Protecting pension scheme assets

• A trustee holds the assets of the scheme for the benefit of the members and their beneficiaries in accordance with the scheme’s trust deed and rules.
• A trust structure is intended to deliver a level of member security by keeping the scheme’s assets separate from those of the employer.
• It’s the trustee’s duty to act in the best interests of scheme members and other beneficiaries. This includes monitoring the suitability of all investments.

Trustees must also act within the framework of the law. Pensions law is extensive with a raft of member protection requirements. There are various areas of legislation which impose requirements on occupational pension schemes, including trust law and specific pensions legislation (supported by Codes of Practice and guidance issued by The Pensions Regulator).

The Pensions Regulator is the UK regulator of work-based pension schemes. Its objectives include improving confidence in pensions by protecting members’ savings and encouraging high standards in the way pension schemes are run.

The People’s Pension Scheme (referred to as ‘The People’s Pension’ or just ‘the Scheme’) is a trust-based defined contribution occupational pension scheme, registered with HMRC and The Pensions Regulator.

The Scheme is an authorised master trust and has to meet rigorous ongoing requirements designed to increase safeguards for pension scheme members. It is closely supervised by The Pensions Regulator. The requirements include having fit and proper people involved in running the Scheme, sufficient financial reserves, and robust systems.

The People’s Pension Trustee Limited is the Trustee of the Scheme. The Trustee is responsible for the investment of members’ pension accounts held within the Scheme in accordance with any instructions from members. Meet The People’s Pension Trustee.

People’s Administration Services Limited (a company within the People’s Partnership Group) has responsibility to provide funds to the Scheme where costs aren’t otherwise met, in line with the requirements for master trust authorisation, in its role as scheme funder. It must maintain sufficient financial reserves, and The Pensions Regulator ensures that it meets these requirements.

The Trustee has also appointed People’s Administration Services Limited to carry out the day-to-day administration of the Scheme.

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Investing contributions

The People’s Pension Trustee is the direct legal owner of the majority of the Scheme’s assets which are managed by Amundi and Invesco – global asset managers – on behalf of the Trustee. Northern Trust is the investment custodian for the Scheme and is responsible for delivering several services to the Trustee including the safekeeping of the assets.

The day-to-day management of the rest of our investments has been delegated by the Trustee to a professional investment manager, State Street Global Advisors Limited (SSGA).

SSGA manages the investments within the restrictions set out in an investment management agreement. SSGA also owns and manages the Shariah Fund, but they delegate the stock selection to HSBC.

Amundi, Invesco and SSGA are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA, which means they meet the regulatory requirements to operate and provide financial services in the UK.

Should Northern Trust, Amundi or Invesco become insolvent, management and custody of the assets would be moved by the Trustee to an alternative manager / custodian.

The Trustee invests the funds with SSGA in highly regarded mainstream pooled investment funds accessed via a contract of linked long-term insurance with Managed Pension Funds Limited (MPF). If MPF were to become insolvent, it may be possible for any deficit to be recovered from the Financial Services Compensation Scheme (FSCS). The FSCS website at www.fscs.org.uk advises that for claims relating to long-term insurance policies the maximum compensation is 100% of the claim with no upper limit. However, we believe that this position has yet to be tested.

If the Scheme was to terminate and the Trustee decides to wind up the Scheme, members’ pension pots are protected and cannot be used to meet any expenses relating to the operation and winding up of the Scheme.

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Annuities

We do not currently offer annuities to our members. So, some members who take retirement benefits from the Scheme do so by securing an annuity with an insurance company. An annuity pays a pension income, usually for life. If the provider of such an annuity was not to meet its obligations due to insolvency, the member may qualify for compensation from the FSCS. The maximum level of protection is currently stated on the FSCS website as 100% of the retirement income the member is drawing down from that product as a benefit falling due.

Further details about the FSCS can be found at www.fscs.org.uk

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In summary

• If a participating employer in the Scheme was to become insolvent, as the Scheme assets are held under trust they’re legally separated from the assets of the employer and wouldn’t therefore be available to creditors of the insolvent employer.
• If the Founder, People’s Partnership Limited (a company within the People’s Partnership Group) was to become insolvent, as the Scheme’s assets are held under trust, they’re held outside of this company and would not be available to creditors of People’s Partnership.
• If the scheme funder (People’s Administration Services Limited) was to become insolvent, members’ pension pots are protected. The Trustee can seek another scheme funder of sufficient strength in financial terms so that the Scheme can continue running as usual. Or the Trustee can decide that it would be better for members’ pension savings to be transferred to another authorised master trust (or arrangement of a member’s own choice) and the Scheme be wound-up.
• If the Scheme terminates and is to be wound-up, members’ pension pots are protected and can’t be used to meet any expenses relating to the winding-up of the Scheme.
• If People’s Administration Services Limited (the Scheme administrator) was to become insolvent, new administrators would be appointed by the Trustee.
• If The People’s Pension Trustee Limited was to become insolvent, new trustees would be appointed.
• If Amundi, Invesco or SSGA was to become insolvent, new investment managers would be appointed. It is possible that a legal investment vehicle held by the Trustee with an investment manager could, in extreme situations, be impacted upon by the insolvency but the regulatory structure provides considerable protections. This would not apply where the Trustee owns the assets and they are managed by the investment manager on the Trustee’s behalf.

The contributions made to the Scheme buy units in investment funds for the benefit of Scheme members. The value of these units can go down or up depending on the way the investments perform and will affect the value of members’ pension accounts. Any investment losses caused by movements in unit prices are not covered by the FSCS.

The trust structure affords protection for members’ interests as the separation of services and legal ownership of the Scheme’s assets, which are independently controlled by the Trustee, means that timely, proactive changes can be made to any elements of the service, such as the investment provider.