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NEWSFLASH - 2009
Trafalgar House Pension Trust (THPT) – Trustee’s August 2009 Newsletter
Giving fellow members of the THPT my personal reactions to the Trustee’s communications to THPT members has long been my practice. This Newsflash is no exception and sets out my views on the Trustee’s August 2009 Newsletter.
What is the best feature of the Newsletter?
Undoubtedly it is the continuing improvement in the willingness of the Trustee to inform members on how it is operating the THPT. Especially noteworthy this time is the focus on the work of the Committees of the Trustee board and the progress of the investment strategy.
Much of this text has been lifted from the Trustee’s annual report for year ended 31 March 2009. This is commendably informative. It is available in hard copy on request by any member and can be viewed on THPT’s website.
What might be of concern to members?
The investment strategy has performed well in maintaining the value of the investment portfolio in 2008/9 during a further period of extreme volatility in financial markets. But so far it has not produced the target level of returns to reduce the THPT’s deficit.
Indeed, the deficit of £298m at March 2006 had edged up to £309m at March 2008, as advised in the Summary Funding Statement we received in June 2009. Incidentally, the Trustee issued this SFS fifteen months after the March 2008 calculation date, taking the maximum period of grace allowed by the regulations. This is inconsistent with the communication progress I commended above.
The Newsletter stresses that the strategy is designed to eliminate the deficit over time. Nevertheless, it is disappointing to see the estimated date for this to have stretched out to June 2023 from the original estimate of June 2014.
What is the practical significance of THPT being in deficit?
In the short term the deficit is not a worry, given that the investment strategy aims at long term results, but we shall all feel more comfortable when we can see the deficit reducing. I do not expect the actuarial valuation as at 31 March 2009 to provide good news on this score when factors such as improved longevity will influence the results. We are promised that the results will be reported in the February 2010 Newsletter.
Almost all UK defined benefit schemes are currently in deficit. But the THPT is probably unique in having no sponsoring employer capable of contributing new money to fund scheme liabilities.
Need we worry about dispute over the Pension Protection Fund levy?
No, this is purely procedural, and the repetition in the Newsletter of the assurance of continued eligibility of THPT for admission to the PPF, should this ever prove necessary, is welcome.
Is developing Trafalgar House Pensions Administration a good idea?Administration is the Cinderella of the pensions world, being a distinctly unglamorous activity compared with portfolio investment. However, we all depend on efficient administration for delivery of our benefits, so it is encouraging to see effort, and, no doubt money, being devoted to upgrading THPA’s capability for our benefit.
Whether the project to extend THPA further into the competitive market for third party business will produce financial benefits of any significance to THPT’s overall finances is open to question.
What can be said of the Newsletter overall?
It demonstrates that the Trustee has made considerable progress with regard to matters of concern that I have highlighted in the past, namely –
- - governance processes
- - communication with members
- - administration
The results of the March 2009 valuation will be significant in giving us a view of the THPT going forward in terms of its deficit and the recovery plan which goes routinely to The Pensions Regulator.
Feedback
So, how do you react to the Newsletter? Do let me have your views. Do also consider giving your comments to the Trustee’s chairman, Mr. Froeshaug, or the Secretary, Mr. Wake. They need to know that members do take notice of the Newsletter.
Alan Ford
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