Posts by David

David Davison

David Davison

Specialist consultant on pensions strategy for corporate, public sector and not for profit employers
David Davison

A change in practice by local government pension scheme Lothian Pension Fund (‘LPF’) outlined in a recent Bulletin has finally looked to rectify a long standing anomaly with pension schemes of this type.

Many charities joined LGPS as a result of outsourced arrangements from local authorities or other public bodies. These arrangements resulted in the transfer of staff from the local authority and allowed these staff to continue their pension provision.

Unfortunately Funds were unable to segregate the service for these individuals between the two employing bodies which meant that the later employer, usually a charity, inherited all the liabilities. Read more »

David Davison

Spence & Partners, the UK pension actuaries and administration specialists, today shared their concerns that more charities will become trapped in multi-employer pension schemes with damaging liabilities unless government amends Section 75 legislation.

In March of this year, the Department for Work and Pensions (DWP) were seeking views on the operation of the employer debt regime for non-associated multi-employer defined benefit schemes in a call for evidence which closed in May. As of yet no proposals have been made and the DWP website warns that it was published under the Coalition government and therefore might not be a priority for the current regime. Read more »

David Davison

The Pensions Regulator has produced 65 pages of guidance for pension scheme trustees and sponsors on assessing and monitoring the employer covenant. We have provided some generic guidance via the attached link – TPR’s guidance on assessing and monitoring the employer covenant.

Helpfully in Appendix B and C from pages 54 onwards there is specific guidance for not for profit organisations. The key recommendation is that commercial operations and donations need to be considered independently with the guidance providing examples where donation income represents a low and high proportion of overall income. Read more »

David Davison

Spence & Partners latest blog for Pension Funds Online –

Many charities participating in local government pension schemes (LGPS) have been increasingly frustrated by the lack of recognition of the issues they face by the schemes and indeed the Department for Communities and Local Government (DCLG) who oversee them.

The issues are not new but there remains an element of denial and finger pointing and it’s very easy to see how charities could be frustrated. Read more »

David Davison

In March 2015 the Department for Work & Pensions launched a call for evidence on ‘Section 75 Employer Debt in Non-Associated Multi-Employer Defined Benefit Pension Schemes’. This is a once in a generation opportunity for charities to influence government to get legislation which is seriously damaging charities financial viability. I therefore would urge charities who participate in schemes of this type to make their views known to the DWP. I’ve included  a link to an article I’ve written on Civil Society Online and our response to the Consultation which should hopefully help charities with their responses. The consultation closes on 22nd May 2015 so not much time left.

David Davison

SHPS or leaky boat?

“Déjà vu all over again” is a famous quote attributed to famous baseball manager Yogi Berra which must perfectly describe how England and Wales social housing organisations must be feeling following the publication of the results of the 2014 valuation for the Social Housing Pension Scheme (“SHPS”). The results show that the ‘on-going’ funding deficit has increased from £283m in 2005 to £663m in 2008 to £1,035m in 2011 and now £1,323m at 2014. I’ll not mention the current position which would be even worse!!

In the face of further  increased future contribution costs and further future risk exposure, organisations may now be considering what options are open to them. Read more »

David Davison

Local Government Pension Scheme (‘LGPS’) – Technical consultation on Local Government Pension Scheme Rules – December 2014

Introduction

The evolution of LGPS over the last number of years has created significant inconsistencies and unfairness particularly in the treatment of admitted bodies.  This is highly problematic for participants as well as building up significant difficulties for the LGPS themselves. It has also resulted in LGPS looking unresponsive to the issues that their admitted bodies face.

The consultation specifically requests “suggestions on how to better protect local tax-payers where there is a risk they will have to foot the bill for employers who leave the scheme.” LGPS need to recognise that the current approach is unfair, impractical and ultimately unsustainable. LGPS would appear to prefer to continue to pursue excessively prudent cessation settlements which are rarely if ever paid, as they are unaffordable, while organisations continue to accrue further liabilities which will remain unsettled until a point where an organisation ceases to operate and the burden is left with the tax-payer. Surely to protect the tax-payer it would be much more sustainable to find a way to prevent additional unaffordable liabilities accruing and adopt a more pragmatic methodology in calculating and obtaining any cessation liabilities due.

In this response I will therefore look to identify a number of the key issues faced and offer some proposals how the LGPS could adapt for the good of participants and themselves. Read more »

David Davison

With many charities now facing full balance sheet disclosure of their multi-employer pension scheme liabilities for the very first time trying to get a handle on the potential impact can be daunting. We’ve already put together a guide for charities in these schemes which explains the technical details and the key choices charity FD’s are likely to face. In addition we’ve designed a FRS102 liability calculator which will allow organisations to enter their deficit recovery contributions and recovery period and obtain an estimate of the net present value figure they’ll be likely to have to include on their balance sheet. Based upon this the calculator will also provide a proxy figure for a full disclosure equivalent to that calculated currently derived under FRS17.

From this charities should be able to see the potential financial impact and begin to consider if steps need to be taken to protect the balance sheet position. For some the steps could be relatively straightforward however for others, particularly those where this change could have a material impact, and potentially even result in a negative balance sheet, more bespoke action could be required and planning needs to begin early to consider all the alternatives.

The calculator will allow multiple calculations to be carried out, saved and printed and we hope it will provide access to a valuable resource for charities to better understand their obligations.

David Davison

I am delighted to have been able to contribute to, and indeed sponsor, the publication of “Navigating the Charity Pensions Maze” produced by Charity Finance Group (CFG). I believe that this document will provide charities with an invaluable reference guide to the complex pension issues they face.

The document was launched on 10th July 2014 in London by CFG with support from Pensions Minister, Steve Webb and also included the launch of a Pensions Manifesto which highlighted the areas of importance and makes proposals how these issues could be effectively improved or reformed.

The Maze document has taken around 6 months to compile, includes detailed research carried out by CFG and covers a wide array of topics which will hopefully allow finance directors, HR managers and CEO’s to find information on the issues which affect their charity and therefore help them get the most from their pension provision. Read more »

David Davison

When encouraging change to the approach taken with charity pensions I’m constantly asked the question by large schemes and regulators – have you got any analysis of the issues. This has often been difficult to obtain and as a result the pension difficulties charities face are often all too easily ignored. Charities really need to have their voice heard and here is your chance. Charity Finance Group are carrying out a pension survey to use to better inform on the issues faced and to assist in negotiations with DWP and LGPS for a change in legislation and approach.

This is a great opportunity for charities to influence future pension policy and thinking, and to really get their views across at a high level.

I would strongly encourage charities to participate by following the link and providing your experience.

But don’t delay as the survey closes on the 7th April.

 

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