pensionsfocus 2016 | pensionsfocus · Welcome to this issue of pensionsfocus, which aims to keep...

pensionsfocus 2016 | 01

pensionsfocusBritannia Pension Scheme

February 2016

The co-operative bank

02 | pensionsfocus 201602 | pensionsfocus 2016

InsideWelcome 03Our accounts 04Our members 05 Our investments 06Valuation update 08How secure is my pension? 09Other Scheme information 10News update 11Get in touch 12

Help for visually impaired membersIf you have trouble reading this newsletter, you might prefer a large print version. If so, please call 0161 246 4731.


Welcome to this issue of pensionsfocus, which aims to keep you in touch with developments in your pension scheme. It is addressed to you as a member of the Britannia Pension Scheme (‘the Scheme’) and is from the Trustee Directors.

This newsletter summarises the annual Report & Accounts which the Trustee is requiredto produce for the Scheme. If you wouldlike to see the full Report & Accounts, please go to www.legalandgeneral.com/coopbank and follow the link at the top of the page to “Other schemes” then “Guides & factsheets” for the Britannia Pension Scheme, or via the contact details on page 12.

Welcome The Scheme Trustee

It is with great sadness that we inform the members of the death of Barrie Bernstein on 24 August 2015, aged 76. Barriewas the former Chair of the Trustee to the Scheme and served on the Trustee Board for a number of years. He was wellrespected, with an unassuming approach but the highest level of integrity. He made a significant contribution to the Schemeand will be sorely missed.

Bill Ashburner took over as Chair on 30 June 2015. Bill is an Independent Trustee who brings a wealth ofexperience to the role. He serves on a number of Trustee Boards and has been a Trustee and Trustee Director to the Scheme for 8 years.

The Scheme is run by a corporate trustee company called Britannia Pension Trustees Limited. The Trustee Board has six Trustee Directors (although two of these roles are currently vacant):

Employer-nominated Trustee Directors

WF Ashburner (Independent Trustee and Chair from 30 June 2015)

S Aitken (appointed 11 February 2015)

J Hope (appointed 16 June 2015)

BAW Bernstein (resigned 16 June 2015)

R Burrows (appointed 17 September 2014, resigned 30 November 2015)

I Dale (employer nominated to 4 June 2015)

Member-nominated Trustee Directors

I Dale (member nominated from 4 June 2015)

C Massey (resigned 30 March 2015)

H Owen (resigned 10 October 2014)

A new employer-nominated Trustee Director is expected to be appointed in the near future. In addition, as a result of a withdrawal of a candidate from the final stage of the member-nominated director process in June (leaving one vacancy unfilled), the Trustee Directors will run a new member-nominated director process shortly.

The Co-operative Group’s Pension Department has also been providing support services to the Trustee Directors and Scheme. As part of the wider separation of the Bank and Group, these services will be provided by KPMG LLP going forwards.

In addition, due to the separation of the Bank and the Group, there has been a change to the Scheme’s main sponsor. The company now principally responsible for the Scheme is the Co-operative Bank plc (it was previously Co-operative Financial Services Management Services Limited).

The Trustee Directors also have regular dialogue with representatives of the membership.


Value of the Scheme’s assets at 5 April 2014 £653.6m

+Plus income £17.1m

including employer contributions of £1.1m and investment income of £16.0m

–Less expenditure £20.0m

including pensions and other benefits of £13.0m and payments to leavers of £3.5m.

+Change in market value £125.1m

the increase in the value of the assets during the year

=Value of the Scheme assets at 5 April 2015 £775.8m

Our accounts

The sponsors currently pay £1 million per annum to meet the ongoing costs of running the Scheme.


Compliance statementThe Trustee continues to review the effectiveness of the controls in place to manage risk on an ongoing basis. A wide range of controls are in place to make sure that the Scheme meets legal requirements and best practice standards, while providing a high quality service to all members. The controls were also reviewed as part of the annual audit of the Scheme by our independent auditor, Deloitte. Deloitte also confirmed that the accounts give a true and fair reflection of the Scheme’s finances.

Our members*The Britannia Pension Scheme is made up of the following types of member:

Deferred members 3,332These members have stopped working for the Bank or have chosen to opt out of the Scheme, but they haven’t yet started to receive their pension.

Pensioner members 1,318These members are receiving a pension from the Scheme and include people receiving a spouse’s or child’s pension.

Closure members 405These members continue to work for the Group or Bank (depending on their employer and the Bank separation project) and they haven’t started to receive their pension from the Scheme.

* Membership figures as at 5 April 2015

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Our investmentsThe money that has built up in the Scheme is known as its ‘assets’. The way that the assets are invested is a very important part of keeping your benefits secure. The Trustee takes professional advice before deciding how to invest the Scheme’s assets and will make changes to the investments if it believes this can provide more security for the Scheme.

How the investments performed Over the year to 5 April 2015, the Scheme’s assets grew by 21.4%. The benchmark return (a target set by the Trustee) for the same period was 20.1%. Over three years to 5 April 2015, the assets grew by 12.9% a year compared to the benchmark increase of 11.4% a year.

How the assets are invested The chart opposite shows how the Scheme’s assets (excluding members’ Additional Voluntary Contributions) were split across different types of investments on 31 March 2015. Spreading the investments in this way helps to protect the Scheme against a sudden fall in the value of a particular type of investment.


How the Scheme assets were split: Liability driven investments 58.5%Investments that aim to match the Scheme’s liabilities (which include, for example, fixed-interest and index-linked bonds issued by the UK Government).

Cash 1.9%Cash held in Scheme accounts.

Property 10.7%Investments in secure income and global property.

Shares 17.1%Securities representing an ownership interest issued by companies.

Alternative growth assets 11.8%Investments in a range of assets, which aim to provide equity-like returns with less volatility.

Figures subject to rounding



Valuation updateThe Trustee has an appointed independent and qualified professional, known as an Actuary, to help us review whether the Scheme has enough money and whether the Scheme’s sponsors need to pay more to the Scheme. This review is called an Actuarial Valuation and is carried out at least every three years.

The last formal Actuarial Valuation for the Scheme was carried out as at 5 April 2011, the results of which have been previously communicated to you.

The Actuarial Valuation for the Scheme as at 5 April 2014 is currently underway and discussions are ongoing with the Scheme’s main sponsor (which has recently changed from Co-operative Financial Services Management Services Limited to Co-operative Bank plc as part of the separation of the Group and the Bank). The statutory deadline for completing this valuation process (5 July 2015) has been passed, and the Pensions Regulator is aware that this deadline has been passed. The Pensions Regulator is understanding of the unique and specific reasons for the delay. (The Pensions Regulator is responsible for regulating work-based pension schemes in the UK, such as the Scheme, with objectives which include protecting member benefits and promoting good scheme administration).

The Trustee Directors would have wished for the process to be concluded in line with the statutory timescale. However, there have been a number of changes affecting the Scheme’s sponsors (including Bank and Group separation and re-capitalisation within the Bank) and it is appropriate that the Trustee fully understands these changes and what these mean for the Scheme. The priority of the Trustee Directors is to look after your benefits responsibly and to make sure that these are appropriately funded for over the long term. With our professional advisers, we are making good progress in respect of the 2014 Actuarial Valuation and we anticipate being able to communicate the results to you in the first half of 2016.


The Scheme aims to have enough money to pay pensions and other benefits to members as they fall due. However, the Trustee is also required to consider what would happen if the Scheme’s sponsors were unable or unwilling to support the Scheme in the future. Please note that this is a legal requirement and does not mean that there is any intention to terminate (or “wind up”) the Scheme.

The Scheme’s sponsors feel that they are able to meet the obligation to ensure that the Scheme has enough assets to pay benefits as they fall due, and the Trustee and Scheme Actuary work closely together during actuarial valuations to ensure that there is enough evidence provided to support this. The valuation includes a test of whether the Scheme could afford to secure all of its benefits with an insurance company, for example if the Scheme were to wind-up. This is called the solvency position and it is a much harsher test than the long-term funding plan, because it takes into account the expensive terms imposed by insurance companies. Virtually all UK pension schemes have substantial shortfalls based on insurance company terms. If the Scheme were to wind-up, the Trustees would try to recover as much of this amount from the sponsors as

possible. An update of the financial position when measured on this basis for the Scheme will be provided as we finalise the 2014 Actuarial Valuation process.

Please be assured that it is a legal requirement to provide this information, and it does not imply that the sponsors have any intention to wind up the Scheme. Please also note that if there were insufficient money to secure all of its benefits on wind-up there is a “safety net” provided by the Pension Protection Fund which aims to provide a certain minimum level of benefits in most circumstances. Further information on how and why a scheme may enter the PPF, along with the benefits available, is available on the PPF website at www.pensionprotectionfund.org.uk.

What if the scheme is wound up?


Other important Scheme informationBy law, we are required to confirm whether any payment has been made to the Scheme’s sponsors out of the Scheme’s assets in the last 12 months. We must also tell you if the Scheme has been modified by the Pensions Regulator or whether the Pensions Regulator has made any directions regarding the Schedule of Contributions or how Scheme benefits are valued.

We can confirm that none of these events has occurred. There are a number of documents about the Scheme which are available for you to read. Please contact us (using the contact details on page 12) if you would like to receive a copy of any of the following documents (a charge for distribution of hard copies may apply which we will confirm when we receive your request):

Annual Scheme Report and AccountsThis summarises the Scheme’s financial position over the financial year between 6 April and 5 April in any given year.

Actuarial Valuation ReportsThis shows the Scheme’s latest financial position. The most recent valuation is as at 5 April 2011 with subsequent update reports as at 5 April 2012 and 5 April 2013

Recovery Plan

This sets out how, following the 5 April 2011 Actuarial Valuation, the Scheme’s

sponsors agreed to pay contributions to the Scheme so that it has enough money to pay everyone’s benefits. A new Recovery Plan will be agreed following completion of the 5 April 2014 Actuarial Valuation.

Schedule of ContributionsThis shows the total amount of money that, following the 5 April 2011 Actuarial Valuation, the Scheme’s sponsors agreed to pay into the Scheme for the duration of the Recovery Plan. A new Schedule of Contributions will be agreed following completion of the 5 April 2014 Actuarial Valuation.

Statement of Funding PrinciplesThis sets out how the Trustee and Scheme’s sponsors have agreed to assess the financial position of the Scheme.

Statement of Investment PrinciplesThis sets out our policy on investing the Scheme’s assets.

Scheme RulesThese are the legal documents which set out how the Scheme is run.


News updateKey things to note• You can access your pension

benefits if you are over age 55

• You now have more retirement options than you would have had in the past

• These are designed to give you more flexibility to shape retirement benefits that better suit your needs

Retirement can be an exciting part of life that hopefully will last for many years to come. The Trustee wants to ensure you get the most out of your retirement, understand the options within the Scheme, and make the right decision for your needs. We will write to you again shortly to provide further details of these flexibilities and your options.

Greater pensions flexibility

In the previous edition of pensionsfocus, we highlighted some of the pensions flexibilities being introduced in March 2014. Even more flexibilities were introduced by the Government in April 2015 and we wanted to highlight some of these to you.

These flexibilities (named as Freedom and Choice by the Government – see https://www.gov.uk/government/consultations/freedom-and-choice-in-pensions for further details) were primarily aimed at members of Defined Contribution (“DC”) schemes. The Britannia Pension Scheme is a Defined Benefit (“DB”) scheme so cannot offer the same level of flexibility at retirement. However, these flexibilities are available if you transfer the value of your benefits to a suitable DC arrangement.

For many members, taking retirement benefits from the Scheme is likely to remain the most appropriate option and we would strongly encourage any member wishing to consider taking a transfer to obtain independent financial advice (moreover, this is a requirement for members where the value of DB benefits in the Scheme is more than £30,000).

However, if you are considering your options, flexibility means:

Benefits in the Scheme at retirement:

• you can receive a pension payable for life

• you can exchange some of your pension for a one off tax free lump sum

Benefits available via a transfer to a DC scheme:

• you could choose to take a larger lump sum, this could be up to the total value of your benefits (although you may pay tax on some of the benefits)

• you could choose a different type of pension (known as an “annuity”) to better suit your circumstances

• you could choose to access your pension pot over time, withdrawing amounts of your choice as needed until your pension pot has been used up

• you could choose any combination of the above


Remember to tell us if you move address so that we can keep you updated with news about your pension. If you haven’t completed an expression of wish form, to tell us how you would like benefits from the Scheme paid out on your death (or if you need to update your wishes) you can ask Mercer to send you a form. Mercer carry out the administration, including the calculation of individual benefits, on behalf of the Trustee Directors.

Get in touchPensioner membersFor questions about the payment of your pension, please contact Mercer at the address below:

In writing: Mercer Ltd, PO Box 434, Westgate House, 52 Westgate, Chichester PO19 3ZU

By phone: 0845 602 4710

By email: [email protected]

Deferred and Closure membersIf you have any questions in relation to your pension, or would like any more information, please contact Mercer at the address below:

In writing: Mercer Ltd, Belvedere, 12 Booth Street, Manchester M2 4AW

By phone: 0121 733 4144


Please quote the name of the Scheme and your National Insurance number when making contact.

General queriesYou can contact Natalie Wignall, who provides secretarial support to the Trustee, if you have any general questions about pensions or feedback about this newsletter:

In writing: Natalie Wignall, C/O KPMG LLP, 1 St Peter’s Square Manchester, M2 3AE

By phone: 0161 246 4731


Please note: Benefits are determined by the Scheme’s Rules. If there is any conflict between any information in this newsletter and the Rules, the Rules (as amended from time to time) will be overriding and will govern the benefits that you receive. If you have any questions or would like a copy of the Rules, please contact Mercer.

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Any correspondence to be directed to the Trustee should be addressed to Natalie Wignall who will liaise with the Trustee accordingly.

pensionsfocus 2016 | pensionsfocus · Welcome to this issue of pensionsfocus, which aims to keep...

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