Agenda item

The Investment Manager introduced this item. She said that the Fund’s Termination Policy was set out in the report. She introduced two guests from Curo, Donna Baddeley, Executive Director of Corporate Services, and Jane Jones, Head of Human Resources.

Ms Baddeley addressed the Committee. She said she wished to state Curo’s current position and update Members on the consultation process that had been undertaken in relation to the proposed exit. She said that Curo was a long-term business, which was under pressure from its own regulator to manage and reduce risk in its external environment. Curo needed to consider how it managed external risk, so that it could continue to deliver a viable business in future. Curo also wished to ensure equity between its employees, who at present were covered by several different pension schemes. About two thirds of employees were in the Group Pension scheme provided by Aviva. As part of the review of pensions provision by Curo advice had been taken from KPMG and Curo’s solicitors. Advice had also been taken on consultations with employees. Discussions had taken place with Unison and Unite. Curo had a good relationship with the unions, who had worked closely with Curo on this proposal. Group presentations and one-to-one meetings had been available to employees. Representatives of the Avon Pension Fund and from Aviva had given presentations to employees. Email groups had been established and a set of FAQs had been issued. The Curo Board was determined that the alternative offer to employees through the Group Plan should be a good one. It was proposed that Curo’s current contribution offer for all employees would be improved, and the upper level raised from 8% to 10%, with employees increasing their contributions from 4% to 5%. Curo was also offering to pay an additional 4% for the next two years to the affected staff. The Group Pension plan would be included in the flexible benefits offer, so that a salary sacrifice option would also be available. The unions would not advise their members to leave the Avon Pension Fund, but did feel that what was on offer from Curo was very good. 75% of employees had accepted the offer unconditionally.

In reply to a question from a Member, she confirmed that consultations with employees were now complete. Those who had not consented to the new arrangements would be offered re-engagement on the new terms from 1^st April 2015.

A Member asked whether the Pensions Benefits team had received enquiries from Curo staff as a result of these proposals. The Pensions Benefits Manager said that members of the team had met Curo staff as part of the consultation process, but he was not aware that the proposals had otherwise generated a higher level of enquiries from Curo staff.

A Member noted that Curo had not stated that their business would not be viable if they remained in the Fund, and asked how Curo was significantly different from other organisations who were not withdrawing from the Fund. After all, it was the aim of the new LGPS to cap employers’ costs overall. As for the current inequity between employees, Curo had created that situation when it had decided in 2007 that new employees would not be able to join the Avon Pension Fund. Ms Baddeley said that she could not speak for other organisations. Curo’s aim was to secure its financial security for the future,  to find the best ways of managing external risk and to maximise its opportunities for investment in social housing, which required keeping costs under control.

The Chair drew attention to paragraph 4.4 of the report, which set out the Exit Policy agreed by the Committee at the meeting of 28 March 2014. He said it was not the role of the Committee to second guess the decisions of the management, but to consider the application from Curo in relation to the policy. He asked whether, having met Curo, officers were able to provide assurance that the policy was being complied with. The Head of Business, Finance and Pensions said that officers been quite explicit about what was required in terms of consultation and that payment of the debt was required in full. The assets would be invested in corporate bonds following exit. Advice had also been taken from the Fund’s actuary. Officers were able to assure the Committee that Curo was meeting the terms of the Exit Policy.

A Member asked whether any other member body was contemplating leaving the Fund. The Investment Manager replied that officers were not currently in discussions with other member bodies about their possible exit from the Fund on this basis.

The Investment Manager referred to section 5 of the report, and reminded Members that at the September meeting they had asked for advice on whether the existence of a payment plan could impact on the seniority of debt, and thereby affect the probability of repayment in the event of insolvency after the plan was agreed. Advice had been obtained from the Fund’s solicitors and the Fund’s actuary and was as set out in sections 5.2-5.4 of the report.

RESOLVED

1. To agree that Curo has effectively managed the employment issues relating to their exit from the scheme, and that the proposal from Curo meets the terms of the Exit and Termination Policies, subject to the payment of the outstanding debt in full on exit.

2. To note the advice regarding the seniority of an admission body’s pension debt once a deficit plan is agreed on exiting the scheme.