The Trustee is currently conducting a tender process for all actuarial work, including the Scheme Actuary appointment for the With Profits Section. The review has been prompted by the retirement of Jonathan Punter from the appointment after ten years and the Trustee’s view that it was an appropriate time to put the actuarial work out to tender. Peter Black, from XPS Pensions (formerly Punter Southall) has been appointed as Scheme Actuary in the interim. The annual employers’ meeting has been deferred until the tender process is completed.
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. With effect from July 2014, the With Profits Section was re-classified as a cash balance scheme and is therefore subject to the scheme specific funding regime.
The latest valuation was undertaken as at 31 December 2017. The valuation showed a funding level on an ongoing funding basis of around 102%. On this basis, the Trustee did 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 Actuary has produced an Actuarial Report as at 31 December 2018, available on this page, which shows a deterioration of the funding position following less positive returns in 2018. The funding level has improved during 2019 – see June 2019 funding update.
The Trustee is targeting a self-sufficiency funding level at the end of 2022. 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, which is regularly reviewed, 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 relevant percentage for each employer will be applied 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.
Cheviot is able to re-claim the majority of VAT relating to the operational costs of the With Profits Section. We have previously provided VAT only invoices for the period 1 January 2012 to 31 March 2016, we will be issuing invoices for the period 1 April 2016 to 31 March 2019 shortly.
If your company is VAT registered, payment of this invoice will be at nil cost to your business, as it can be recovered within your own VAT return.
The With Profits Statement of Investment Principles 2019 is available here.
The Summary Funding Statement for members was issued in August 2019 and is available here.
Quarterly funding level updates on a scheme funding and FRS102 basis are made available on this page. Please use these updates to update your auditors.
If you have any queries please contact the With Profits team using the following email address email@example.com
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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