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July 2014

I write this month’s blog after a weekend of sunshine, humidity and some cracking thunderstorms that the forecasters have been struggling to predict with any certainty. Uncertainty…what a wonderful segue into pensions…

HMT hands GG to TPAS and MAS – OMG!

Her Majesty’s Treasury (HMT) has confirmed today (21 July) that the ‘Guidance Guarantee’ for retirees, they trailed in the Budget, will be carried out by The Pensions Advisory Service (TPAS) and the Money Advice Service (MAS). HMT believes that by handing the responsibility to independent bodies, rather than the providers themselves, consumers will ‘trust’ the guidance. The government has stated that it will continue to work with the likes of Citizens Advice and Age UK, to ensure they remain ‘inside the tent’.

So far, HMT has received approval for £10m for this service, seeking to double that amount in due course to fulfil the £20m contribution promised when the announcement was made. At the time of writing, I haven’t seen what the estimated costs (initial and ongoing) are for TPAS / MAS to fulfil their new obligations, nor whether there is a chance of the £20m war chest to be boosted, should the need arise. I’m not a betting man, although a small wager on provision of the guidance guarantee exceeding £20m is looking rather appealing!

CoA upholds CG for BTPS – ATM

The Court of Appeal (CoA) has ruled that the government (i.e. taxpayer – remember, there isn’t a bundle of cash, sitting in escrow, waiting to be handed out if the need arises) remains responsible for the full cost of benefits for the British Telecom Pension Scheme (BTPS), should there be an insolvency event. Cue much wailing and gnashing of teeth at the department for Business, Innovation and Skills (BIS) who hold the cheque book in respect of the Crown Guarantee (CG) that was provided at the time British Telecom (BT) was privatised, back in 1984.

The government believed that they had provided a guarantee for those pensions up until the point of privatisation, with all post-1984 pensions for the employer to stump up. The Trustees of the Scheme, along with the employer, are keen to see the guarantee extended to all pensions – quelle surprise.

This case has been rumbling along for some time now, with the previous decision to uphold the CG made in the High Court in 2010. The difference between the two judgements is on how the liability is calculated – the High Court stated that buyout should be the measure, whereas the CoA has removed this highest of measures, in favour of the company’s obligation to pay deficit contributions, as per the BTPS trust deed and rules.

Estimates for the cost of the guarantee range from around £8bn to anything up to £22bn, although the latter figure has been, apparently, dismissed by the BTPS trustees.

The government’s next step is to appeal the judgement to the Supreme Court, should they chose to do so. Again, I am not one prone to gambling, however a modest wager on an appeal being lodged looks better value than my tip in The Open!

Talking of The Open and Rory McIlroy’s triumphant win, according to Forbes his earnings for the year to June 2014 were $24.3m…now there’s a chap who is unlikely to need to call on the Guidance Guarantee when he decides it is time to retire!

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Category : A month in the life of pensions — admin @ 1:00 pm November 28, 2014