UK - Cable & Wireless have agreed a pension settlement with the trustees of its UK defined benefit scheme which is to be split as part of its demerger, while Hertfordshire County Council is seeking a pensions administrator and the Institute of Directors is calling for the default retirement age to be increased to 68.From March 2010, Cable & Wireless will separate into two businesses - C&W Communications and C&W Worldwide - and the membership of the main UK DB scheme will be split between the two firms based on the last known employer of each member.
This is expected to leave around 6,300 members in the existing Communications scheme, while around 8,700 will be transferred to the new Worldwide pension scheme. The new scheme will have the same benefits and powers as the existing scheme and about half of the existing pension fund's assets and liabilities will be transferred to the Worldwide fund. (See earlier IPE article: C&W to split UK scheme as part of demerger)
To ensure the security of members' benefits are not adversely affected by the demerger, C&W has agreed a settlement with the trustee which includes an additional cash injection of £30m (€34.2m) into the pension fund.
C&W Communications intends to pay £25m (€28.6m) in cash into the existing scheme "on or shortly after the demerger", to offset the change in average duration of scheme liabilities following the membership split. This will be in addition to the firm's agreed share of the July 2009 interim funding agreement - which equates to payments of £9m in October 2010 and £20m in April 2011.
It has agreed to a £100m contingent funding agreement where the trustees can call for a letter of credit or cash escrow in certain circumstances. The next triennial valuation of this scheme is due in March 2010, however the company confirmed a funding plan to clear any potential deficit will end no later than April 2016.
Meanwhile, C&W Worldwide has agreed to inject £5m into the new scheme to help support members moving across from the existing pension. This is in addition to its share of the interim funding agreement that equates to payments of £11m in October 2010 and £25m in April 2011. It also has agreed a £100m contingent funding agreement. The issue of triennial valuations and funding plans will be agreed with the trustees of the new scheme shortly.
The council is offering eight-year contract for administration services, as the existing contract with Serco is scheduled to end in March 2011. The Council noted that while the relationship "has worked well to date, HCC is re-tendering the contract to identify savings and seek further opportunities in the market".
The closing date for the tender is 5 March 2010 with the appointed provider expected to commence work from 1 October 2010 to allow for a six month transition period.
Following the end of the government's consultation on the future of the DRA - which allows employers to force people to retire at age 65 - the IoD stated: "In some instances, it simply won't be possible for employers to adapt jobs to suit older workers. And in small firms it may be completely impossible to redeploy older workers to suitable jobs."
Miles Templeman, director general of the IoD, added: "We think that the current system, where employees can work beyond the DRA with the agreement of employers, is sound in principle, and supports both parties. However, it's important that the UK's retirement system evolves in line with modern working practices. On this basis, we would support the DRA being raised initially to 68. This would allow people to work longer, while ensuring employers retain the flexibility they need to manage their workforces."
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