benefit member benefits. The proposal argues this could generate hundreds of billions of pounds in surpluses to be shared among defined benefit members, defined contribution savers, and investing in the UK economy, while incentivizing schemes to invest for growth rather than complete de-risking of investments.
Work and Pensions report into UK corporate DB fundingHenry Tapper
The document summarizes the findings of the Work and Pensions Committee on defined benefit pension schemes in the UK. Key points include: concerns that the new funding regime may require some open schemes to de-risk inappropriately; replacing the Pensions Regulator's objective to protect the Pension Protection Fund with a new objective to protect both past and future benefits; ensuring scheme members' reasonable expectations for benefit enhancements are met from any surplus; and addressing ongoing concerns about governance standards in some schemes.
This document summarizes a presentation by Polsinelli PC on managing withdrawal liability risks for employers participating in troubled multiemployer pension funds. It discusses changes made by the Multiemployer Pension Reform Act of 2014 that allow pension funds to reduce benefits, including for retirees. It provides an overview of evaluating a fund's status, collective bargaining strategies for either remaining in or withdrawing from a fund, and risk mitigation options. The presentation aims to help employers understand options and determine the best course of action regarding multiemployer pension fund participation.
The document discusses provident funds in Bangladesh. It defines a provident fund as a mandatory retirement savings scheme jointly established by employers and employees to provide long-term savings for employees upon retirement. Both employees and employers must contribute a percentage of the employee's monthly salary to the fund. The statutory contribution rate is 10% as prescribed by law. Upon retirement, employees can access the accumulated contributions and interest in their provident fund account. While provident funds provide an attachable and non-withdrawable source of funds for retirement, they may not generate sufficient returns to cover an individual's full post-retirement needs on their own.
This document discusses the importance of developing an education policy statement for 401(k) plans. It notes that the shift from defined benefit plans to defined contribution plans has increased the responsibility of employees to manage their retirement savings. An education policy statement can help plan sponsors meet their fiduciary duties to provide participants with sufficient education and tools. It should include objectives like describing investment options and performance, key investment concepts, asset allocation, and retirement goals. The policy statement also specifies how education will be delivered through meetings, media, and interactive tools.
The document discusses trustee duties and the role of the actuary regarding member options in pension schemes, particularly cash commutation which allows members to exchange accrued pension for a tax-free lump sum. It notes that trustees must exercise discretion reasonably by considering all relevant factors, such as scheme funding, and act impartially between member classes. The actuary confirms the reasonableness of factors like commutation rates, considering actuarial values and other relevant factors. Both trustees and actuaries should aim for fairness between interested parties when setting factors for member options.
The document summarizes key points from a pensions conference discussing the future of retirement. It provides an agenda for the day-long event covering topics like managing pension liabilities, smoother investment strategies, and the impact of scrapping the default retirement age. Historical context is given around how pensions were previously used and factors affecting their future like longevity, regulations, and the need for past liabilities not to dictate future strategies.
The document summarizes the evolution of America's pension system from defined benefit plans to defined contribution plans. It discusses the early history of defined benefit plans and the emergence of ERISA in response to failures to provide promised pension benefits. It also examines the current financial issues facing the Pension Benefit Guarantee Corporation and alternatives to traditional defined benefit plans that have emerged, including defined contribution plans and hybrid plans. Social Security reforms are also discussed.
Seven case studies of live Pension SuperFund transactions (27 April 2021)Jason Kenny
It is helpful to note that Pension SuperFund (PSF) see SEVEN drivers of deals, as follows:
1. M&A situation – removing DB pension consideration from the transaction.
2. Business restructuring/refinancing – the DB pension is preventing corporate actions.
3. Overseas parent – an opportune time to take DB pensions off the UK P&L.
4. Active sponsor – worried about increasing pension risks and the new financial and criminal sanctions from TPR.
5. Concerned trustees – worried about weak or volatile sponsor covenant which is underpinning the security of members' benefits.
6. Pre-insolvency – trying to save the sponsors' business in addition to protecting members' full benefits.
7. PPF+ situation – PSF are likely to provide far better member outcomes than a buyout.
Here are seven case studies, one of each of the drivers.
Each case study is typical of many other cases that share the same drivers. Where applicable, we have also added a section at the end to bullet point the more interesting variations and flexibility that PSF has developed.
For confidentiality reasons, we have altered some details and figures.
1 M&A - drivers 1, 2, 5
2 Normal case - drivers 4, 5
3 Overseas parent/business restructuring - drivers 2, 3, 4, 5
4 “Brexit casualty” - drivers 2, 3, 5
5 "Pandemic Shock" but closer to PSF entry price than they realised - drivers 3, 4, 5
6 Removing pension risk and volatility (PE-owned) - drivers 4, 5, 6 (+ private equity)
7 PPF+ - drivers 5, 7
jay.kenny@thepensionsuperfund.com
Coordination of Benefits and its implications to Health PlansCitiusTech
Coordination of Benefits (COB) allows plans that provide health and/or prescription coverage with Medicare to determine their respective payment responsibilities (i.e. determine which insurance plan has the primary payment responsibility and the extent to which the other plans will contribute when an individual is covered by more than one plan). Member’s primary plan has the responsibility of paying claims first, followed by coverage by remaining plans. This process of splitting the costs across multiple coverage is called COB. This document introduces COB and how health plans and members benefit through COB regulations.
Similaire à BP action group letter to the Work and Pensions committee (20)
The document outlines guidance for connecting pension schemes to the UK's new pensions dashboards programme, including a connection deadline of 31 October 2026 and staging timetable for large and medium schemes to connect between 2025-2026. It discusses establishing connection standards and user testing for 2024 launches. Several industry groups are collaborating on the programme to ensure individuals can access their pension information securely online through the dashboards. Providers are encouraged to prepare for legal obligations, data, and their method of connection.
The document summarizes a report from Aon on the state of UK defined contribution pensions. It notes that:
1) Retirement living standards set by the Pensions and Lifetime Savings Association increased significantly, requiring higher expenditures in retirement.
2) As a result, Aon's UK DC Pension Tracker, which measures expected retirement incomes, fell sharply over the quarter with savers further from a comfortable standard of living.
3) The Pension Tracker has now returned to levels from 2020, suggesting retirement savings have not improved in the last three years for most savers.
Con Keating's coffee morning presentation.pptxHenry Tapper
The document compares asset and liability estimates from different sources including TPR, ONS, and PPF over time. Key findings include:
- ONS estimates of total assets are consistently lower than TPR and PPF estimates
- TPR estimates funding ratios are higher than ONS estimates, implying fewer schemes in deficit
- Discrepancies could be due to differences in discount rates and methodology between sources
- The accuracy of estimates has implications for assessing the costs of new pension regulations to sponsors
JD ED Strategy Policy and Analysis. TPrpdfHenry Tapper
The Executive Director of Strategy, Policy & Analysis at the Pensions Regulator is responsible for developing the regulatory framework to enable market innovation while protecting savers. The role involves leading strategy, policy, economics, risk management, and data analysis functions. As a member of the Executive Committee and Board, the Director also provides leadership across the organization and engagement with external stakeholders. Key responsibilities include developing strategic plans, policies, and regulatory solutions; overseeing research, risk analysis, and market insights; and driving organizational change and performance.
2024-3-29 - PR Newswire - Federal Judge Says BP Must Reform its Pension Plan.pdfHenry Tapper
A group of retirees from Standard Oil of Ohio (Sohio) filed a lawsuit against BP in 2016 alleging that BP had misled them about changes made to their pension benefits in 1989. After an eight year legal battle, a federal judge recently ruled in favor of the retirees, finding that BP had committed fraud and violated federal law regarding employee retirement benefits. The ruling could potentially impact around 7,000 former BP employees. The judge ordered BP to provide equitable relief to remedy the situation, and the case will now move to a next phase to determine what actions BP must take. The retirees and their attorneys view this as an important victory that upholds protections for workers' retirement benefits.
Press release from the BP Pensioner Group on the WPC DB reportHenry Tapper
The Work and Pensions Committee report calls for changes to the proposed regulatory approach for defined benefit pension schemes in order to ensure their long-term viability. While their numbers have declined in recent years, defined benefit schemes remain important for savers and the economy. However, two decades of cautious regulation have led to low-risk investment approaches that threaten the sustainability of remaining open schemes. The report recommends allowing more flexibility in investments and funding to take advantage of improved funding levels and prevent premature closure of open schemes. It also calls for improved governance standards and legislation to support pension consolidation to strengthen defined benefit pensions for the future.
Advice Guidance Boundary Review Evidence Final Feb 24.pdfHenry Tapper
This document provides evidence from Ferret Information Systems in response to the FCA's Advice Guidance Boundary Review. It summarizes the key points made in the document, including that: 1) the review should consider sources of advice beyond regulated financial advice, as many seek non-regulated advice; 2) the advice gap is larger than implied since only 8% seek regulated advice; and 3) personalized advice is still possible without product recommendations by assessing different decumulation choices based on individual circumstances. The submission argues the review could better address advice needs for those on low incomes interacting with the benefits system.
This document analyzes the potential benefits of transitioning the UK's large unfunded public sector pension schemes to a funded model. Such a move could enable them to become global investment powerhouses, provide cheaper financing for the government, and deliver better outcomes for taxpayers and public sector workers. However, it would also face significant political opposition and require bold leadership. The document argues that while challenging, transitioning these schemes now could generate substantial long-term economic and fiscal benefits for the UK.
letter to the EF and Premiership about pension liabilitiesHenry Tapper
1. Pension SuperFund Capital proposes taking on the pension obligations and liabilities of the Football League Pension Scheme to relieve the clubs of future funding risks and costs.
2. Under the proposal, Pension SuperFund Capital would provide a new company to join the pension scheme and assume full risk of the pension obligations on a "last man standing" basis, providing certainty for members and clubs. It would also provide a 10% capital buffer to improve funding and allow for benefit enhancements.
3. The proposal would benefit football by supporting struggling non-league clubs in the scheme, providing upside sharing with members, and dedicating 5% of upside to grassroots football programs in the UK. Pension SuperFund
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Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
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Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
办理美国UNCC毕业证书制作北卡大学夏洛特分校假文凭定制Q微168899991做UNCC留信网教留服认证海牙认证改UNCC成绩单GPA做UNCC假学位证假文凭高仿毕业证GRE代考如何申请北卡罗莱纳大学夏洛特分校University of North Carolina at Charlotte degree offer diploma Transcript
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BP action group letter to the Work and Pensions committee
1. Written evidence from the BP pensioners group DBP0080
After the closure date of written submissions to this Inquiry passed on 26 April 2023,
several issues that we believe are highly relevant to your Inquiry have come to light
concerning one of the UK’s largest Defined Benefit Pension Schemes – The BP
Pension Fund.
These include:
1. The decision last month of the sponsoring company to overrule the clear
recommendation of the Fund Trustees and block a discretionary increase in the
pensions payable to the members which would part-recognise the impact of
inflation. The company has given several – but changing - reasons for its decision
including financial impact on the Fund (despite the trustees proposing it) and BP’s
desire for equity of treatment between stakeholders in the UK and around the world
(despite the BP UK pension scheme being UK based and subject to UK law).
2. BP’s Annual Report has revealed a very large surplus of around £6 billion has
accumulated in the Pension Fund. The Annual Report makes an assumption about
the Company’s right to recover that surplus - which we believe is in conflict with the
interests and rights of the Pension Fund members.
3. Indications that the Fund Trustees and the sponsoring company have begun to
progress plans to ‘hive-off’ the Fund to third party insurers now that it is closed to
new members and new accruals. There has been no consultation with members
about such a step.
In the short time since these matters came to light, over 900 members of the BP
Fund have contacted BP or the Trustees to express their alarm at these
developments and have demanded BP and the Trustees properly consult with the
Fund members and most importantly explain how the above three factors are inter-
woven.
2. As members of the Fund, we have volunteered to act as coordinators for this group
of Pensioners – a group that is growing fast – and make representations to BP on
their behalf. But BP has outright rejected our approaches.
We believe the issues raised with this Fund and its governance are pertinent to many
other UK DB Funds. For that reason, we very much welcome the opportunity to
provide your Committee with some brief evidence post-deadline. This evidence,
focusing on Q7 ‘How should scheme surpluses be treated?’, is attached.
Our evidence is confined to Question 7:
How should scheme surpluses be treated? For example, should they remain in the
scheme or be shared between the employers and scheme members? Are the issues
different between open and closed schemes?
We provide this evidence on behalf of a group of over 900 members and beneficiaries of a
major UK Defined Benefits (DB) pension scheme. Like many UK DB schemes, it has been
closed to new members since 2010 and closed to existing member accruals since 2021. This
scheme currently possesses a surplus.
In 2022, for the first time, the rise in pension did not keep up with inflation. BP has also
recently rejected the BP Pension Fund Trustees recommendation to increase the annual
pension paid at May 2023 by 9% to (partly) recognise inflationary pressures on Fund
members. This decision and its reasoning raise important questions about the conflict of
interest that companies like BP have as DB pension funds – especially those in surplus -
reach maturity.
While we are in dispute with BP about its decision to reject the discretionary increase in
pensions, our contribution here is confined to general points we believe are pertinent to UK
DB funds in general and this committee’s Inquiry.
1. Summary
1.1 The Termination and subsequent winding up of a Defined Benefit pension scheme
creates considerable risk for scheme members. Trust Deed arrangements for schemes are, if
similar to BP’s, unsuited to protection of scheme members’ interests and, consequently,
stronger arrangements should be afforded to scheme members.
1.2 Commercial considerations will influence the financial outcome of this process. If similar
to BP’s, an employer/sponsor first issues the Trustees with a notice of termination.
Subsequently, negotiations between the Trustees, many nominated by the
employer/sponsor and an insurance company will lead to the insurance company trying to
capture all or part of a scheme’s surplus. Any residual surplus is then available to Trustees to
decide whether to improve member benefits beyond those provided by the insurance
3. company. However, the employer/sponsor has the opportunity to withhold permission for
this enhancement and capture the residual surplus to improve its financial position.
1.3 Scheme members are passive observers in this process, relying on their interests being
defended by the employer/sponsor and Trustees (some member-nominated). Effectively
excluded from the process of deciding the fate of their pensions, they are set up to be the
victims.
1.4 We urge the Committee to conclude that more rights and protections are afforded to
defined benefit scheme members – particularly governing the process of transfer/sale to
the insurance industry.
2. Context
BP Pension Fund assets are substantial: £20bn (UK), £27bn (total)1
The UK pension plan had a surplus of £6bn2
There are some 60,000 members in the UK DB scheme3
o 33,000 pensioners
o 10,000 dependents
o 17,000 deferred
Of these, some 16,000 are aged in their 80s and 90s.
The average BP DB pension: £18,000 pa4
2.1 Fund surpluses are one piece of a jig-saw and, accordingly, have to be considered
against the wider picture.
2.2 Personal decisions whether to join a company, remain with it and ultimately resign or
retire, have at their heart an individual’s consideration of the total value and composition of
the broad employment package offered by an employer.
2.3 Personal decisions fundamentally hinge on the balance between cash reward during
employment (e.g. salary) and deferred cash reward in the form of a pension5. These are
‘life-decisions’: among a handful of very high-consequence decisions people take.
2.4 Salary and pension are indivisible for employees / scheme members. They are
intertwined. Changes in one area inevitably have a substantial impact on the other.
2.5 Possibly the greatest decisions employees in DB schemes make, is whether to cash-in
their pensions on or after retirement.
3. Who Owns The Surplus
3.1 Since 1928 the BP UK pension fund assets have come from:
a) payments into the Fund made by BP as part of each employee’s benefits package6;
1 BP Annual Report 2022 s24 p231 - $25bn (UK), $34bn (total) converted at 1$ = £0.80
2 The $25.1bn fair value of the UK assets minus the $17.5bn future UK benefit obligations at 1$ = £0.80
3 BP Pension Fund - Trustee’s Annual Report and Financial Statements 31Dec21 p11
4 Benefits paid (BP Pension Fund - Trustee’s Annual Report and Financial Statements 31Dec21 p26) / no.
pensioners + dependents (p11)
5 Putting so-called employment hygiene factors to one side (e.g. holiday entitlement, maternity leave, etc)
because legislation has improved this aspect of employment
4. b) Additional Voluntary Contributions e.g. salary sacrifice by employees;
c) occasional additional payments by BP to remedy any deficit;
d) transfers into / out of the Fund as a consequence of BP’s acquisitions, divestments
and mergers; and
e) capital appreciation/gains and investment income.
3.2 Pension funds are governed by relevant legislation, including Acts of Parliament and
regulations, as well as their specific administrative agreements. The BP Pension Fund’s
agreements (Trust Deed and Trust Rules) record the detailed contractual arrangements
between employer, fund Trustees, fund managers and scheme members. Booklets issued to
scheme members summarise the detail.
3.3 The BP Pension Fund is legally owned by its Trustees, its assets being “… held in trust and
are completely separate from BP plc’s finances”7. However, the assets and liabilities appear
on BP’s Balance Sheet, with associated payroll costs having been taken through the Profit &
Loss account. The Trustees (a mix nominated from BP and scheme members, all appointed
by BP) are required to act in line with the pension scheme trust deed and rules; in the best
interests of the pension scheme members; and impartially, prudently, responsibly and
honestly.
3.4 The Fund has in the past been underfunded at times but adequacy was restored by BP
committing to a medium-term funding agreement
3.5 The Fund is now in surplus and this surplus is available to meet the future needs of the
scheme members – subject to the terms of the Trust Deed.
4. The fate of the surplus
4.1 The employer has the right to give notice of Termination of the Fund to the Fund’s
Trustees. The Trust Deed describes what will occur when the Trustees wind up the Fund
(refer Annex). In summary:
Existing payments have first call on the Fund and continue until formal termination
of the fund;
The second call on the Fund is the cost of winding down the Fund;
Third, remaining assets will be used to either buy insurance policies for scheme
members (a so-called Buy-Out) or transfer amounts to alternative funds requested
by individual scheme members. These new benefits must closely match those
previously provided by the Fund; and
Finally, any residual amount, with the agreement of BP, can be used by the
Trustees to enhance the benefits of scheme members. Any residual amount after
this enhancement is returned to BP.
4.2 Clearly, it is not in BP’s commercial interest to allow a fund surplus to be used to
enhance scheme member benefits although that is the clear intent and primacy of the
6 On closing its DB scheme, BP gave employees a 20% salary uplift to compensate for moving to a DC scheme
7 An important message to all members of the BP Pension Fund, CEO BP Pension Fund Trustees Ltd., June 2010
5. relevant clause of the Trust Deed. But it is clearly in BP’s commercial interest for any surplus
remaining on BP’s balance sheet to return to itself. Even for a company of the scale of BP,
the surplus is significant – potentially $bns and the claim to the surplus is already included in
BP’s accounts.
4.3 The Trust Deed and Trust Rules have evolved since the scheme was first offered to staff,
often in response to legislative changes. Similarly, consultation with scheme members has
evolved, timed around changes to the scheme and its administration. Future consultation
with scheme members would be essential if: (a) the legislative framework changes; and/or
(b) an employer and Fund Trustees consider any Buy-Out/transfer.
5. Size of Surplus
5.1 Surpluses can be calculated using a range of methodologies.
5.2 BP reports in its statutory accounts a deficit or surplus based on market-based
valuations The Fund is in rude health using this measure.
5.3 The Fund also calculates its health using a more conservative methodology, one that
insurance companies might use when assessing the assets and liabilities of a fund Buy-Out.
Currently, BP’s fund has an adequate surplus using this approach
5.4 Inevitably, an insurance company’s list of valuation assumptions will include three items
that are not currently faced by the Fund:
Unexpected risk events – a financial buffer will be required to meet inflation-driven
increases in pension payments, whether guaranteed or discretionary, and risks to
asset values. Whereas the BP Pension Fund has a guarantee from BP that it will
financially support pension rises up to 5% RPI.
Corporate overheads – the publicly quoted insurance company carries considerably
more overhead than the narrower management of BP’s fund.
Profit and dividend – insurance company shareholders have to receive an adequate
return.
5.5 Together, these three items will consume part of the Fund at Buy-Out/transfer and
reduce the surplus available for distribution to scheme members as enhanced benefits or
returned to BP.
5.6 In a nutshell, the scheme members, who accumulated the Fund assets over many
decades as part of their terms and conditions of employment, would in the event of sale to
an insurance company have a portion of their surplus transferred to the insurance company
for no gain in benefits. I.e. the pensioners would foot the bill for the transfer.
5.7 In this BP case, as sponsor of the Fund BP has the power to terminate the scheme under
the Trust Deed but it does not have the power to approach or negotiate with third parties.
On notice of termination being served, it falls to the Trustees, as the legal owner of the Fund
assets, to explore winding up options that may include the purchase of an insurance policy
or annuity contract from an insurance company, lump sum payments or transfers.
5.8 Substantial conflicts of interest exist in such a buy-out/transfer transaction:
6. The sponsor of the Fund, BP in this case, would be seeking to maximise return to its
shareholders. So, in advance of terminating the Fund they are motivated to:
(a) reduce the insurance company’s uncertainty about future liabilities e.g.
establishing a precedent of no discretionary increases (as has just occurred in
BP’s case, for the first time ever);
(b) avoid having to add funds to complete the winding up transactions and
contract the transaction in a manner that enhances its reported financial results.
c) preserve the size of the surplus, at the expense of the Fund members, with the
aim of maximising its own opportunity for a windfall.
Any buyer of the Fund will: (a) seek minimum obligations and uncertainty; (b)
maximum asset transfer value; and
The beneficiaries, the pensioners, will seek, as a minimum, the continuation of the
retirement terms they were led to expect over decades of employment and
retirement. In BP’s case this would include making good the recent 11% erosion in
the value of the pension paid with any surplus that remains being, as per the Trust
Deed (4.1 above), used by the Trustees to enhance the benefits of scheme members
with the agreement of BP.
5.9 This raises the prospect of unseemly squabbles between the DB funds’ legal owners (the
Trustees), potential buyers, and subsequently between the Trustees and the sponsoring
company regarding any residual surplus. Each party has different interests, misaligned with
the fund beneficiaries - who essentially ‘own’ the fund including its surpluses.
6. Concluding Remarks
6.1 While the ownership and governance of a fund including its surplus should be
contractually unambiguous, commercial considerations will heavily influence the scale of
the surplus at Buy-Out/transfer and how the surplus is distributed between employer, Buy-
Out insurance company and scheme members.
6.2. The BP Pension Fund provides a useful exemplar of the conflict of interest that will arise
between sponsor, trustee and members for DB funds approaching maturity. The Fund has a
strong surplus. The trustees have recommended increases more closely aligned to inflation.
But the Sponsor has withheld its consent on what are considered to be spurious grounds. As
a consequence, over the past two years the members are 11% worse off in real terms.
6.3 Government has stated that it is not prepared to countenance a reduction in employer
liabilities which might simply facilitate a transfer to shareholders of cash members are
relying on to support them in retirement8. However, this appears to be happening in plain
sight, at least in BP’s case
6.4 Scheme members, the beneficiaries of the trust fund, have no opportunity to influence
the outcome of commercial negotiations for a Buy-Out/transfer and are therefore likely to
suffer sub-optimum future benefits.
8 Protecting Defined Benefit Pension Schemes – 2018 White Paper, CM9591, para 218
7. 6.5 We urge the Committee to conclude that more rights and protections are afforded to
defined benefit scheme members – particularly governing the process of transfer/sale to
the insurance industry.