News From the HPS Trustees

Communications from the HPS Trustees

 The HPS Trustees are keeping HPS members informed through Member Communications. Key points from the recent communications are:

• Firstly, negotiations over funding of the HPS by CH2M Hill are not moving forward as quickly as expected.

We must conclude from this that the 2011 Valuation Report will not appear for some time, despite hopes expressed by the Trustees at the time of the takeover for early publication. In response to our queries we were advised: “The Pensions Regulator specifies a time period of 15 months [i.e. 31st March 2013] however, should the matter not be concluded within that timeframe, the Trustees and the Company would ordinarily contact the Regulator to advise them of the reasons for the delay and provide a revised timeframe. The Regulator would seek to satisfy himself that all parties were acting to expedite the matter as quickly as possible.” We have suggested that the HPS make very clear to the Pension Regulator that the HPS has been pressing for an early publication date.

• Secondly, the Trustees have added a forensic accounting capability to their advisory team.

Forensic accounting relates to the investigation of fraud, and although we can only commend the Trustees for taking this step, it is clearly of concern that it has been felt necessary. Perhaps this action will progress no further, but it creates suspicion that the Halcrow accounts, prior to take-over, may not have accurately represented the true situation.

• Thirdly, Beverley Wright, who was appointed as a Trustee by CH2M Hill in February 2012 and welcomed with a seven paragraph accolade by the board, was removed by them in November.

No reason for this is given, but it could signal an impending conflict of interest between her role as a Trustee and her position in the company.

• Fourthly, the HPS is setting up its own payroll system. CH2M Hill is putting staff onto their US based Oracle system but not pensioners “to ensure they do not infringe data privacy regulations for pensioners”.

We do not consider this to be a valid reason as data privacy regulations have to be respected for all, so why suggest that this is the case? The move does represent a further step in disengaging the activities of the HPS from CH2M Hill. The Trustees have not discussed the cost implications.

Not all news is bad. The Trustees have reported on the growth of the investment fund, which on the basis of the growth from 1st January to 31st October, seems to be on track for a growth of £M20 this year, consistent with an average growth of 5.4% per annum over the last 5 years. In current circumstances, that is good news.

A comparison of the pensions actually paid (including lump sum payments, as tabulated in the recent Popular Reports) over the period 2008 to 2011 with the predicted amounts in the Valuation Reports (that of 2005 for the amount in 2008, and that of 2008 for the other years) shows that the average payout has been only 89% of the estimated amount. The gap is closing, but looks now to be about 95%. While we cannot be sure that this will continue, it does suggest that pension liabilities were slightly overestimated in 2008, and consequently, that the deficit may not be as great as was feared. The new valuation, when it appears, should clarify this.