HPS - The Offer from Halcrow 31st May 2016

[michael tordoff]

Thanks Martin.  This responds to an afterthought added to my basic thoughts.  Does anyone have a comment on the first paragraph.

[Clive Williams]

Also, I'm not sure how it works, but I understand that firms (ie Halcrow Group Ltd) have to pay a PPF levy each year. If so, would CH2MHill continue to pay this to ensure that if the scheme failed in the future it would go into the PPF ?   
It seems to me that it is best to wait until very close to the option choice deadline (ie days) before considering making any decison (or non-decision). That way HPS members will have made best use of all the information available and responses to questions.

I think what will happen is that CH2M will put Halcrow Group Ltd into liquidation and any pension members left in the HPS will enter the PPF mechanism; those that choose to transfer their HPS to the new HPS2 will be in a scheme sponsored by some company other than Halcrow Group Ltd (there are 19 companies under the Halcrow umbrella and 6 CH2M companies registered in the UK), but probably not CH2M. This sponsoring company will have to maintain payments to the PPF but possibly at a reduced level because there won't be so many members at risk.

I shall be going along to the meeting in Bristol so shan't be doing anything until then.

Given the lack of any of the triennial valuations I guess we are left repeatedly requesting a transfer value?

[finneyb]

HPS members should be aware that ITS is wholly owned by Jardine Lloyd Thompson Group plc (JLT), the same group which is providing the “independent financial advice to members". Caveat emptor.
One of the many reasons we need to challenge the nature and number of choices we are being given.

Stephen,

1. I think we need to explain ITS.   My understanding is that it is Independent Trustees Services they are professional Pensions Scheme Trustees - Chris Martin of ITS is an Employer side HPS Trustee brought on after CH2 took over; he was also the Chair of the BHS Pension Scheme Trustees and I suspect a Trustee of other schemes.  He is paid for his services - I asked the question when he was appointed.

2. Financial Advice -  JLT letter 27 May 2016 2nd para - '....they are there to help make an informed decision but will not provide you with a personal recommendation. If you require a personal recommendation ...... seek an advisor'   They are not providing financial advice to members, it is very carefully worded, which begs the question what are the meetings about?     

[finneyb]

I would expect CH2 to look after their existing staff - they earn fees  -  if a pre retirement age HPS members went to PPF they lose 10% immediately and have a cap as Michael spoke of above. I see the only reason for the offer of a 'new' scheme, rather than PPF for all when Halcrow is put into administration, as I am sure it will be, is to minimise existing  staff ill-feeling; they  would suffer a 10% immediate loss and a cap if HPS went into the PPF.

CH2 need to be equitable to all scheme members hence they have offered those with a pension in payment the same 'new' scheme, but it is immaterial to CH2 whether you take it or leave it   - as a pensioner your earning days for CH2/Halcrow are over.


Brian

[Adam Schofield]

Surely if this approach proposed by our "Trustees" were legal, every company which has a DB pension deficit would have already done the same. But they haven't.

And indeed the government was going to start considering how CPI (instead of RPI) could be forced onto British Steel pension members, but that it would require a new legal instrument to deliver this, so they have had to consider further if it is even possible. And stated that its an exceptional circumstance that its even being considered.
In what way can CH2M/HPS Trustees operate beyond what the government has considered?

To give members an ultimatum like this is quite out of order, especially with the paucity of information provided. Really sinking low.

Stephen - would it help to send summary to Frank Field? (Work and Pensions Committee chairman)

[John Ratsey]

2. Financial Advice -  JLT letter 27 May 2016 2nd para - '....they are there to help make an informed decision but will not provide you with a personal recommendation. If you require a personal recommendation ...... seek an advisor'   They are not providing financial advice to members, it is very carefully worded, which begs the question what are the meetings about?     

But the letter from JLT in the bundle claims that the information that they will provide is impartial.

We are independent from your company and although the fee for our work is paid by the company the information that we provide is impartial.

Given that they are in the same company as one of the trustees then that impartiality is questionable. However, they can maintain the impartiality promise by not actually giving out any information.

[finneyb]

But the letter from JLT in the bundle claims that the information that they will provide is impartial.Given that they are in the same company as one of the trustees then that impartiality is questionable. However, they can maintain the impartiality promise by not actually giving out any information.

John

It maybe that all they are going to do is explain the system ie when  Halcrow is in administration then HPS goes to PPF and point people to the comparison between PPF and 'new' HPS as set out in the letter, so that the HPS member can make an informed decision. Factual information by definition is impartial, provided they give the whole picture.

Brian

[finneyb]

Surely if this approach proposed by our "Trustees" were legal, every company which has a DB pension deficit would have already done the same. But they haven't.

Adam

The poss answer to your question is that HGL the scheme sponsor will be in administration therefore HPS goes to PPF as would any other DB scheme.  But, out of the goodness of their hearts?? CH2 have offered a v slightly better package  - pl. see my post just above yours for my thinking why they have done this.

Steel production ie TATA Steel is of national importance and it is unionised hence the Govt proposal ie they want don't want TATA Steel in administration the jobless numbers would be disastrous. Being cynical the Consultation kicks the can down the road until after the EU ref

As Stephen has said previously HPA has a legal advisor looking at the matter. IMO the legal advisor is no lightweight - hope that is of some comfort to you.

Brian

[Stephen Brichieri-Colombi]

In a circular to CH2M Staff, the following information is provided.
"CH2M will make a payment of £80m towards the pension scheme deficit and also provide a guarantee of £50m towards it too"

CH2M normally qualifies all statements about the future in a way that allows them to do the opposite of what they say, but in this case do not appear to have done so. The £80 million is around 40% of the £204 million they pledged 5 years ago. Does this mean that 5 years from now, this pledge will be reduced to £32 million?

 

[Adam Schofield]

Brian - so is the suggestion that CH2M are going to transfer remaining 4000 staff from the HGL subsidiary company to CH2M proper (and all contracts etc), and then declare HGL insolvent, requiring remaining pension members to transfer to PPF?
PPF and any court would surely laugh at the nonsense of it – you can’t transfer all benefits of ownership (staff and contracts) and then ditch the liabilities. That would be fraudulent, and Trustees as individuals could be prosecuted for such behaviour. Trustees hold a degree of personal liability, as previous court cases have demonstrated.

One question which I am unsure of in the ‘offer’ – for deferred members the proposal under new scheme backdates the use of CPI from the date of leaving (I think). Whereas if the scheme fell into PPF, the starting point for the calculation (90% etc) is at the time the scheme went under. Since I left a few years ago, this means indexation (a mix of 5% and RPI in my case) would be applied. This is a much better starting point than the backdating of CPI that the new HPS3 scheme is offering. At least, that’s how I read it. Which is another reason that this ‘offer’ makes no sense without proper explanations and individual valuations for each member.

[finneyb]

Brian - so is the suggestion that CH2M are going to transfer remaining 4000 staff from the HGL subsidiary company to CH2M proper (and all contracts etc), and then declare HGL insolvent, requiring remaining pension members to transfer to PPF?
PPF and any court would surely laugh at the nonsense of it – you can’t transfer all benefits of ownership (staff and contracts) and then ditch the liabilities. That would be fraudulent, and Trustees as individuals could be prosecuted for such behaviour. Trustees hold a degree of personal liability, as previous court cases have demonstrated.

Adam,

My response to the first part of your post is below - the second part is above my pay grade

Pl see:
1.  JLT letter 27 May 2016  mid way down page 1   '2. Remain in the HPS, which will be transferred into PPF '
2. JTL letter 27 May 2016 2nd page para 1  ' HPS will be transferred to PPF shortly'
3. JTL letter 27 May 2016 2nd Page para 2  ' active members will be transferred to the CH2M Hill 2013 Group Personal Pension Plan '

For HPS to be transferred into PPF HGL must be in administration. On paper it appears to be insolvent, which is what the auditors basically said, so there should be no problem in closing HGL down. Of course, financial transfers inside Group companies can be opaque as we have seen with the likes of Amazon etc.

If active members ie current employees are going into CH2M Hill 2013 Group Personal Pension Plan then it looks to me as if the staff are being transferred to CH2M employment contracts.

CH2 may be relying on HPS members' lethargy to get their own way. I understand their thinking, it's certainly a tack I would try.

HPS members are not being forced into PPF, if they go it is their choice; CH2 are giving them an option albeit little better than PPF.

HPA must be a real PITA !

Brian

[Adam Schofield]

Brian et al,

I will attempt to explain the 2nd part of my post with an example, because I would like others to confirm whether I am barking up the wrong tree or what.
Say John Smith left Halcrow in 1999 with 20 years service, with a forecast pension (in 1999) of £10k all at 5% indexation, and is now a deferred member until 2020. Since 1999 his pension has been recalculated at 5%  – and is therefore currently worth £22.9k  and will be worth £27.9k in 2020.

Under the new Scheme rules, CPI would apply from 1999 to 2020, which (assuming 1% for 2016 to 2020) results in a final pension of £14.3k in 2020. (I haven’t applied the CPI caps because its too complicated for this example).

Under PPF, the starting point for pension calculation is when the Assessment is approved, but then factored by the 90% cap.  John therefore has a pension of (£22.9k * 90%) = 20.6k. No further PPF cap would apply. Then also add 4 yrs future CPI inflation 2016 to 2020 leads to a final pension of £21.4k.

Therefore John is 50% better of under PPF. However, the new scheme states you will not be any worse off, so lets assume that the Trustee honours this statement. But my point is, I don’t know what these values could be for me. The letter strongly indicates we would be better off under the new scheme, but provides no valuations to demonstrate this. We also have not been provided independent financial advisors to be able to assist us in making this assessment.

Comments (& corrections) please!

[Adam Schofield]

sorry - I forgot to add the 1% uplift offered to deferred members on transfer. But it doesn't change the issue.

[finneyb]

Adam,

This is my thinking as a lay person.

The £22.9k is the pension that the new scheme and PPF will use as a baseline.

CPI in the new scheme applies to future increases to this baseline ie CPI upto 5% for service between 1997 and 2005;  CPI upto 2.5% for service after 2005  according to the Factsheet received from CH2. NB My factsheet is for members over normal retirement age  - you will have a different factsheet, but I suspect that the CPI arrangements are the same.

Suggest that you call TPAS www.pensionsadvisoryservice.org.uk/   it's a free service and I've found them very helpful in the past, they could probably answer your question over the phone.

HTH

Brian

[Stuart Brown]

Dear All, I spoke this afternoon to Tony Apps (who has a vested interest in this through his wife, of course), who also happens to be my financial adviser. I outlined my situation - joined Halcrow beginning January 1988 (in the middle of a pensions contributions holiday), transferred in eight years' worth of LG Superannuation Fund contributions, left Halcrow in March 1998. We discussed the level of faith that one can place in CH2M. The PPF as a fallback makes the acceptance of the CH2M offer (see note below) a no-brainer if (and only if) there is no uncertainty attaching to the PPF option. Personally I'm not convinced that the PPF itself would be free of risk, given the number of final salary schemes for which it is having to pick up the liability. My inclination, therefore, is to go with the CH2M offer but as somebody else already noted, to leave it as long as possible before informing them of my choice. I don't trust CH2M further than I can spit, frankly. https://www.ch2m.com/newsroom/news/seventh-year-ch2m-hill-named-to-ethispheres-worlds-most-ethical-companies begins to look somewhat hollow; perhaps our lawyer could fire that suggestion back at them and ask how an ethical company can justify disregarding a covenant that it signed.
Stuart Brown

Note: I gather that the alternative was the European operation being cast adrift and going into complete administration. That doesn't surprise me: the European consulting market is stupid these days, with fee rates being undercut right, left and centre. One of the reasons I decided to hang up my boots and compose music instead.