23/03/2022 – House of Fraser Pensions in the UK
Update from the Trustees of the
House of Fraser Beatties & Jenners Pension Scheme (“the Scheme”)
We would like to take this opportunity to provide you with a further update on the Pension Protection Fund (“PPF”) assessment process and to reassure you that we remain on track to secure your benefits with an insurance company in the second quarter of this year.
We previously wrote to you in October 2021 with a general update on the work the Trustees had been doing to enable the Scheme to exit the PPF assessment period and secure the best possible outcome for our members’ Scheme benefits.
Exiting the PPF Assessment Period
Since our previous update in October 2021, the formal valuation (known as the “s143 valuation”) has been completed and the PPF has approved the valuation. The results of the s143 valuation were shared with you in our letter of 8 December 2021.
The Scheme is now in the last stage of the assessment period. Once that stage has been completed, the Trustees will be in a position to secure benefits for members outside of the PPF and to pay transfer values to members.
Securing your benefits – the court proceedings
As we noted in our October 2021 update, the funding position of the Scheme means that it is not possible for the Trustees to secure full Scheme benefits for members. As a result of this, the Trustees need to determine what form of pension benefits you will receive with the insurance company.
We notified you that the Trustees were seeking confirmation from the court about the way in which we propose to secure benefits for members, i.e. to secure a pension at the same – or higher – rate than you are currently receiving (or for deferred members, would receive at retirement), and any increases when your pension is in payment being provided at a fixed rate rather than a variable rate. The application was heard by the court in January, and we are very pleased to say that the court has approved the Trustees’ proposed option.
This was an important step in the process of securing your benefits and enabled the Trustees to proceed with certainty to the next stage – selecting an insurance company.
Securing your benefits – selecting an insurance company
The Trustees are currently in the process of selecting an insurance company regulated in the UK to secure benefits for all Scheme members. The Trustees have had strong engagement from the insurance companies operating in this market and are confident of being able to secure benefits for members which are higher than the benefits you have been receiving in the PPF assessment period (or for deferred members, would receive at retirement).
The Trustees are still on track to secure benefits for all members during the course of the second quarter of 2022. We will be communicating with you again once the benefits have been secured with the selected insurance company and for those already receiving their pension, including details of how and when your benefits will be uplifted from current PPF levels.
We are aware that one consequence of the Scheme having been in a PPF assessment period is that no member has been able to transfer their benefits out of the Scheme. Once the Scheme formally exits the PPF assessment period – which is expected to be in early July 2022 – that restriction will no longer apply and members who have not yet retired will be able to transfer their benefits, subject to complying with the applicable legislative and regulatory requirements.
If you are interested in transferring your benefits out of the Scheme, please contact the Scheme administrator, Spence & Partners using the contact details below. Spence will then contact you when we are in a position to issue transfer quotes, which we expect to be in the next one to two months once the calculations for each member’s share of the overall assets of the Scheme have been finalised. However, we reiterate that we cannot legally pay any transfer values until the Scheme formally exits the PPF assessment period in early July 2022.
Thank you again for your continued patience and understanding about the process the Scheme has been going through. We appreciate that the Scheme has been in assessment for longer than originally anticipated but, as explained previously, ours is one of the largest schemes to go through this process. That said, at all times the Trustees’ core objective has been to secure the best value benefits possible for all of the Scheme’s members. We are now entering the most important stage of this process and actually securing those benefits for you and other members. We look forward to communicating with you in due course as to the outcome of the process.
07/10/2021 – House of Fraser Pensions in the UK
Important update from the Trustees of the
House of Fraser Beatties & Jenners Pension Scheme (“the Scheme”)
As you will know, the Scheme is currently in a PPF assessment period and the Trustees have been working hard with their advisers to enable the Scheme to exit the PPF assessment period and ensure that our members receive the best possible outcome for their Scheme benefits in the circumstances. The Trustees have made significant progress on both matters and are writing to you to provide you with an update.
Exiting the PPF Assessment Period
The Trustees expect to be in a position to confirm shortly that the Scheme does have sufficient assets to pay at least the minimum level of benefits offered within the Pension Protection Fund (“PPF”). This will be confirmed by the completion of the necessary formal valuation (known as a “s143 valuation”) which requires PPF approval. The results of the valuation will be shared with you shortly after it has been completed.
This means that the Scheme will then be in the last stage of the assessment period and once that stage has been completed, the Trustees will be in a position to secure benefits for members outside of the PPF.
Securing your benefits
The Trustees are therefore preparing to secure your benefits outside the PPF and we are only too aware of the length of time the Scheme has already been in the PPF assessment period. We have been investigating, with the help of our advisers, what options are available to secure benefits outside of the PPF and which will provide the best value for members. We explored different options for securing your benefits and have decided that the option which will provide the best result for our members is to secure benefits with an insurance company regulated in the UK who would then pay your benefits going forwards.
The funding position of the Scheme means that it is not possible to secure full Scheme benefits. However, the Trustees are confident that there will be sufficient assets to secure benefits for each member that are higher than the level of benefits that would be provided by the PPF.
The exact level of benefits which will ultimately be secured for members is currently uncertain and will depend on a number of factors beyond the Trustees’ control. These include fluctuations in the market value of the Scheme’s investments (although you should be aware that we have taken significant steps to reduce the exposure of the assets to market volatility), the value of any assets recovered by the Trustees from the House of Fraser companies that contributed to the Scheme (although any recoveries are expected to be modest and won’t have a material impact on the benefits we are able to secure), and the cost to the Scheme of securing your benefits with an insurance company.
Given that the Scheme will not be able to secure your full Scheme benefits including future pension increases, the Trustees need to determine what form of pension benefits you will receive with the insurance company.
The Trustees are currently taking legal and actuarial advice in relation to the final form of pension that will be secured (including the level of increases) and the Trustees’ overriding concern is to provide members with the best value possible in the circumstances.
The Trustees have been advised that while the law in this area is clear about what share of the assets are used to secure benefits for you individually, the law is unclear as to whether the Trustees are required to secure a specific “shape” of pension for you going forwards. The Trustees have identified an option which they consider meets the objective of securing the best value pricing from the insurance company, which would mean that the insurance company will pay a greater proportion of members’ overall benefits. This option is to secure a pension at the same – or higher – rate as you are currently receiving (or for deferred members, would receive at retirement), and any increases when your pension is in payment will be provided at a fixed rate rather than a variable rate.
However, given the uncertainty and the importance of this decision to members, it was considered appropriate based on the advice received to seek confirmation from the court about the way in which they intend to secure benefits for members.
As part of this process, the court will need to hear arguments for and against the Trustees’ application. It is not practicable for all of the Scheme’s members to be involved in the proceedings and the court procedures enable the court to appoint a person or persons to represent the interests of all persons who have the same interest in the claim. These representatives appointed by the court are called representative defendants or representative beneficiaries. In the current case, it has been arranged that two members, one member of the HOF Section and one member of the BJRB Section, are being appointed with the approval of the court with a role to scrutinise the Trustees’ application and whether the Trustees’ proposal is an appropriate exercise of their powers. The representative members have an independent lawyer advising them throughout the process and to present their arguments to the court.
If you are currently receiving a pension, this will continue to be paid at the current rate (with the current rates of increases) while the Trustees seek the court’s guidance. Once the Trustees have the answer from the court, they will make their final decision on the shape of the benefits to be secured. The Trustees will then select an insurer to secure benefits with, following advice and a robust due diligence process. All members will be informed when the benefits have been secured.
What does this mean if I am currently receiving a pension from the Scheme?
In the short term you won’t see any changes and the Scheme won’t exit the PPF assessment period immediately. The s143 valuation will need to be finalised before the Scheme can exit the assessment period.
The Trustees also need the court’s answer before they can secure the benefits with an insurer. This process is underway but cannot be finalised until the court provides its answer. The time it will take to get the court’s decision is outside of the Trustees’ control but the Trustees have asked the court to consider this as a matter of urgency.
Subject to the timing of the court decision, the Trustees currently expect to secure your benefits with an insurance company in the second quarter of 2022.
When will I hear more?
We will write to all members again once the court has provided its answer and the Trustees have made a final decision on the shape of benefits that will be secured. We will also confirm when the s143 valuation has been finalised and the Scheme has exited the PPF assessment period. In the meantime, pensioner and deferred members will receive another letter in the next couple of weeks asking for confirmation of some data so the Trustees can ensure the correct benefits are secured for you.
You do not need to take any action in relation to the court process. However, if you have any questions or would like to make any comments about the proposed court proceedings, please contact the Scheme administrator, Spence & Partners in the first instance, and your query will be directed accordingly:
We would like to take this opportunity to thank you for your continued patience and understanding, to reinforce the good news that the Trustees are confident that the Scheme will be able to secure benefits which are higher than the benefits you have been receiving in the PPF assessment period (or for deferred members, would receive at retirement), and to reassure you that the Trustees’ overarching objective is to secure the best value benefits possible for all of the Scheme’s members.
01/10/2021 – House of Fraser Pensions in the UK
10/09/2020 – House of Fraser Pensions in the UK
Statement of Investment Principles
The Scheme is sectionalised and consists of two separate sections. One section is known as the HOF Section and the other section is known as the BJRB Section. The assets and liabilities of the two sections are separately identifiable.
The Trustee invests the assets of both sections with the aim of ensuring that all members’ accrued benefits can be paid.
Due to the Pension Protection Fund (PPF) assessment period, the Trustee is managing the Scheme on a care and maintenance basis with the ultimate objective to transact with an insurer in 2021.
With the Scheme targeting buy-out in 2021, the HOF Section’s target strategy, which the Trustee is working to implement over the coming months, is to target a buy-out ready portfolio which is set out below:
|Asset Class||Proportion (%)|
The HOF Section also has synthetic gilt exposure as part of the LDI mandate. The mandate aims to hedge 116% of the Section’s PPF liabilities.
|Asset Class||Strategic allocation (%)|
|LDI overlay||116% of PPF liabilities|
Similar to the HoF Section, the BJRB Section’s target strategy is also aiming to target a buy-out ready portfolio, which is set out below:
|Asset Class||Proportion (%)|
|Liability Driven Investments||24.5%|
The BJRB Section has entered into a partial buy-in of pensioner liabilities whereby a portion of the assets are held by an insurance provider with the objective of providing a match to the corresponding pensioner liabilities.
The BJRB Section’s LDI mandate aims to hedge 100% of the Section’s PPF liabilities that are not covered by the existing pensioner buy-in.
|Asset Class||Strategic allocation (%)|
|LDI overlay||100% of PPF liabilities not covered by the buy-in|
The insurance policy is held as an investment by the Trustee and provides returns that are expected to be in line with the benefits insured under the policy. The insurance policy is held as a matching asset which hedges the investment, inflation and mortality risks for those pensioners insured under the policies.
The above investment strategies were derived from careful consideration of the nature and duration of the Sections’ liabilities and the risks of investing in the various asset classes.
The Trustee recognises that the investment strategies are subject to risk, in particular the risk of a mismatch between the performance of the assets and the calculated value of the liabilities. This risk is monitored by regularly assessing the funding position and the characteristics of the assets and liabilities. The risk is managed by investing in assets which are expected to perform in excess of the liabilities over the long term, and also by investing in a suitably diversified portfolio of assets with the aim of minimising (as far as possible) volatility relative to the liabilities. The assets of both Sections consist predominantly of investments admitted to trading on regulated markets.
The Trustee has appointed a number of investment managers to manage the Scheme’s assets. The investment managers are regulated under the Financial Services and Markets Act 2000.
The decisions around day-to-day management of the assets are delegated to the investment managers via a written agreement. This delegation includes decisions about:
- Selection, retention and realisation of investments including taking into account all financially material considerations in making these decisions;
- The exercise of rights (including voting rights) attaching to the investments;
- Undertaking engagement activities with investee companies and other stakeholders, where appropriate.
The Trustee takes investment managers’ policies in the above respects into account when selecting and monitoring managers. The investment managers are expected to exercise their powers of investment with a view to giving effect to the principles contained within this Statement, so far as reasonably practicable.
The Trustee aims to appoint managers that are signatories to the UN Principles of Responsible Investment and compliant with the Financial Reporting Council’s Stewardship Code where reasonably applicable.
The investment managers’ remuneration is based upon a percentage value of the assets under management, and in some cases an additional performance-related element. The fees have been negotiated to be competitive.
The Trustee has appointed a global custodian to manage the custody of Scheme’s holdings as appropriate. Where the Scheme’s assets are invested in pooled vehicles, the custody of the holdings is arranged by the investment manager. The custodians provide safekeeping for the assets, and perform all associated administrative duties such as the collection of dividends.
Investment Manager Monitoring and Engagement
The Trustee monitors and engages with the Scheme’s investment managers and other stakeholders on a variety of issues. Below is a summary of the areas covered and how the Trustee seeks to engage on these matters with investment managers.
|Areas for engagement||Method for monitoring and engagement||Circumstances for additional monitoring and engagement|
|Performance, Strategy and Risk||The Trustee receives a quarterly performance report which details information on the underlying investments’ performance, strategy and overall risks, which are considered at the relevant Trustee meeting.||There are significant changes made to the investment strategy.|
The risk levels within the assets managed by the investment managers have increased to a level above and beyond the Trustee’s expectations.
Underperformance vs the performance objective over the period that this objective applies.
|Environmental, Social, Corporate Governance factors and the exercising of rights||The Trustee’s investment managers provide annual reports on how they have engaged with issuers regarding social, environmental and corporate governance issues.|
The Trustee receives information from their investment advisers on the investment managers’ approaches to engagement.
|The manager has not acted in accordance with their policies and frameworks.|
The manager’s policies are not in line with the Trustee’s policies in this area.
Through the engagement described above, the Trustee will work with the investment managers to improve their alignment with the above policies. Where sufficient improvement is not observed, the Trustee will review the relevant investment manager’s appointment and will consider terminating the arrangement. Given the Trustee is managing the Scheme on a care and maintenance basis, any monitoring and engagement will be proportionate to the manager’s relevance in the journey towards buy-out.
The employer entered into administration in 2018, and therefore the Scheme does not have any employer-related investments given the financial status of the sponsor.
Direct investments, as distinguished by the Pensions Act 1995, are products purchased without delegation to an investment manager through a written contract. When selecting and reviewing any direct investments, the Trustee will obtain appropriate written advice from its investment advisors.
The Trustee of the Scheme makes all major strategic decisions including, but not limited to the Scheme’s asset allocation and the appointment and termination of investment managers.
When making such decisions, and when appropriate, the Trustee takes proper written advice. The Trustee’s investment advisors are qualified by their ability in and practical experience of financial matters, and have the appropriate knowledge and experience. The investment advisor’s remuneration may be a fixed fee or based on time worked, as negotiated by the Trustee in the interests of obtaining best value for the Scheme.
This Statement has been prepared in compliance with the Pensions Act 1995, the Pensions Act 2004, and the Occupational Pension Schemes (Investment) Regulations 2005. Before preparing this Statement, the Trustee took appropriate written advice and will do so in future before making any changes. The Statement is reviewed at least every three years, and without delay after any significant change in investment policy.
Steve Sargent (Chair of Trustees) – September 2020
26/08/2020 – House of Fraser Pensions in the UK
An Important update from the Trustees of the House of Fraser Beatties & Jenners Pension Scheme (the “Scheme”)
The Trustees and their advisors have completed a lot of work behind the scenes to ensure that our members can receive the best possible outcome for their Scheme benefits. We are now writing to provide you with an update on the significant progress we have made so far.
What has happened so far?
Most of you will know that the Scheme has been going through a Pension Protection Fund (PPF) assessment period, to determine whether the Scheme has sufficient assets to pay benefits that are higher than those prescribed by the PPF (known as PPF ‘compensation’). This has been a lengthy process as it requires a full audit of the Scheme’s data and checks of the rules that apply to the payment of benefits.
We are now in a position to confirm that the Scheme is expected to have sufficient assets to pay at least the minimum level of benefits offered within the PPF (but less than full benefit entitlements). As a result, the Trustees have decided that the Scheme will seek to secure benefits outside of the PPF.
When will the Scheme exit the PPF assessment period?
The Scheme will stay in the PPF assessment period until the Trustees have determined the best way of securing members benefits for the future. The decision facing the Trustees is a complex one because there are several providers in the market. The Trustees are currently assessing the suitability of the options carefully, so as to offer the best value for all members.
While the Scheme is within the PPF assessment period the benefits are protected to an extent, so the Trustees expect to keep the Scheme within the assessment period until a decision has been reached on the best way to secure the benefits for members, and will only leave the protection of the assessment period once the new option can be implemented. This reduces the risks to the membership.
The Trustees’ advisors currently estimate that the Scheme will remain in PPF assessment throughout 2020 and will not exit until well into 2021.
What does this mean for my benefits?
If you are receiving a pension this will continue in the normal way. Members can also retire while the Scheme is in the PPF assessment period, but their benefits may be restricted by the amount that can be paid by the PPF.
Before the PPF assessment period, members not in receipt of a pension had the option to transfer their benefits out of the Scheme. Until the Scheme exits the PPF assessment period, this option is not available. This is set under the legislation setting out the rules of the PPF assessment period and the Trustees do not have discretion to permit transfers out of the Scheme.
When will I hear more?
Once the Trustees have made a decision as to how the Scheme will exit the PPF, we will write to all members and let you know what will happen. Further communication will follow explaining how your benefits will be secured.
The Trustees would like to take the opportunity to thank the members for their patience and understanding, to reinforce the good news that the Scheme is expected to be able to exit PPF assessment, and to reassure members that the Trustees’ overarching objective is to secure the best value benefits possible for members.
If you have any questions, please contact the Scheme administrator, Spence & Partners:
25/08/2020 – House of Fraser Pensions in the UK
An Update for Members regarding Covid-19 – Issued August 2020
The Trustees remain committed to ensuring that the Covid-19 coronavirus outbreak causes minimal disruption for our members.
When we wrote to you in April, we told you that our administrator, Spence & Partners, has a robust business continuity plan for managing crisis events. We are pleased to confirm that whilst all Spence staff have been working from home since mid-March, they have maintained business as usual for members and, in particular, pensions have continued to be paid on the same day each month.
We also acknowledged in April that members may have some concerns about the Scheme’s finances, given the dramatic movements in global investment markets as a result of the pandemic developing at the start of this year. Whilst most markets have returned closer to their pre-pandemic levels, as we explained before, the Scheme is invested in a wide range of different assets and we believe this diversifying investment approach has helped protect the Scheme and reduce the impact of difficult conditions, whilst satisfying the regular need for cash for example to pay pensioners each month. The Trustees continue to monitor the investment managers’ performance and consult regularly with our advisors. If we believe it is necessary to take action regarding the Scheme’s investments, we will do so and advise you accordingly.
As Trustees we are used to working remotely from each other, keeping in contact between meetings by telephone and email. Since March, we have held all of our meetings with advisors and each other by video conferencing. This has been very efficient, and we expect that in future, we will continue to hold many meetings this way.
We are about to send all members an Important Update about the PPF assessment period. If you do not receive this by 7 September, further details will be available on this website and any questions should be directed to the Scheme administrator in the usual way:
We hope you have found this brief update helpful and that all members stay safe and well in this difficult time.
10/04/2020 – House of Fraser Pensions in the UK
An Update for Members regarding Covid-19 – Issued April 2020
Following the government’s announcement asking everyone to stay at home, we are writing to assure you that the Scheme’s administration remains fully operational.
Our administrator, Spence & Partners, has a robust business continuity plan for managing crisis events. To help ensure the safety of colleagues, minimise the risk of spreading the virus, and maintain business as usual for members, all Spence staff have been working from home since March 17. Spence is organised in such a way that should any member of the administration team fall ill, a colleague can take over ongoing tasks and ensure continuity of service to Scheme members.
This means that:
- members can get in touch with Spence as normal, by post, email or telephone, however, please note that members are requested to use email or telephone wherever possible to minimise risk of delay given the current restrictions in place;
- there are no changes to the contact opening hours;
- the administration service to members is unchanged and the Scheme can process retirements and make any member payments in the usual way;
- pensions will continue to be paid on the same day each month.
Members may also have some concerns about the Scheme’s finances, given the recent and dramatic movements in global investment markets. It is important to remember that the Scheme is invested in a wide range of different assets and this diversifying investment approach is designed to help protect the Scheme and reduce the impact of difficult conditions. It also factors in the regular need for cash for example to pay pensioners each month. Global banks and governments are making major efforts to offset the short-term impacts of COVID-19. Nevertheless, the Trustees are in regular dialogue with their advisers and will take any further action they believe is appropriate to protect the Scheme. We will keep members informed of any changes we need to take.
With so much attention now focused on actions relating to COVID-19, this will naturally affect our project plan of activities for the year. As a result, some of the actions we were due to take in the coming months will unfortunately need to be delayed. Again, we will keep you updated as appropriate.
In summary, while we are all facing unprecedented challenges, you can be confident that the Scheme’s administration is business as usual. The Trustees are keeping a careful watch on all aspects of the Scheme that may be affected by the current COVID-19 crisis. We will continue to work with our advisers for the benefit of all members, and will keep in touch with you regularly.
For more detail on this, please refer overleaf. In the meantime, we hope that all members and their families stay safe and well.
For and on behalf of the Trustees of the House of Fraser Beattie & Jenners Pension Scheme
In last December’s Pensions in House, we explained that the main purpose of the PPF assessment is to work out the exact level of funding to see if the PPF will need to take over the Scheme. The early indications were that this would not be necessary and this continues to be the Trustees’ understanding, although there is still work to be completed to conﬁrm that the Scheme will be able to secure members’ beneﬁts above PPF levels (the PPF broadly pays 90% of pension for those under normal pension age at 31 August 2018). The Trustees will obviously keep members informed should this position change going forward.
In this scenario, known as PPF+, the assets are not suﬃcient to cover the full amount of members’ beneﬁts due under the Scheme Rules. However, the level of beneﬁts members would receive via an insurance buyout is still likely to be higher than the level of compensation oﬀered by the PPF. The ﬁnal level of beneﬁts that can be insured depends on the results of the data and beneﬁt audits, the value of the assets of the Scheme and perhaps most importantly, the insurance pricing.
Extensive work has been carried out as part of the assessment so far, including:
- Completion of audited accounts eﬀective as at 30 August 2018, the day before the Scheme went into assessment.
- Beneﬁt audit – the Scheme’s lawyers have drafted ‘beneﬁt speciﬁcations’ for each category of member, detailing exactly what the beneﬁts are under the Rules and who is eligible for these. Spence has checked a sample of members’ beneﬁts against these.
- Data audit – you should have received a data veriﬁcation letter last year setting out the data the Scheme holds for you. Thank you to everyone that responded. We had a very good response rate and all responses have been updated on Spence’s admin system. In some cases, information from paper records that had been scanned to members’ files has also been examined and records updated accordingly.
- Equalisation – the Scheme’s lawyers have checked that benefits were properly equalised following various legal cases that clarified how benefits should be recalculated if, in the past, there were differences between the benefits offered to men and women. The Trustees are also in the process of equalising Guaranteed Minimum Pensions following recent guidance.
- Tracing – over time, members move house or change their name and sometimes forget to tell us or, when members die, their family may not know they had benefits in the Scheme and don’t notify us. Target, our tracing agency, has confirmed that addresses for over 8,000 of our members are accurate and up to date. Around 800 are still undergoing further checks and about 100 members are believed to have died, so where benefits are due, we are now trying to trace their families. Over 200 members are currently ‘untraceable’ and Target are continuing to work on these.
- Investments – the Scheme is invested in a diverse range of assets, which are designed to spread and reduce risk. Some of these investments are specifically chosen to match the benefits that are in payment or due to be paid in future, while some are seeking to provide additional investment returns. The Trustees had started to take action to sell some of the return-seeking assets, investing instead in assets which are better suited to creating a portfolio that will be attractive to insurers, however, recent events have caused significant volatility in investment markets and, as a result, the Trustees have been advised to pause some of their planned disinvestment activity until markets are more stable.
In summary and as stated before, although the assets held in the Scheme are not suﬃcient to cover members’ beneﬁts in full, the Trustees still remain hopeful that the level of beneﬁts members would receive from an insurer buyout will likely be higher than the level of compensation oﬀered by the PPF and that, where possible, some members may be given a choice of their form of beneﬁts. Given the current uncertainties caused by COVID-19, it is hard to predict how these plans may be affected at this stage, but we will update you when we are in a position to do so.