Review of the governance structure of the Trustee Board and resignation of Chair
Merchant Navy Ratings Pension Fund (“the Fund”)
Following the publication of the Trustee Report and Accounts (“Report and Accounts”) for the year ended 31 March 2019 on the member website, we are writing to ensure that all members are aware of the information contained in the Report and Accounts on page 9 outlining the Pensions Regulator’s (the “Regulator’s”) investigation into the governance of the Fund and to provide you with some further information.
In late 2017, the Trustee initiated an independent review of the governance of the Fund. Following an approach from the Trustee, the Regulator became involved and commenced its own investigation in November 2018.
The Regulator’s process is ongoing and the Trustee is engaging with the Nominating Bodies (the RMT and the Employers Group (MNP EG)) on the governance issues which have been identified.
During this time, the Board is continuing to progress business as usual activities.
We would like to reassure you that this has no impact on the security of your benefits or current impact on the day-to-day operation of the Fund as the Regulator’s involvement relates purely to the governance of the Trustee Board. As you know, the Fund has a robust sub-committee structure which deals with all day-to-day activities and enables the Trustee to focus on strategic matters and certain key decisions.
All day-to-day operations are therefore ‘business-as-usual’ and the Trustee will continue to manage the Fund to achieve its long-term strategy. The Trustee is continuing to work with Participating Employers and to collect contributions in line with the implementation methodology, established in the 2015 Court Case.
As highlighted in the Popular Reports which are issued annually to members, the funding level of the Fund has increased from 67% as at 31 March 2014 to 88% as at 31 March 2019, primarily as a result of the Trustee collecting £365 million in contributions from Participating Employers towards the deficits shown in the 2014 and 2017 Actuarial Valuations. (Please refer to the 2019 Popular Report for further information on the financial health of the Fund.)
Following the resignation of the Independent Trustee John Preston the Board expects to conduct a process in conjunction with the Regulator to appoint a new independent Chair of the Trustee, but in the meantime, the Trustee Board has an appropriate framework to operate on a day-to-day basis.
The ongoing investigation into the governance of the Fund by the Regulator prevents us from providing further information on this matter at this time. However, we will write again at the earliest opportunity to provide you with more information. Regardless where we are with the Regulator’s process, we will provide you with an update before the end of March 2020.
In the meantime, should you have any queries regarding your benefits please contact JLT via email at firstname.lastname@example.org or on the phone on 0345 521 0049.
On behalf of the Merchant Navy Ratings Pension Fund Trustees Limited
Ill health early retirement benefits (“IHER benefits”)
We updated you last year of the legal uncertainties relating to the entitlement of certain members to enhanced ill health early retirement benefits (“IHER benefits”) from the Fund. The Trustee has kept members updated on the actions they are taking during the course of the year. As you are aware the Trustee is applying to the High Court for directions over these issues.
As mentioned previously, the Trustee has a neutral position in this case. Therefore, the Trustee has appointed representatives to act in the interests of both the members and the employers and each representative has their own legal team to support them. We wrote on 29 March 2019 to all members to let them know the names of their representatives and their legal team. Both the members’ and employers’ representatives are building their own case on the questions before the Court about IHER benefits and following a detailed process the Court will decide what IHER benefits members might be entitled to.
The Court Case will be heard in November 2020 which is the earliest possible date. Judgment is expected early in 2021. Once the Trustee has received this judgment, it will be better placed to decide what the next steps should be and whether members are entitled to any extra benefits. Depending on the outcome of the case, a further Court process may be required for this purpose. The case should not result in a reduction to the overall value of the total benefits of any members.
If higher or new enhanced IHER benefits are to be paid, it will create additional liabilities for the Fund (which were not reflected in the last valuation). We have informed Participating Employers of this.
As we said last year, it would be helpful if potentially affected members retained any medical history about past health, if they believe they may be entitled to this benefit. The Court will clarify if different categories of members are affected, but we believe this relates to members who had service before 8 October 1993.
The Trustee will continue to keep you informed as this matter develops.
Collection of Deficit Contributions
The Trustee has collected four instalments of deficit contributions from the Participating Employers towards removing the Fund’s 2014 deficit of £354 million. As at March 2019 the Trustee had received £314 million in deficit contributions and other payments towards the 2014 deficit.
The Trustee concluded the 2017 Actuarial Valuation (as at 31 March 2017) in 2018 which showed an additional deficit, in excess of expected receipts towards the 2014 deficit, of £89 million. As at March 2019 the Trustee had received £51 million in deficit contributions and other payments towards the 2017 Additional deficit.