The New Scheme

Scenario

Whilst the death of final salary schemes has been predicted for many years, occasionally an employer needs to set one up, for example in order to accept staff under a TUPE transfer, or Local Government outsourcing arrangement.

BBS was recently involved in such a scenario, when a commercial organisation accepted a contract from a quasi-Public Sector employer and agreed to take on 300 staff and honour their existing pension terms.

The decision to accept the contract was made in February, with the Scheme being effective from 1 April.  The Company had used their usual lawyers to establish a shell Trust, and their accountants to help them understand what the scheme might cost.

Clearly speed was of the essence.

Solution

Whilst the Company's accountants were able to get things up and running, using them over the longer-term to manage the scheme could be costly, and was likely to introduce conflicts of interest.  The appointments were put out to tender with BBS being appointed in early April.

The Company wanted to ensure that there was no confusion of roles, so the accountants were retained to advise the Company on funding matters, and BBS were appointed by the Trustees using our full-services solution:

• Consultancy and Secretarial Services;
• Administration Services;
• Scheme Actuary Services;
• Bookkeeping, cash-management and accountancy services.

In order to meet the complex legislative requirements associated with a new scheme, three Trustees meetings were held in quick succession, so that Funding Plans, Investment Managers, Legal Advisers and Auditors could be selected.

The Outcome

At first sight everything seemed straightforward.  There were no past-service liabilities, no complicated sex-equality problems and no nasty historical records to look after.

Of course, things are never that simple, and the TUPE arrangements required the Company to honour the complex AVC arrangements and provide salary-linking of the previous employer's benefits.

Despite these complications, and a panel of Trustees with no experience, BBS managed to implement the new AVC arrangements so that there was very little delay in member contributions being invested, and give advice to the Trustees so that they could meet the salary-linking requirements.

After 12 months, the Scheme has bedded down, and the Trustees and Company are able to take a hands-off approach to management, safe in the knowledge that BBS will be ensuring that they remain compliant and the members are well looked after.