The Baptist Union of Great Britain has established an employer group to develop a strategy for plugging the scheme’s increased deficit.
Many defined benefit schemes have suffered from soaring deficits in recent months, placing greater emphasis on the relationship between employers and trustees. However, this is not always easy, particularly when it comes to coordinating employer views in a multi-employer scheme.
Employer groups can give rise to some interesting discussions where employers get into financial difficulties
Stephen Scholefield, Pinsent Masons
“A new pension employer group has been set up to help [principal employer] BUGB represent employer views and we are already engaging with them in several areas,” states a 2016 scheme newsletter for churches and other employers.
The employer group's objective is to work with the trustees to come up with solutions to ensure that the deficit, which rose to £105m in 2015 from £84m in 2013, “is solved by this generation”.
In addition to discussing the Baptist Pension Scheme's £180.4m DB section, and giving churches and other employers a greater say in solving the deficit issue, the group will also review the defined contribution scheme that ministers and staff are now provided with.
The newsletter noted that over the past few years there has been a sustained period of very low interest rates, significantly increased liabilities as people live longer, and lower-than-expected investment returns.
“As one of the UK’s largest multi-employer schemes the Baptist Pension Scheme has been heavily impacted by these forces,” it states.
The newsletter continues to say that addressing the deficit “will not be an easy task, will involve some imaginative solutions and will require sacrifice by all parties”.
Source: Baptist Pension Scheme
Coordinating employer views
Tim Middleton, technical consultant at the Pensions Management Institute, said most corporate pension schemes have one central management, “so the idea of coordinating an employer view on how best to liaise with trustees wouldn’t be a problem, it would be all centralised, and there wouldn’t be that diverse range of different entities.”
With regard to the BUGB’s employer group, “you can see the rationale behind it”, said Middleton.
“They clearly want to think about what’s the best way to manage this deficit,” he said.
“Because they’ve got such a wide and diverse number of different separate employers within the Baptist Union as a whole, they feel that this is the best way to coordinate all of those organisations and employers, and to get a single strategy as to how they’re going to manage the recovery plan,” he said.
The idea of dealing with deficits is going to be a very long-term problem, said Middleton, referencing a report published by the Pensions Institute in December last year.
The report explores early intervention strategies for sponsoring employers and trustees of ‘stressed’ DB schemes.
For many schemes, “there is this possibility that coming to the end of a recovery plan and reaching full funding might not actually happen”, said Middleton.
Stephen Scholefield, partner at law firm Pinsent Masons, said employers are generally “becoming more hands-on with their schemes and recognising the risks that they present”.
With regard to multi-employer schemes, the relationship between the trustee board and the employers in the scheme may not be as close as that of a single employer scheme, said Scholefield.
The advantage of setting up an employer group in a multi-employer scheme is that it is more cost effective because “instead of them all taking advice from different consultants, they come together and share the cost of that”, said Scholefield.
He said that this means the employers speak with one voice and “it’s much easier for the trustees to deal with”.
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However, for some multi-employer schemes the employers are often competitors and they sometimes "have different views about how the scheme should be dealt with, especially around the funding discussions”, he added.
Scholefield said that employer groups “are a good idea in principle and often work very well whilst everything is going nicely”, but that “they can give rise to some interesting discussions where employers get into financial difficulties”. In this event an employer sometimes wants to withdraw from the group.
David Davison, director at consultancy Spence & Partners, said that it is important for an employer group to have “a clear set of objectives” as well as “very clear conflict-of-interest policies”.
