The People’s Pension Scheme (the Scheme) is a defined contribution occupational pension scheme, established under a trust by B&CE Holdings Limited (B&CE), a not-for-profit organisation. Any surpluses made by B&CE are used for the benefit of members, not to pay dividends to shareholders. Your employer is one of many who use the Scheme as their workplace pension scheme.
Because the Scheme is established under a trust arrangement, you have the reassurance of knowing that your personal account and the assets of the Scheme are held legally separate from both B&CE and your employer, which delivers a level of member security.
Trusts, such as the Scheme, need trustees to hold and manage the assets of the trust. A trustee company – The People’s Pension Trustee Limited (the Trustee), whose directors are independent from B&CE – has been appointed to manage the Scheme in line with the Scheme’s governing trust deed and rules. The Trustee is also responsible for the investment of your personal account, in accordance with any instructions you may have provided. It is the Trustee’s duty to follow the terms of the trust and act in the best interests of scheme members and other beneficiaries.
The Trustee has appointed B&CE Financial Services Limited (another company within the B&CE Group) to carry out the day-to-day administration of the Scheme.
Pensions law, with which the Scheme has to comply, is extensive and there is a raft of member protection requirements.
In addition, the Scheme is registered with The Pensions Regulator, the UK regulator of work-based pension schemes. The Pensions Regulator oversees the running of pension schemes and can intervene in cases where scheme trustees, employers or advisers may have failed in their duties. The Pensions Regulator’s aims include improving confidence in pensions by protecting members’ benefits and encouraging high standards in the way pension schemes are run.
The Trustee ensures that the Scheme is run in a manner that is consistent with pensions law and other Codes of Practice and guidance issued by The Pensions Regulator.
The Scheme is also registered for tax purposes with HM Revenue & Customs.
What if things go wrong?
If your employer were to become insolvent – the Scheme’s assets are held under trust and are therefore separate from those of your employer. The assets would not therefore be available to creditors of your insolvent employer.
If B&CE were to become insolvent, the Scheme assets, being held under trust, are held outside of this company and this event would not result in a charge on the assets.
If the Scheme terminates and the Trustee decides to wind up the Scheme, the Trustee could be obliged to set aside such part of your account as is needed to meet the Scheme’s wind up cost. Only once those costs have been met would the balance of your account be used to provide pension benefits to you.
If the Scheme’s administrator (B&CE Financial Services Limited) were to become insolvent, the Trustee would appoint new administrators to operate the Scheme.
If the trustee company was to become insolvent, new trustees would be appointed – there would be no effect on Scheme assets (or therefore on your personal account).
If the investment manager (State Street Global Advisors Limited or any other investment managers appointed) were to become insolvent, new investment managers would be appointed. It is possible that the scheme investments held by the Trustee could, in extreme situations, be affected by the insolvency of the investment manager but considerable protection is in place.
Currently, all contributions are invested by State Street Global Advisors Limited in mainstream pooled investment funds, accessed by a long-term insurance contract with Managed Pension Funds Limited. This is a typical investment structure used by many pension funds in the UK.
Financial Services Compensation Scheme
If Managed Pension Funds Limited was to become insolvent, it may be possible for any deficit to be recovered from the Financial Services Compensation Scheme (FSCS), although we believe this position has yet to be tested. See www.fscs.org.uk for further information. It should be noted that an insolvency event of this kind that ultimately resulted in a detrimental impact on members’ personal accounts would be an extreme event. The Trustee of the Scheme keeps all investment managers under careful review based on independent investment advice from a prominent FCA-authorised and regulated advisory company.
Annuities at retirement
Some members who take retirement benefits from the Scheme do so by securing an annuity with an insurance company. If the insurance company does not meet its obligations due to insolvency, members may qualify for compensation in their own name from the FSCS. The maximum level of protection is currently stated by the FSCS as 100% of the retirement income being drawn down from that product as a benefit falling due.