CWU SPONSORED PENSION SCHEMES

[TrueBlueTerrier]

Letter to Branches

No. 179/11
Ref: TK/PM/sn
Date: 23/02/2011

CWU SPONSORED PENSION SCHEMES

POLICY

CWU General Conference 2010 carried the following motion, number 54.

Conference notes with concern that despite the carriage of Motion 60A at Annual Conference 2007 the CWU still operates with 3 separate pension schemes which has cost the union over £500,000 in administration costs since 2007.

Conference further notes that the CWU’s pension deficit, like many other defined benefit schemes e.g. Royal Mail, British Telecom, is growing at an alarming rate and if left unchecked will eventually bankrupt the CWU.

Therefore Conference agrees the following:

1. That following Annual Conference the NEC immediately enter into a process with the 3 pension schemes with the view of finally amalgamating the 3 existing schemes into 1 by no later than Annual Conference 2011. The NEC will update branches on the progress on a regular basis.

2. At the same time the NEC will look into the future funding of its pension scheme in order to ensure that the CWU employee’s pensions remain secure. However this must also recognise the fact that the union’s income going forward will be greatly reduced. The NEC will therefore produce a report to Annual Conference 2011 with its findings and recommendations.
LTB828/10 dated 27th September and LTB1151/10 dated 22 December 2010 gave updates on this issue with the latter giving information on the legal verbal advice received on the options facing the CWU. I indicated in that LTB that when received the written legal advice would be published to Branches in order that any discussion can take place on a factual basis as opposed to being fuelled by supposition.

ADVICE

That advice is attached and the conclusions drawn in LTB1151/10 are confirmed.

Obviously Branches are free to draw their own conclusions from the advice however it is worth drawing out the headline comments/conclusions as they pertain to the overarching objective i.e. full scheme merger.

Firstly the report highlights the potential for cost savings that we would expect to accrue from scheme mergers. It then goes on to point out what the Trustees of the schemes would need to be assured on with regard to protecting members benefits, indeed this is our policy under paragraph 2 of the above motion. The advice highlights the different funding levels although makes clear that as they are not actuaries they can not be specific on the amounts of monies referred to. However, as was detailed in LTB /10 the amount of money needed to ensure that Trustees voting for a fully merged scheme secure members benefits, as they are required to by law is, based on latest valuations approximately £10 million.

Clearly the CWU does not have that type of spare cash and even if we did using it in this manner would not be a sensible use of funds. Therefore as the advice points out p6/7 “Given the amounts of monies which it is likely the Trustees of the NCUSSS would require to be injected into the merged scheme to preserve benefit security for their members, it is possible that the cost savings which may be achieved through merger will not outweigh the actual costs of the merger”

The advice then goes on to consider other options, in particular merging all three schemes into a sectionalised scheme. This would be that “all three schemes are transferred into one trust, but the schemes will remain in separate sections for all other purposes (as if they were separate schemes)”. The advice here is that whilst “the actual mechanics should not pose any significant problems” (to the Trustees) the point is made that “the cost of administering the separate sections may not be significantly less than the cost of running separate schemes. However the merger costs and the set up costs are likely to be more significant than in a “normal merger” adding that “the ongoing issues relating to how legislation applies to sectionalised schemes may create administration costs going forward” so the outlay could be significant and the administration costs increase.

The advice then goes on to deal with some of the legal and technical aspects around merging of schemes and in particular the role of scheme actuaries in this regard. It can be seen from the advice that the requirements placed on actuaries makes a full merger, notwithstanding the £10 million referred to above, even less likely.

The advice then goes on to deal with other issues i.e. “Co-ordination of trustee and adviser services” and “Alternative risk reduction strategies”.

NEXT STEPS

Given the strength of the advice around, particularly the monies needed to secure a full merger, the report is clear that there is other work that can be undertaken to reduce the sponsor’s liability whilst considering how to respond to the advice received.

Accordingly attached to this LTB is a “Heads of Agreement” document to move forward on a number of issues, all of which will reduce the cost of the schemes administration and potential scheme funding liability to the CWU.

At the time of producing this LTB two of the three sets of Trustees have agreed the form of words whilst the third is due to meet shortly (March) to discuss this matter. I believe the document secures an approach that commits all three schemes to work together with the common aim of reducing the burden of the CWU.

CONCLUSION

The written report is extremely detailed but in reality lays out the complexities that face us as we deal with the historical legacy left to us by our predecessors. The significant point to keep in mind is that due to the state of the current funding levels it would need a cash injection from the CWU of approximately £10 million to realise a position whereby the Trustees could vote for a merger whilst carrying out their legal and fiduciary duties. At the risk of being repetitive, the CWU does not hold such sums as spare cash and in any event handing such sums over simply to secure a principle would be totally irresponsible and as such is not a route we will be considering.

However despite this position we are determined to continue to pursue this matter to ensure we reduce as much as is possible the financial burden on the CWU. That is why we are asking the Trustees to commit to the attached document as this identifies the areas we can and should make progress on and identify the rationale for this.

The aim as contained in the agreement is that “All parties do however recognise and accept the need to work together to reach agreement on measures designed to ensure the future viability of the employer…” and goes on further to state, “Accordingly all parties named above agree to explore all areas of the existing arrangements with a view to reduce both the administration costs of the employer and of the three schemes and to identifying what steps are possible to reducing the employers liability in the area of scheme funding going forward.”

This is a significant step in that never before have the three schemes come together to co-operate either in such a manner or with such an objective, i.e. to assist the employer financially, in mind.

On assumption that the third set of Trustees aggress the documents, meetings will then commence and further updates will be provided to Branches as progress is made.

Finally the motion to General Conference called for a report to annual conference 2011. This LTB and its attachments in addition to LTB’s 828/10 and 1151/10 fulfils that requirement by highlighting the actions taken and identifying how the matter will progress.

Any enquires in regards to this LTB should be directed to Tony Kearns, Senior Deputy General Secretary on telephone number 020 8971 7237 or email address sdgs@cwu.org.

Yours sincerely

Tony Kearns
Senior Deputy General Secretary

Attachment 1: legal advice Attachment 2: Heads of Agreement

[TrueBlueTerrier]

HEADS OF AGREEMENT BETWEEN THE FOLLOWING

THE COMMUNICATION WORKERS UNION (The Employer)

CWU 2000 PENSION SCHEME (the 2000 scheme)

NATIONAL COMMUNICATIONS STAFF SUPERANNUATION SCHEME (the NCUSSS)

UCW PENSIONS 2001 SCHEME (the 2001 Scheme)

PURPOSE

The purpose of this document is to set out the issues that the above parties will examine, discuss and work together on in light of the significant pension’s costs facing the CWU against the background of their current serious financial position.

This document is not an agreement to merge the schemes sponsored by the CWU, albeit that such a position is their policy as determined by CWU General Conference.

It is acknowledged by all parties that the decision to merge (or otherwise) rests solely with the Trustees of the three schemes named above as covered by the relevant Trust Deed and Rules, legislation, regulation and their fiduciary responsibilities. However, nothing in this agreement prevents the trustees of any of the schemes, independent of these discussions, from making their own decisions with regard to merger with one or other of either of the other schemes sponsored by the CWU.

All parties do however recognise and accept the need to work together to reach agreement on measures designed ensure the future viability of the employer which is vital to maintaining good, secure pensions benefits for all members and pensioners of the CWU sponsored pensions schemes, again as determined by CWU General Conference policy.

Accordingly all parties named above agree to explore all areas of the existing arrangements with a view to reduce both the administration costs of the employer and of the three schemes and to identifying what steps are possible to reducing the employers liability in the area of scheme funding going forward.

ISSUES

The following issues will be examined initially:-

The merging of scheme administration including the examination of external provision.

The scope for moving to a common set of professional advisors for all 3 schemes. Including examining: actuaries, legal advisors, accountants, auditors, investment advisors, investment managers.

Alternative risk reduction strategies e.g. buy in, buy out, enhanced transfer values.

The above list, in recognising that pension’s legislation and regulation can and may change, is not to be considered to be exhaustive. Additionally all parties will need to act in cognisance of any legal advice received on any or all of the matters under discussion.

It is also recognised that full consultation on pension benefit related issues may also be required between the sponsor and the unions representing CWU employees.

Following initial examination of these issues, their impact upon the schemes sponsor will be analysed before identifying any appropriate next steps.

CONCLUSION

All parties recognise the need to examine and report and recommend on these issues. Such reporting will be, as and when appropriate, jointly to Branches of the CWU and to members and pensioners of each scheme.

It is acknowledged that from time to time there may be a need to share sensitive information and this will be done on a strictly in-confidence basis and only when necessary. The exact criteria for when this would be required and how this would be done would be the subject of discussion at the appropriate time.

In agreeing to this document all parties are accepting that there is a need to address these issues, change where necessary and appropriate whilst discharging their fiduciary duties to members and pensioners.


Signed on behalf of


The Employer by:-……………………………………………………………………………………..
Signature – name – position



The 2000 scheme:-……………………………………………………………………………………



The NCUSSS:-………………………………………………………………………………………..



The 2001 Scheme:-…………………………………………………………………………………..



Dated

[TrueBlueTerrier]

Legal advice attachment keeps generating an error no matter which source I use - anyone care to post it up.

[brothermagrew]

Legal Advice.pdf

[TrueBlueTerrier]

[fishtank]

The NCUSSS trustees would most likely be opening themselves up to legal action from their members if the were to merge with the disastrously funded UCW scheme.
In my opinion a complete merger of the 3 schemes is a non-starter.

[Martin Walsh]

The NCUSSS trustees would most likely be opening themselves up to legal action from their members if the were to merge with the disastrously funded UCW scheme.
In my opinion a complete merger of the 3 schemes is a non-starter.

Based on the advice your correct . But here lies the problem can the CWU continue to fund the benefits from the schemes ?

The old UCW scheme is 100% contributionary from the union , as is the ex ncu scheme whereas the wimbledon scheme is 42 % funded.

Pehaps if we can get a merger than the benefits will need reviewing or the deficit and costs will get worse for the CWU. However is it correct that some pay nothing torwards their pensions whilst others do.