UK roundup: Post Office seals £450m derisking deal [updated]

The Royal Mail Pension Plan (RMPP) has insured £450m (€510.1m) worth of defined benefit (DB) liabilities with Rothesay Life.

The transaction secured benefits accrued after 2012 by 5,700 members of the Post Office section of the RMPP, most of whom have yet to retire.

Rothesay Life linked the price of the deal to a portfolio of gilts, the insurer said in a statement, “giving price certainty during execution and ease of premium payment once executed”.

Joanna Matthews, independent chair of the RMPP, described the deal as “an important step in improving the security of Post Office workers’ pension benefits”.

Charlie Finch, partner at consultancy LCP and lead adviser to the RMPP trustees, added: “Insurers were engaged early in the process, which meant the trustee was well prepared and could move quickly to take advantage of an attractive pricing opportunity when it arrived.

“This is a good example of a trustee, with sponsor support, acting decisively to remove pension liability risk in the Post Office Limited Section.”

The Post Office section of the RMPP closed to future accrual on 31 March last year.

Royal Mail plans to introduce a collective defined contribution (CDC) scheme for all its current employees and, with trade unions, is lobbying government to make the legislative changes necessary for such a scheme to operate. The Post Office is a separate organisation and is unaffected by the CDC discussions.

Universities and staff seek USS deal

The UK’s Advisory, Conciliation and Arbitration Service (ACAS) is to step in to help resolve the long-running dispute between universities and staff union UCU over the future of the UK’s biggest pension fund.

Lecturers began strike action earlier this month in protest at plans to stop DB accrual in the Universities Superannuation Scheme (USS). The scheme’s Joint Negotiating Committee has opted to stop future DB accrual from April 2019 and switch all staff to a defined contribution scheme. The changes were estimated to cut USS’ deficit by more than half, from £12.6bn to £6.1bn.

However, the University and College Union (UCU) pushed for strike action in protest at the changes. It has argued for a “small amount of increased risk” in USS’ assumptions – which it has claimed are too cautious – and changes to accrual rates without removing the DB element.

Yesterday both the UCU and Universities UK, which represents employers, agreed to more talks over the scheme’s future. ACAS will oversee the discussions, which will begin on Monday.

Universities UK asked the union to stop strike action while the ACAS talks took place, but in a statement yesterday the UCU indicated that lecturers would still walk out today. Further walkouts were scheduled for 5 March for four days and five days from 12 March.

Trustees growing more concerned about fraud

Pension scheme trustees are more aware of potential fraud risks but “too complacent” about prevention, according to consulting firm RSM.

The audit and tax specialist surveyed 124 UK trustees and found more than half (52%) saw fraud as a “significant threat” to their members – up from 41% in a similar survey conducted last year.

The findings follow political debate about pension savers falling victim to scams as they seek to take advantage of flexibilities around withdrawing retirement funds.

RSM said 85% of trustees questioned had included fraud on their schemes’ risk registers. However, one third failed to carry out an annual test of anti-fraud controls.

The consultancy also warned that schemes were neglecting some forms of scam, such as “pensioner existence fraud”, whereby somebody continues to take the pension of a deceased member.

Ian Bell, head of pensions at RSM, said: “Schemes must do much more to uncover ‘old school’ frauds such as relatives continuing to claim payments after a member’s death or tackling suspicious pensions transfer requests, while at the same time staying alert to new and evolving threats such as cybercrime.”

Fiona Frobisher, head of policy at The Pensions Regulator, said it was “encouraging” that fraud and cybercrime were on trustees’ agendas. She added that trustees also needed to ensure “robust internal controls are put in place and are being tested”.

Note: This article was updated to clarify the distinction between Royal Mail and the Post Office.