The With Profits Section of the Cheviot pension was set up by the Cheviot Trust as a money purchase arrangement. Over the years many hundreds of employers and their employees have participated in the Section, primarily from the legal sector.
From July 2014, the With Profits Section has been classified as a cash balance scheme and is subject to the scheme specific funding regime.
The first scheme specific funding valuation was completed as at 31 December 2014 following the introduction of a contribution rule which imposed funding obligations on a wide definition of With Profits Employers. On the basis of the valuation results, the Trustee concluded that no contributions were required from employers. The valuation assumed specific levels of mortality and expenses and took account of expected future investment returns from a 55% allocation to the Investment Fund for a period of eight years to reach a self-sufficiency funding level.
A further valuation was undertaken at 31 December 2017. The valuation shows a funding level on an ongoing funding basis of around 102%. On this basis, the Trustee does not consider it necessary to require contributions from employers.
The valuation reflects current mortality assumptions and makes specific provision for expenses over a five year period to the end of 2022. The allocation to the Investment Fund remains at 55% but the expectations for future returns have reduced slightly in light of market conditions. As a result of good returns in the past, the valuation still targets reaching a self-sufficiency level at the end of 2022. The position will be formally reviewed again at the end of 2020.
The Trustee is still targeting a self-sufficiency funding level at the end of 2022 (eight years from the first scheme specific valuation date). Self-sufficiency in this context means a funding position which allows the Trustee to reduce investment risk significantly but not completely. It currently makes no allowance for expenses from 2021. The actual position may be different.
The Trustee will at some stage consider, in consultation with employers, options to reach a buyout position, which may change the timescales involved. A buyout would mean the liability is secured with a provider and all employers would then be discharged.
The Trustee has discretion under the general terms of the contribution rule on how liabilities are allocated between employers. The contribution rule applies until the earlier of the discharge of the employer by the Trustee and the termination of the With Profits Section. The Trustee’s current policy is not to discharge employers. Employers therefore remain liable under the contribution rule even if their last member dies or transfers out.
In order to ensure fairness between employers and to provide a practical and transparent methodology for the future, the allocation is fixed on the basis of the liabilities just before the Section was reclassified in 2014. The intention is to apply the relevant percentage for each employer to any future funding, buyout or FRS102 deficit to calculate any contribution that may be due or any accounting liability. The Trustee reserves the right to withdraw, replace or amend this policy in the future.
A revised Statement of Investment Principles was signed in June 2018.
An updated Summary Funding Statement for members was issued in July 2018.
Quarterly funding level updates on a scheme funding and FRS102 basis are made available on this page.
The annual employers’ meeting was held on 6 June 2018. The presentation slides are also available on this page, together with a note of the questions raised at the meeting.
If you have any queries please contact the With Profits team using the following email address firstname.lastname@example.org
Disclaimer: Cheviot accepts no liability to third parties in respect of the information on this page and linked documents which is provided in good faith but is not legal advice or binding on the Trustee and should not be relied upon to determine any particular course of action. The trust deed and rules will override in the event of any inconsistency.
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