HPS - The Offer from Halcrow 31st May 2016

[Stephen Brichieri-Colombi]

HPA has written to William Brierly, the Chief Ethics and Compliance Officer at CH2M HILL Inc, asking about the ethics of stating to the reviewers of the covenant that they would continue with the 2008 recovery plan, and making further statements to the press to this effect, then threatening to renege on this promise. He has replied, asking us to first consider the offer they made on 31st May and write again before he would reply (a delaying tactic). We immediately replied, pointing out that the offer is merely a choice between two unpleasant alternatives compared with the recovery plan, and repeating our request that he look at their ethical conduct to date, not any plans they have for further unethical conduct. No answer yet.
I have also contacted Ethisphere to ask about the procedure to expose companies that abuse the awards they are given. No reply as yet. You might also like to visit their site and ask them the same question. You may be aware that two of the documents submitted in court in 2011 referred to CH2M being an ethical company, in order to justify the belief that would continue to support HPS.

[Adam Schofield]

Brian (and others?) – the Booklet does not state that the indexation from time of leaving to time of transfer will use the old HPS system – it states that Inflation will be used for the full period. It also says full details of benefits are set out in the Trust Deed and Rules of the new scheme, but oh dear, that’s not provided. The Fact sheet for Deferred members does suggest that the old HPS indexation might apply for that period, but its quite vague. To say it’s unclear is an understatement. So my point holds – unless Halcrow provide sufficient information to inform us otherwise.

Another thought. What happens if New HPS goes to the wall in 2 years time, for whatever reason (Brexit, or CH2M pull out, or whatever, take your pick). Then New HPS would get capped by 90%, and we would be worse off than if we chose PPF now. There is no guarantee that New HPS will be any more secure than Current HPS is alleged to be.

[finneyb]

Brian (and others?) – the Booklet does not state that the indexation from time of leaving to time of transfer will use the old HPS system – it states that Inflation will be used for the full period. It also says full details of benefits are set out in the Trust Deed and Rules of the new scheme, but oh dear, that’s not provided. The Fact sheet for Deferred members does suggest that the old HPS indexation might apply for that period, but its quite vague. To say it’s unclear is an understatement. So my point holds – unless Halcrow provide sufficient information to inform us otherwise.

Another thought. What happens if New HPS goes to the wall in 2 years time, for whatever reason (Brexit, or CH2M pull out, or whatever, take your pick). Then New HPS would get capped by 90%, and we would be worse off than if we chose PPF now. There is no guarantee that New HPS will be any more secure than Current HPS is alleged to be.

Adam,

As I see it you suffer the PPF 90% cap unless you are over normal pension age when you transfer regardless of when you transfer.

Brian

[Steve_2]

Adam,

As I see it you suffer the PPF 90% cap unless you are over normal pension age when you transfer regardless of when you transfer.

Brian

Adam/Brian,
The PPF Revaluation guidance is here:
http://www.pensionprotectionfund.org.uk/DocumentLibrary/Documents/PPF_Revaluation_Guidance.pdf
The relevant paragraph is:
"Revaluation for the period between the day after pensionable service ended and the day before the assessment date is calculated in line with a scheme’s admissible rules. Revaluation for the period from the assessment date until normal pension age (NPA) or early payment is calculated in line with the statutory levels of PPF compensation."

So the way I read it, revaluation (first stage, to enter the PPF) would use RPI (and any applicable salary linkage) if entering from HPS, BUT possibly CPI if entering under HPS2.1 rules (though this is far from clear). 

Agree, the PPF 90% cap and age cap would apply in both cases, unless they change by the time HPS2.1 enters. But I think you may be able to mitigate some of this if a proportion is taken as a commuted sum???

[Tony Green]

Has anyone requested clarification from HPS on Adams point about the revaluation between date of leaving and date of transfer?  I am deferred still below pensionable age (2020)  and not so far from Adam's 'John Smith' illustration so it makes a big difference to me. I think it is a question re HPS2 not the PPF whose rules are fairly clear as Steve posted above.  Then there is the question of the 'additional' pension until government pension kicks in (in my case 66 not 65).

[Adam Schofield]

Tony - I have just sent an email requesting clarification on this issue to the pensions team. Plus other clarifications, including request that all members are provided with the new Trust Deed and Rules of the new scheme, so that we can read what we are signing up to. Seems only reasonable. Call it 'due diligence'.

Stephen -  its the benefit at time of transfer to the new pension scheme that is unclear, not the choice for transfer to PPF. The Booklet makes it clear that under the New Scheme the indexation for the time between leaving employment and transfer now is also being changed to CPI. Whereas under PPF this would not be the case, as you note.

[John Ratsey]

The HPS admin team has sent out a 15 page Q&A document dated 09 June 2016.

For ease of reference it is here.

[John Ratsey]

Those are valid questions which are best directed to pensionsteam@ch2m.com unless already answered in the 09 June Q&A.

[billf]

Halcrow Group put their offer in the post yesterday so it has started to fall through the letterboxes.

Here is a copy (it's possible that the section "Factsheet for pensioner members over Normal Retirement age" (pages 5 to 9 of the PDF) may be different in the letter sent to the scheme members who are not over their normal retirement age.

Note the emphasis on comparing with the PPF. I see no illustration of the longer term financial implications for members in their retirement and, particularly, for widows after their husbands die (they tend to be younger and live longer so reduced increases hits them the most).

I was concerned to find out that as my contributions were before 6 April 1997 I will no longer receive an annual pension uplift. This in effect means that in real terms the value of my pension will decrease each year by inflation! I'm sure there are many HSPS or HPS members in this situation, but have not noticed any mention of it within any of the discussion streams.
Am I interpreting this correctly?

[Jane Tordoff]

I will also be affected by the decision for no increase, as my payments were all before 1997.  Those in the same situation will be on a "fixed income". 

[John Ratsey]

Am I interpreting this correctly?

Yes, and I'm sure we have discussed this point somewhere and it was mentioned in Newsletter 18. The information sent out to HPS members only gives comparison with PPF terms and provides no comparison with the existing HPS terms. In my case about 3/4 of my pension accrual is pre-April '97 which means that under the proposed offer my annual pension increase would be about CPI/4.

I recall that the actuaries would assume that I would be getting about 23 further years of pension and, any small difference compounded over 23 years becomes a very big difference. Assuming that CPI is 2% pa then I calculate that £10,000 of pension now would increase to £15,460 after 23 years if all indexed at CPI while it would only be £11,160 at the CPI/4 which the proposal would give me. That's better than staying at £10k but still represents a substantial loss of income. Can someone check my sums?

[Stephen Brichieri-Colombi]

Stop Press:

We are extremely pleased to advise that three members of the HPA committee, and Martin Jenkins, have been invited to meet with Nicola Parish and her team at the office of the Pension Regulator. She is  Director of Case Management, and has been closely involved with the BHS case. The meeting is to discuss the role of tPR in the case, and a report that they are preparing on the HPS. We expect the meeting to be held next week.

We believe this is probably as a result of a phone call from Robert Buckland, MP.

[michael tordoff]

John,

I come up with (10,000* 1.02^23 =) £15,769 and (7500+2500*1.02^23) £11,442, which are near enough to your figures to say that either set of numbers gives the correct impression. 

What I think is more informative is to relate numbers to today's prices.  That means the 3/4 portion of £10,000 pension that is currently worth £7,500 would only be worth (£7500*(1/1.02)^23 =) £4,756 at today's prices in 23 years time.  In other words you would be (7500-4756 =) £2,744 worse off at today's prices.  However few engineers of our vintage would only be on a Halcrow pension of £10,000.  Those currently on £30,000 would be £8,231 worse off and those currently on £40,000 would be £10,975 worse off than they are today (pre tax). 

On the plus side it would put those currently paying 40% tax on part of their pension into the 20% tax bracket!

What I have not checked is the 75% assumption.  Also the assumption of 2% inflation could be wildly out if the £ devalues because we leave the EU.  We could go back to the days of double figure inflation!

[chrishoggart]

I am in a similar situation to Stuart Brown, except that on joining Halcrow in 1989, I transferred in ten years worth of local government superannuation contributions. I received a written offer from Halcrow (which I still have) and on that basis chose to move my pension from a very secure scheme to the HPS. Presumably, because I moved this money prior to 1997, and actually left Halcrow in 1996, I can expect no further increases to my pension and it will be allowed to whither away to nothing through inflation. I must say that I do feel cheated.

Given my situation, I don't see much difference between the HPS offer and going into the PPF. On the one hand there is the pitiful 2.5% increase, which will make little difference to my decision, whereas the PPF should be a more secure option given CH2M's track record to date (I have zero confidence that they will stick to any promises).

I agree with much of what's been said already, in particular the fact that we shouldn't be expected to make this decision without the missing financial information and that there is insufficient time to make such a life-changing decision. If, in the first instance, we can get more time agreed that would be a very good place to start.

[Clive Williams]

I think you will find that the new contracts issued in 2013 were still in the Halcrow name. That's what I've been told by several friends who are still on the payroll.

Just sifting through my old emails and when they made me redundant they sent a copy of my contract for my lawyer, it is with CH2M Hill - no mention of Halcrow at all. I wonder of they screwed up and sent me the wrong contract?