Civil service to review actuary
UK - The UK civil service pension scheme is tendering for an actuarial consultant to oversee the management of its strategy once the final salary scheme has closed to new members.
Colin Hennem, pension policy manager for the Cabinet Office Civil Service, told IPE while the unfunded close defined benefit scheme is looking for an actuary but part of the role will also be to advise on the management and appointment of firms handling its defined contribution schemes.
"We are looking for actuarial advice on our money purchase AVC and our stakeholder [pension] as well as our Plus Partnership, another form of stakeholder with significant employer contributions. We would expect the consultant to do an annual review of [these] providers," added Hennem.
Hewitt Bacon & Woodrow is currently employed as actuarial consultants and the firm is now working on the scheme's quadrennial scheme valuation.
Should the civil service scheme change its consultancy provider they will be required to conduct the review in four years' time, said Hennem, as well as look at scheme factors, contribution rates and deliver "a certain amount of ad hoc work advice" on the operation of the scheme.
Pre-qualification questionnaires will be sent out to firms interested in tendering and they must be returned by July 1.
A beauty parade will then be held for shortlisted candidates and an appointment is likely to be made in November, before the contract begins on April 1 2008.
The call for tenders is unrelated to an announcement made by the civil service pension scheme in January to close the unfunded scheme to new members from July 1 this year.
The existing DB scheme is currently unfunded with liabilities of around £101bn (€148bn) to March 31 2006 so the costs of any liability shortfalls have to be paid by the British taxpayer.
From July, all new civil servants will be enrolled into a defined benefit fund, in a bid to make the scheme cost-neutral.
New members will move onto a career average revalued earnings schemes (CARES), which will see employees at 65 receive 2.3% pension of average salary for each year of service.
According to official figures released by the UK government, the cost of financing UK public sector pensions is expected to reach £29bn this year. But contributions from employers and employees are expected to reach just £19bn - leaving a potential black hole of £10bn to be funded by British taxpayers.