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.
Following a change in primary legislation, the With Profits Section is 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.
The Trustee has discretion under the general terms of the contribution rule about 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.
The Trustee has considered how best to ensure all employers bear an appropriate share of the With Profits Section’s obligations. In order to ensure fairness between employers and to provide a practical and transparent methodology for the future, the Trustee will fix the allocation on the basis of the liabilities just before the Section was reclassified in 2014. The intention is to apply this percentage 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.
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. 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 actuarial report as at 31 December 2016 showed the funding level on an ongoing funding basis had improved from 96% at the end of 2015 to 100% at the end of 2016, primarily as a result of improved investment returns.
As at 30 September 2017 the funding level had improved further to 104%. A more accurate allowance for expenses is likely to reduce this to around 101%. This revised expense allowance will be adopted together with any other changes in the scheme funding assumptions in the next valuation, as at 31 December 2017. The Trustee will consult with employers regarding the valuation basis in Q2 2018.
The Statement of Investment Principles was finalised in July 2015. It was reviewed in 2016 and also in May 2017 but no changes were required.
An updated Summary Funding Statement for members was issued in July 2017. Quarterly funding level updates on a scheme funding and FRS102 basis will also be made available on this page.
The annual employers meeting was held on 5 July 2017 and the slides are now available online. An annual Management Report in respect of 2016 is also available on this page.
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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