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Press comment: Supreme court judgment reaffirms pension trustee constraints on inflation tracking

07/11/2018

Today the Supreme Court ruled the trustees of Barnardo’s pension scheme are not allowed to change the measure of inflation used for pension payments. If you’re covering the issue please see the following comment from Jon Greer, head of retirement policy at Quilter

Jon Greer"The switch from RPI to CPI indexation for pensions in payment may seem an obscure and relatively unimportant issue, but this supreme court case shows the  change isn’t insubstantial as it would also have a wider impact on society. Barnardo’s argue the use of RPI in uprating pensions in payment diminish funds available for its charitable projects. However, the judgment holds fast that rules for the indexation of pension payments are hard baked into the scheme with no leeway for amendment.

"According to its 2017 accounts, Barnardo’s pension scheme has a reasonable pension deficit.* In 2017 the charity had to pay £18 million towards its pension schemes, according to its annual report. About 60% of that went to its now closed defined benefit scheme with the remainder funding the current defined contribution scheme. To meet its funding shortfall (which the accounts show is in excess of £100m) Barnardo’s will contribute an estimated £10.7m a year until 2037. Allowing the trustees to adopt CPI for pension payment increases would reduce the funding shortfall by between £36m to £74m. However, in some respects it would have been robbing Peter to pay Paul as changing the inflation mechanism is a retrospective pay cut  for scheme members since the principle behind DB pensions is that it is deferred pay.

"The government had  also proposed allowing a shift in calculation as part of their review of DB schemes but had opted against it, perhaps fearing the backlash of millions of DB pension holders."

 

*The funding assumptions the Trustees use are different to those used in the accounts so they may have a different figure for the funding shortfall, but will agree that £10.7m a year needs to be paid till 2037. 

For more information contact

Kathleen Gallagher023 8072 629307990 004932kathleen.gallagher@quilter.com

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• The private client advisers business is now Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

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