Pension News 04/06

PENSION NEWS

THE SECRETARIAT

February saw the handover of the Chairmanship of the Trustee Board from Ports to Pilots and Richard Williamson, a Boston pilot, was duly appointed to this position at the meeting held on 28th February 2006.

Aside from this little has changed at the Secretariat as we are still working hard trying to cope with all the changes arising from the Pensions and Finance Acts 2004 and the triennial valuation as well as the impact these will have on our systems, understanding of pensions and communicating it simply but sufficiently to members. Hopefully by the time you read this the worst of it will be over and we will have managed to have communicated and coped with all the changes successfully.

VALUATION AS AT 31 DECEMBER 2004

It is beginning to feel like that by the time the ramifications of this valuation are finally done and dusted it will be time for the 2007 one to start.

The finalisation of the results of the triennial valuation was considered an appropriate time to review the factors used by the PNPF when calculating the various benefit options available to members. The two factors of particular relevance to members are:

·        The Early Retirement Factor (ERF)

·        Commutation Factor

It is the Fund’s practice to reduce a member’s pension if taken before normal retirement age. This is because it is expected that the member’s pension will be paid for a longer period of time and thus the funds underpinning the pension will be invested for a shorter period of time. The factors are designed to be cost neutral to the pension being given up. At their February meeting the Trustees agreed to adopt the recommendation of the fund’s actuary and these factors became effective on 28 February 2006.

The Fund’s commutation factor had been 10 since the beginning of 1991, but the Trustees were advised by the actuary that although administratively easy and simple for members to understand it was, he felt, inequitable. It was agreed that age related factors that reflected the differences in the expected term of pension payments and thus the value of the pension being given up would be adopted as from 28.02.2006. The revised factors are:

Ages                      Factor

65, 64                      12

63, 62                      13

61, 60                      14

59, 58                      15

57, 56, 55                16

PENSIONS AND FINANCE ACTS 2004

Pension regulations continued to change during the course of 2005. Those effective from April 2005 were covered in my article of April 2005. Those that have come into force since are:

From December 2005

The new scheme funding and investment requirements came into force on 30 December 2005. The main requirement of the investment regulations is the Statement of Investment Principles (SIP), which the Trustees must review once every three years and without delay after any significant change in investment policy.  The Trustees must also consult with employers on the content of their SIP. The SIP must cover:

·        The kinds of investment held.

·        Balance between the investments

·        The ways in which risks are measured and managed.

·        Expected return

·        Realisation of investments

·        Extent to which social, environmental or ethical considerations are taken into account.

Scheme Specific Funding replaces the Minimum Funding Requirement (MFR)

for valuations occurring after 23rd

September 2005.

It now falls to the Trustees to decide both which actuarial method is used (provided that it is one of the accrued benefits methods) and also the value of the various economic, financial and demographic assumptions that are to be applied.

From 6 April 2006

Scheme Rule Changes

Employers will be required to consult members if schemes are closed or changed for the future.

Cash Transfers or Refunds

Members who have at least 3 months but no more than 24 months qualifying service must be offered either a transfer payment based on the underlying benefits or a refund of their own contributions.

Benefit Changes

Members have already been notified of the changes arising out of the valuation and tax simplification so I do not propose utilising space to reiterate what members already know. If you have not received a letter please let me know and I will ensure that a further copy is posted off to you.

CHANGES TO PNPF RULES AND EXPLANATORY BROCHURES

Amended Explanatory Brochures and PNPF Rules will be sent out to members as soon as they have been reprinted.

BENEFIT STATEMENTS

Members should have, by now, received their annual benefit statement for 2005.  Apologies for the delay in getting them out but changes in benefits have meant that these statements have had to be manually calculated and checked. Your patience during this process was greatly appreciated.

BUDGET MARCH 2006

On 22nd March 2006 the Chancellor delivered his Spring Budget Report. The general theme of this Budget was avoidance and how to plug the loopholes.

The general points of interest are:

TAX ALLOWANCES

Single Person

Aged under 65 £5035

Aged 65-74 £7280

Aged 75+ £7420

Aged income limit £19,500

Married Couple’s Allowance

Aged under 75 £6065

Aged 75 and over £6135

Age income limit £20,100

Blind Person Allowance £1610

Income Tax Bands

Starting rate 10% 0 – £2150

Basic rate 22% £2015 – £33,300

Higher rate 40% Over £33,300

Debbie Marten

Debbie@pnpf.co.uk

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