BPS Employers Group. Pension Roadshow presented by: The Baptist Pension Scheme Employers Group

Transcription

1 Pension Roadshow presented by: The Baptist Pension Scheme Employers Group

2 Employers Group Members: Malcolm Broad, EG Moderator, Bristol Baptist College Treasurer & former BUGB treasurer Revd Alan Donaldson, General Director, BUS Revd Graham Dunn, Minister and Trustee of Barrow Baptist Church Revd Graham Ensor, Association Team Leader, YBA David Evans, Director, DJE Advisory Services Limited Tim Jackson, EMBA Treasurer & Public Company Director John Levick, BUGB Treasurer & former HEBA treasurer Carole Sheldon, Treasurer of Brighton Road Baptist Church, Horsham and Actuary, Group Finance (Pensions), RSA Group Dean Thorpe - YBA Treasurer & Chief Executive Director, Charles James Financial Planning

3 Why are we here today? 1. The big picture an update on the 2016 actuarial valuation a family solution for a family problem 2. What about my church? individual church employer debts the new draft employer debt regulations 3. The employer covenant 4. Recording pension information in your church accounts

4 Key Aim To eradicate the deficit in the Minister s Defined Benefits Scheme within 10 years or sooner. How can we achieve our aim to enable our churches to be free of the debt burden freeing up resources for missional objectives?

5 The big picture An update on the 2016 Actuarial Valuation

6 Baptist Pension Scheme as at 9/6/2017 Liabilities increased from 245.5M to 349.8M Buyout increased from 288.2M to 387.7M Investments increased from 161.5M to 229.7M

7 Baptist Pension Scheme as at 9/6/2017 Current position 44.6M behind 2013 recovery plan

8 Why has the Scheme deficit increased? Low gilt yields have remained stubbornly low over a long period and uncertainty remains when gilt yields will increase Majority of DB schemes have seen liability values increase compared with three years ago Most investments have performed well, increasing scheme asset values but not to a level that may compensate fully for increased liabilities Many schemes are therefore likely to show larger funding deficits than projected in their last valuation. Source: The Pensions Regulator

9 If we do nothing.. Significant increase in deficit contributions, to 15%-18% on average, depending on length of recovery plan

10 Potential Impact of increased deficit contributions? Current deficit contribution calculated as 28,500 x 12% = 3,420p.a. (minimum contribution) Possible increase to 4,313p.a. (Stipend w.e.f. 1/1/ ,750 + Manse Allowance 6,000 = 28,750 x 15% = 4,313p.a.) Possible increase to 5,175p.a. (Stipend w.e.f. 1/1/ ,750 + Manse Allowance 6,000 = 28,750 x 18% = 5,175p.a.)

11 What does the Pensions Regulator have to say about future recovery plans? Level of underfunding in the scheme -v- the strength of the employer covenant Future investment strategy Strong or tending to strong employers > to seek higher contributions now Trustees expected to take decisive action Source: The Pensions Regulator

12 Discuss impact of increased deficit contributions on your church? No impact, we will find the money Some impact, may affect our disposable income Some impact, may affect what we can give away or spend on mission, buildings etc. Big impact, may not be able to afford full or parttime ministry Big impact, may result in church closure

13 Potential Impact of increased deficit contributions? 1. Reduced ability to fund ministry in the local Church 2. Reduced SBF & BMS giving 3. Reduced ability to fund ministerial development 4. Reduced support for the Scottish Baptist College 4. Reduced support for other mission agencies in Scotland and around the world

14 The big picture A family solution for a family problem

15 What has the EG ever done for you! The EG recognises the strain of the deficit on churches across the Baptist family Has listened to churches and associations solve the problem in this generation Working with specialist pension lawyers and consultants to develop a Family Solution involving BUGB, BU Council, BSG, Associations & Colleges

16 Family Solution For the Family Solution to achieve the aim of eradicating the pension deficit, we need to recognise there is no silver bullet, no one organisation that alone can solve the crisis. Unions, Associations, Colleges, Churches, Retirees and future Retirees must all come together to achieve a common aim, recognising that everyone involved will be affected, but taking fair and reasonable steps can achieve our goal.

17 What is the Family Solution? Cash injection Additional security Reduction in Liabilities

18 Estimated Employer Debts (EEDs) explained? Automated Monthly Debt Estimate (AMDE) What is an employer debt (also known as a pension debt or a cessation debt) and how is it calculated? Trustee s record of the employer s current and former ministers who were in service with the employer (and in certain circumstances, while they were in service prior to joining the employer). Certified Assessment -v- Flexible Apportionment Arrangement (FAA) Pension Trustees preference What does my church do next?

19 How can I find out what my church estimated deficit is? Internet Address: nsions.org.uk/church es-employers/ Click The Employer Hub button Enter address Enter password Letter appears for printing, Table 1 shows your church s estimated employer debt figure Click Estimated Employer Debt - (latest month) A N Other BC line Click Employer Documents (blue) button Click Sign in button

20 Cessation events The facts Made representations to the DWP, including robust response to the consultation

21 What is the employer covenant? An assessment of the strength or otherwise of employers to meet their obligations to the pension trustees both now and into the future. How is the assessment made? a review of every set of accounts from employers (churches) annual income and expenditure of unrestricted funds cash held in unrestricted funds value of assets held by an employer, e.g. property, investments etc. A legal requirement to submit accounts

22 Analysis of our employer covenant? Employer analysis carried out in 2014 showed: property assets with significant value are held, albeit many held in trust a robust level of cash and investment reserves was held (relative to annual expenditure) 2013 valuation, 84m funding deficit with Strong covenant The deficit would have been much higher assuming a Weak covenant, perhaps m Pensions Regulator issued new employer covenant guidance, in August ability of employers to contribute cash

23 Discuss - should employer deficit contributions be aligned to individual church debt? 1. Flat rate across all employers (currently 12%) but would be higher if no action taken or 2. Deficit contribution aligned to individual church debt 3. If 2. should there be protection for churches who face large increases through phased increases? 4. Are there other options we should consider? 5. Which of any option seems fair and just?

24 Examples. Fixed Contribution Variable Variable Variable Variable A. N. Other Church Debt Estimate Debt Estimate Debt Estimate Debt Estimate 25,000 50, , ,000 Flat 12% Contribution Flat 15% contribution Flat 18% contribution Estimated Annual Contribution 3,420 4,313 5,175 1,563 3,125 6,250 12,500

25 Questions for you? Please answer all questions Nos. 1 to 4 No. 5 is optional Please ensure you enter your role at your church at the start of the questionnaire

26 Questions?