Professional Pensions Scheme of the Year Awards 2002
Best New Scheme
- Winner: The Pensions Trust - Career Average Revalued Earnings (CARE) Scheme
The Pensions Trust launched CARE - Career Average Revalued Earnings - in October 2001.
The scheme is a hybrid arrangement based on a core defined benefit structure, supplemented by a defined contributions profit share enhancement.
It was designed to bridge the gap between traditional final salary arrangements, in which the employer bears the investment risk and money purchase arrangements where the member bears the risk.
CARE is operated as a centralised scheme and is unique in that it can offer a uniform contribution rate applicable to all participating employers within the charitable and voluntary sector. This is as a consequence of negotiated agreement with the inland revenue.
The CARE scheme provides a security of benefit for individual members through a prudently funded "defined benefit" core structure. Revaluation of the accrued benefit before retirement is fully in line with RPI.
Surplus funds generated from investment returns, in excess of those needed to provide the core benefits, are used to enhance member retirement benefits.
This surplus is paid into a separate defined contribution account for each individual member, with an ethical option if the member so wishes.
At retirement the funds in the defined contribution account are converted into additional pension benefits, which then supplement the core defined benefit element.
The member contribution rate has been developed to encourage younger members to join the pension scheme.
Members pay an age-related contribution rate, calculated as age divided by 10. The CARE scheme is an affordable way to contribute towards a guaranteed pension, taking into account potential lower earnings for younger employees.
Corporate Governance Award
- Shortlisted: The Pensions Trust
The Pensions Trust previously delegated UK corporate governance voting to its investment managers who voted in accordance with house policies. But this has now changed following the recent implementation of a portfolio-wide UK corporate governance policy.
Alongside this policy, the Trust adopted the Association of British Insurers' guidelines on social, environmental and ethical matters and a statement on overseas voting based on the OECD was also formulated.
As a result, The Pensions Trust has now removed the delegated power from its investment managers regarding voting decisions. Investment managers are directed to vote in accordance with the National Association of Pension Fund's voting issues service recommendations. The Trust's policy will, therefore, mirror any changes in the NAPF VIS policy.
The Trust adopted social, environmental and ethical guidelines as part of its corporate governance policy, underlying which is an assumption that the effective management of the risks associated with SEE matters can lead to long-term financial benefits for the companies concerned.
The change in corporate governance strategy to positive management of voting activities will ensure that corporate best practice is achieved.
Best Industry-Wide Scheme
- Shortlisted: The Pensions Trust
The Pensions Trust was founded in 1946 and is a centralised occupational pension scheme for organisations involved in social housing, education, charitable, voluntary and other similar work, managing net assets of around £2bn.
The Trust has grown significantly over the years. Total membership now exceeds almost 100,000, including 3,500 employers, from a modest 271 members since its inception. This has been achieved through a high number of referrals and recommendations, which have emphasised the strong empathy and understanding that the Trust developed within the sector.
All schemes within the Trust provide cost-effective pension provisions for employers as economies of scale are achieved by sharing costs with other participating organisations.
Developments in the fund include the launch of CARE, an innovative pension scheme to provide a successful alternative to final salary or money purchase schemes, as well as a revised money purchase plan with an ethical investment option.
The Trust continues to be one of the fastest growing pension funds in the UK and the changes in the planned investment performance is now ranked highly.