Security of HPS2? Opting out of Pension once commenced?

[24Bliana]

I have been mulling things, as have lots of others, and am wondering if someone can give a view on a couple of points:

Firstly: how secure is the HPS2 scheme likely to be? Being terribly suspicious I wonder what CH2MH's real agenda is here. I suspect that the reason they don't want to put the scheme into the PPF is that to do so they would have to make Halcrow insolvent. That would have negative impacts on their business. So, will HPS2 be allocated to a Halcrow "company" that in a year or two could be made bankrupt, putting HPS2 into the PPF, but would still allow CH2MH to trade under the Halcrow name?

Secondly: I and many others will have opted to take our final salary pension rather than the transfer out value because the annual increases made this attractive, and of course the transfer values were depressed. But now the goal posts have been moved to a different field (continent?). Is there any legal challenge that would allow existing pensioners to say that as conditions have materially changed we should now be able to transfer to a SIPP?

Apologies if the above have been covered in other threads.

[John Ratsey]

Part of the answer to your question is in the last paragraph on page 10 of the Pensions Regulator's Section 89 report which states:

HPS2 is set up to be eligible for PPF entry, leaving the PPF exposed to the risk of HGL's future insolvency. However, we and the PPF were
satisfied that this risk is being appropriately managed and represents the best solution available in the circumstances. CH2M, HGL and the
trustees have contacted members about their options for transferring to HPS2 or the PPF.

Also read the rest of page 10. There is also an explanation of the pension scheme having a stake in the company which was touched on in the roadshows. Presumably the pension scheme members would also have representation on the company board although this is not mentioned.

[Richard Handy]

Regarding part of your first point "I suspect that the reason they don't want to put the scheme into the PPF is that to do so they would have to make Halcrow insolvent. That would have negative impacts on their business.", it is my understanding that if any HPS members do not transfer it will be necessary for a company to become insolvent in order for PPF to step in to protect them.  However it was explained at the roadshow I attended that CH have already or will set up a company with no assets to take the remaining HPS liability. This company can then become insolvent whilst HGL continues to trade using the Halcrow name.  This appears to be what RAA is all about. Presumably if, in the future, HPS2 becomes unsustainable the process could be repeated.

[michael tordoff]

It strikes me that RAA is a fiddle devised by the Government whereby a company can continue to trade and at the same time greatly reduce its liability to pay pensions.  Whether you accept the reduced benefits offered by the company or choose to have the PPF pay a lower level of pension, the company reduces its liabilities.  So why would the Government want to sanction such a fiddle?  Simple; they want to avoid thousands of UK citizens being made redundant.  In the case of Halcrow there is a further twist, because such a situation will not happen.  Whether Halcrow and/or CH2M go out of business, the Government will want work on HS2 and other important projects to continue and ideally they will not want a change of personnel, whoever they are employed by.  And this explains why the Government are happy to turn a blind eye to the legitimacy of RAA, because otherwise they would have great problems with continuity of work on projects that are of vital strategic importance to the Country.

[24Bliana]

"HPS2 is set up to be eligible..." I need to re-read things to ascertain if this means it will actually be admitted to the PPF. Sure it must be, they wouldn't get away with it not being...

HPS is currently under HGL, surely HPS cannot be arbitrarily reallocated to some satellite subsidiary? If everyone had opted to go to PPF then surely this would only have been possible if HGL was put into administration. CH2MH have now sold off all (?) of the HGL assets so there wouldn't be much cash coming in via the administrators.

Is it legal for just a few the current HPS members to be put into the PPF without Halcrow going into administration? I know that CH2MH are talking of setting up a special purpose company to "hold" the pension liabilities of those that opt not to accept HPS2, but is this really legally possible?

I took early retirement, and the major factor in assessing when to do so and in how much cash lump sum to take was the promised increases in pension. Another option would have been to transfer out to a SIPP. HGL is now proposing to tear up the contract that we had and impose something that is not attractive. I have written to the pensions team asking them to tell me if I can retrospectively take the transfer value (whatever that will be!) on account of them proposing to make fundamental and material changes to my pension. I will let you know what they say, assuming they actually respond at all.

[24Bliana]

Well, not unsurprisingly the answer was that No, I cannot retrospectively transfer out. Seems ludicrous to me as there is an ongoing need to fund my pension at whatever level it is so why not give us the funds to manage ourselves? Of course the amount that might be offered may be so low as to make it unattractive but surely we should be given the opportunity? I sent the following back to Paula:

Thank you for your reply but frankly the response is not acceptable. My
decision on taking my (pitiful) pension was based on the projected increases
each year. Those are now being proposed to be stripped away. It cannot be
acceptable for "you" (as in the pension administration, I am sure that you
personally are just as disappointed in the situation) to unilaterally decrease
my pension terms and present just two poor options.

Whether I move to HPS2 or the PPF there will be a need to fund my future
pension. Presumably if it goes to the PPF then HPS will have to transfer a
proportion of the fund across to the PPF to cover future pension payments. I
cannot see how it might not be beneficial to either the PPF or HPS2 for me to
be removed from the mix and be allowed to take the value into a SIPP instead.
What is the difference? Obviously it depends on what the value is.

At the present time I am simply unable to commit to HPS2 and as things stand I
will therefore be put into the PPF against my wishes and interests.

[mikedyer]

As my pension rights were all aquired pre 97 then there is only a one off 2.5% difference. How concerned should I be that at some time in the future the PPF scheme will put in place measures to prevent such transfers and hem=nce maybe not allow HPS2 into the scheme? If its a real concern then is security of PPF is better than HPS2? Views and comments very welcome.

Michael

[Richard Handy]

My pension contributions were mostly post '97 but like Mike the only apparent difference is the 2.5% one off uplift. I too am concerned by the future risk of PPF not protecting HPS2. So as a pensioner it's a question of balancing the 2.5% against the risk of reduced/no future protection by PPF. How safe is it?I'm still thinking!
Richard

[Jan Harrison]

I was concerned at conflicting advice coming from Halcrow Pensions Team on future entry to PPF if taking HPS2 now, so got in touch with TPAS via their website - www.pensionsadvisoryservice.org.uk, general tel 030 123 1047.
I did not say it was Halcrow but the independent advisor recognized exactly what was happening and has given very informed and well-considered replies. I can fully recommend them. Replies are slow so if you contact them name Halcrow and the urgency.
He said the following –
If you do wish to pass on comments these should be restricted to the high level points. You could also perhaps suggest that your colleagues contact TPAS separately we would be happy to discuss specific points with them on an individual basis.

The high level comments you may wish to share and stressing are:
- The PPF can in theory reduce benefits but has not ever had to do this.
- if the PPF's finances did deteriorate and they did reduce benefits it is entirely likely that they would apply reductions to existing and new schemes that it had taken on. However, this is obviously speculation as, to date, no benefit reductions have been applied.
- at present, the PPF's funding position is strong (it is in surplus).
- re the CH2M scheme, the Pensions Regulator will be monitoring its progress against meeting its deficit and there are regulatory measures in place to stop an company "walking away" from its pension commitments.

In an earlier contact he also said
This is an unusual arrangement, but by way of background to this case, the Pensions Regulator has given approval for the transfer (under a "Regulated Apportionment Arrangement" - RAA) and the PPF have confirmed they do not object to the RAA proceeding, in order that the existing scheme can transfer to the PPF once members who wish to have transferred to the new scheme. If the new scheme was to enter the PPF in the future it would enter on the terms of the PPF at that time (the PPF has said it would accept the new scheme if it did ever need to go into the PPF).

[mikedyer]

Thanks Jan. Helpful. MikeDyer

[Jane Tordoff]

Can I suggest anyone reading this looks at the "News" category".  You will find the latest news on the legal case.

[mikedyer]

I am seriously considering going the PPA route now. With only 2.5% uplift on my pre-97 pension it seems that at least the PPA will be more sustainable than a dodgy HPS2. Who knows if HPS2 will be able to transfer to PPA in the future and if at that date the payments on offer from the PPA will be the same as now. If there is a flood of such schemes following this successful transfer then maybe the PPA will start reducing whats on offer.

A sad day for UK business integrity and regulatory oversight- as if we needed any more evidence.

Mike

[Croley]

I am seriously considering going the PPA route now.

Me too Mike, did you go for it?