HPS Insufficiency Report

[arattray]

I recently requested a CETV (cash equivalent transfer value) for my preserved benefits in HPS.  The transfer value figure was reduced by 55% as the "..HPS has a funding deficit and the assets would not be sufficient to pay full CETV's for all members."  Very bad news!!  Anyone else had something similar?

[arattray]

...but the estimation of retirement benefits for my NRD next year is unchanged?!

[John Ratsey]

HPS is under-funded so any transfers out are valued pro-rata to the current level of funding in order to not leave the scheme worse off relative to the liabilities. Each valuation of the scheme published in the company annual reports (we haven't see HPS trustees version of the numbers for several years) shows the liabilities growing somewhat faster than the rate of inflation. One factor may be the upward adjustment of life expectancy but another factor will be reduced investment returns while the rate of pension increases is fixed. HPS (and all the other under-funded pension schemes) needs the central bankers to get inflation back to 5% or more!

The estimate of retirement benefits, however, assumes that the money will be there, in the fullness of time, to pay the pensions.

[Stephen Brichieri-Colombi]

Current target for inflation in the budget a few hours ago was 2%. Inflation will not be the knight in shining armour for a while yet.
It looks as if the funding ratio in the insufficiency report is 45%, considerably down from the figure in the last valuation report
               Dec-08      Sep-15
Assets            277          425
Liabilities             478          944
Deficit            201          519
Assets/liabilities   58%         45%

[Jerry Neville]

Perhaps elementary (and hence idiotic) but as John R points out the 5% annual increase seems to be incrementing the liabilities powerfully; would a significant reduction in this percentage increase (of course perish the thought) assist in prolonging the life of the pension fund - which as several have said is somewhat the fundamental question? (address withheld).  The alternative factor of having shorter life expectancy has no appeal.