26 June 2013
Performance and Resources Board
21
To note
Progress of the Defined Contribution Pension Scheme
Issue
1.
On 30 June 2013 our existing Defined Benefit (DB) pension scheme will close
to new joiners, with the exception of existing NHS scheme members, who will retain
a right to join until 31 December 2013. From 1 July 2013 we will offer an Aviva
Group Personal Pension plan, a Defined Contribution (DC) arrangement, to new
joiners. This scheme will be used to meet the GMC’s auto-enrolment obligations that
apply from 1 November 2013.
Recommendation
2.
The Performance and Resources Board is asked to note the update on the
introduction of the Aviva Group Personal Pension scheme for new joiners.
Issue
3.
The closure of the existing defined benefit/final salary scheme to new joiners
is a significant change to our terms and conditions of employment. This report
provides an update on progress towards implementation ahead of the scheme going
live on 1 July 2013 and meeting our statutory auto-enrolment obligations that apply
from 1 November 2013.
4.
Implementation has been led by the Human Resources (HR) team, with a
working group meeting with Aviva on a weekly basis to cover the HR, Information
Systems, Payroll and Communications implementation issues. The project has made
good progress in line with the implementation plan and we remain on schedule to
introduce the new scheme from 1 July and later this year meet our auto-enrolment
obligations.
Aviva Group Personal Pension Plan
5.
Following on from their selection as our provider we have worked closely with
Aviva on the implementation of the scheme. We have previously sought the Board’s
approval by circulation for the Default Investment Option (DIO). This is the
investment option that is automatically used for staff that do not wish to, or are
unable to, make an active investment decision.
6.
We are also finalising the life assurance arrangements for the scheme. DC
arrangements generally require a higher level of life cover than DB schemes as they
do not automatically provide dependants’ pensions. The cost of this cover, which
comes from the employer contribution, will be 0.34%. This is in line with our
previous estimates.
Implementation
7.
We have been working closely with IS and Finance colleagues on the main
implementation issues. The relevant systems changes are on track to support a
1 July go live date and further work is on schedule to meet the more complex
requirements that relate to auto-enrolment from 1 November 2013. Auto-enrolment
brings very specific requirements relating to the assessment of eligibility, the opt-out
process and re-enrolment obligations every three years. This second phase of
activity will require further changes to the Agresso system.
8.
We have also incorporated the changes to our pension arrangements into our
relevant HR procedures and documentation (such as offer letters and contracts of
employment).
2
9.
Trustees of the existing GMC scheme have been updated on progress, in
particular the possibility of increasing scheme membership ahead of 1 July 2013.
The closure of the scheme also requires the deed and rules to be updated and
Field Fisher Waterhouse have been instructed to undertake this. Trustees and the
employer will be required to sign off the revised deed before 1 July 2013.
Employee engagement
10.
The changes to our pension arrangements are a significant change in our
terms and conditions of employment. We have implemented a communications plan
to update all colleagues, using screen savers, posters, and for key groups of staff,
personal emails.
11.
The availability of ethical and Sharia compliant investment options has been
an important diversity consideration. We have ensured that these issues are covered
at the staff briefing sessions. Our application form has also been designed to ensure
that a Sharia option can be selected immediately.
12.
The changes do not affect the majority of staff and we have emphasised this
message through our internal communications. For employees who are not in the
existing GMC scheme its closure is significant. In May 2013 we had 93 employees in
this group. They have an option to apply to join the scheme before 1 July 2013. All
have received a personal update and an invitation to a briefing session on the
options open to them. A final reminder to all staff who are not in the current pension
scheme has also been issued.
13.
The position for NHS scheme members is more complicated as they are
currently in a DB scheme. They also have an extended period within which to join
the GMC scheme. These colleagues have had personal invites to briefing sessions
and we plan to provide more detailed advice in September/October.
Auto-Enrolment
14.
In May 2013 the Pensions Regulator confirmed that the GMC’s vesting date is
1 November 2013. We have an established project timetable to manage the process,
including the further system changes required. As with the new scheme, our
employee engagement will be targeted at those who are not in a pension scheme in
the run up to auto-enrolment, although we are required to confirm pension
arrangements with all staff by letter. At this stage we on schedule to meet our
auto-enrolment obligations.
3
Supporting Information
How this issue relates to the corporate strategy and business plan
15.
The move towards a DC scheme for new starters is primarily about the
management of risks associated with an open DB scheme. Managing these risks and
the potential financial consequences relates to strategic aim 7, continuing to use our
resources efficiently and effectively.
If you have any questions about this paper please contact: Andrew Bratt,
Assistant Director – Human Resources, 0161 923 6215,
abratt@gmc-uk.org
4