AESP NEWS June
2005
The Annual General Meeting will be held NATFHE 27 Britannia Street (off Grays Inn Road) Kings Cross London WC1X 9JP on Thursday 7 July 2005 at 14.30. We have invited as our guest speaker Tony Allen Secretary of the ESPS who will look at some of the latest issues affecting the Scheme.
In this issue
Scheme Valuations at March 2004
Scheme Deficits at March 2004
MPs don’t see pensioners’ problems
Illusory promises by government
Pensioners’ costs inflate at a higher
rate than the average consumer
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The Scheme valuation on 31 March 2004 showed total scheme assets of £17.21 billion. The ESPS as a pension scheme is the fourth largest in the country. Some of the individual groups, particularly when the relevant companies money purchase schemes are added, are large enough to feature in the top 100 pensions schemes nationally.
Since the 2001 actuarial
valuation of all pensions schemes had been hit by the falling value of the
equity markets and the falling interest rates.
Most schemes have seen the actuarial surpluses turn into deficits. The
actuarial valuation of the ESPS deficit was £3.03 billion.
This sounds an alarming amount and represents 17% underfunding. The calculation of the scheme assets and the
liabilities is a formulaic process based on a number of assumptions including
the rate of investment return with respect to salary increases, the accrued
benefits of pensioners and former members and the accrued benefits based on
service completed for active members.
What does the deficit
really represent and how alarmed should we be?
For one thing it does not mean that pensions currently in payment are at
risk. The shortfall will of course need
to be made up so that pensions due thirty of forty years hence can be paid.
From the companies immediate standpoint it represents a liability which must
now be shown in one form or another, depending upon the accounting standard
used, on the balance sheet. Not good
news for shareholders
Making up the deficit and
over how long is of course the issue which has faced the trustees and the
companies. Bear in mind that from the
trustees’ standpoint the deficit represents a significant loss of investment
potential. Investment opportunity which
will be missed and will prevent trustees from improving the real value of our
pensions.
Deficit repair decisions are made on the basis that the fund is ongoing. One option which is sometimes canvassed is the purchase of annuities for members on the open market. It is a fact that the sum required to purchase of annuities would be significantly greater than the current value of the fund by a margin much larger that the deficit calculated on an ongoing basis. This would therefore be an even greater burden on the companies. Perhaps more relevant however is the fact that the market could not sustain the purchase of annuities by even one of our smaller groups even if the company was willing and able to fund the cost.
–
Group Statistics March 2004
|
|
Maturity % |
Return
% |
Fund
value
£1,000s |
Equities% |
Gilts % |
Other % |
AEP
|
4 |
26.80 |
46,000 |
100 |
0 |
0 |
|
Alfred McAlpine |
52 |
23.50 |
44,000 |
75 |
25 |
0 |
|
AREVA (1 Jan 2004) |
9 |
--- |
502 |
(a) |
|
|
|
British Energy Combined |
9 |
28.90 |
31,000 |
90 |
10 |
0 |
|
British Energy Generation |
69 |
22.10 |
1,788,000 |
66 |
24 |
10 |
|
Drax Power |
24 |
23.00 |
43,000 |
100 |
0 |
0 |
|
EA Technology |
83 |
23.50 |
44,000 |
76 |
22 |
2 |
|
East Midlands Electricity |
89 |
20.00 |
817,000 |
51 |
33 |
16 |
|
Edison Mission Energy |
36 |
27.80 |
30,000 |
82 |
9 |
9 |
EA Services
|
99 |
16.20 |
162,000 |
39 |
48 |
13 |
|
ESN |
100 |
6.60 |
325 |
0 |
95 |
5 |
|
International Power |
7 |
27.10 |
46,000 |
80 |
10 |
10 |
|
London Electricity |
74 |
23.50 |
1,067,000 |
70 |
30 |
0 |
|
Magnox Electric |
66 |
27.00 |
1,207,000 |
67 |
25 |
8 |
|
Manweb |
79 |
22.70 |
530,000 |
65 |
35 |
0 |
|
Midlands Electricity |
83 |
17.00 |
848,000 |
43 |
56 |
1 |
|
National Grid |
79 |
20.60 |
1,107,000 |
61 |
31 |
8 |
|
Northern Electric |
73 |
20.80 |
678,800 |
61 |
29 |
10 |
|
Power Gen |
89 |
19.30 |
1,252,000 |
50 |
50 |
0 |
|
Powerhouse Retail |
100 |
11.20 |
125,000 |
26 |
73 |
1 |
|
RWE Innogy |
87 |
13.80 |
3,251,000 |
27 |
68 |
5 |
|
Seeboard |
84 |
20.90 |
686,000 |
60 |
31 |
9 |
|
Southern Electric |
80 |
21.30 |
770,000 |
56 |
38 |
6 |
|
TXU Europe |
96 |
22.60 |
791,000 |
62 |
28 |
10 |
|
United Utilities |
81 |
20.00 |
879,000 |
65 |
35 |
0 |
|
Western Power |
82 |
24.00 |
969,000 |
75 |
22 |
3 |
|
Yorkshire Electricity |
|
|
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
17,211,827 |
|
|
|
a) Awaiting transfer of funds
b) Amalgamated
with Innogy Group June 2003 to form RWE Innogy
|
|
£ 1000s |
|
AEP |
13,700 |
Alfred McAlpine
|
9,100
|
|
AREVA |
In surplus 900 |
|
British Energy Combined |
8,800 |
|
British Energy Generation |
375,800 |
|
Drax Power |
20,400 |
|
EA Technology |
10,800 |
|
East Midlands Electricity |
93,000 |
|
Edison Mission Energy |
5,400 |
|
Electricity Association Services |
8,200 |
|
ESN |
100 |
|
International Power |
7,400 |
|
London Electricity |
216,700 |
|
Magnox Electric |
148,400 |
|
Manweb |
132,200 |
|
Midlands Electricity |
125,200 |
|
National Grid |
271,500 |
|
Northern Electric |
190,300 |
|
Powergen |
229,400 |
|
Powerhouse Retail |
4,400 |
|
RWE Innogy |
136,000 |
|
Seeboard |
154,000 |
|
Southern Electric |
275,500 |
|
TXU Europe |
281,500 |
|
United Utilities |
113,900 |
|
Western Power
|
195,300 |
|
|
|
|
TOTAL |
3,026,100 |