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University of Aberdeen Superannuation _ Life Assurance Scheme

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					University of Aberdeen Superannuation & Life Assurance Scheme or UASLAS
Consultation on proposed changes to the UASLAS pension arrangements
Question and Answers Update 11 October 2010


Since writing to you on 9 September 2010, we have received a number of questions and comments from members of the scheme. These have been sent to the
email address, and asked during the three member meetings that have been held.



   Number Question                                                                       Answer

   General questions

    1         Would it be possible to supply members with a formula or template          Three career average examples were provided in the consultation pack that has
              in order that they could compare the potential final outcomes of the       been provided to members.
              two schemes? I know examples have been provided but it is not
                                                                                         The University is preparing a modeller to help members see how the proposals
              easy to translate this into a personal example. If there is a likelihood
                                                                                         might affect them. This modeller will be available in October.
              of a shortfall in the new scheme at retirement then it would at least
              be possible for members to look at alternative investments in order
              to fill that shortfall. I don't see how we can do this without
              personalised examples.

    2         Why call this consultation – isn‟t it a „done deal‟?                       No – the University is consulting with members of the scheme, staff eligible to
                                                                                         join, the Pensions Committee and recognised campus unions. The University
                                                                                         will respond to the questions asked and consider comments throughout the
                                                                                         consultation process as part of an open and meaningful consultation. At the end
                                                                                         of the consultation, we will consider all the feedback received and confirm the
                                                                                         outcome of the consultation.
                                                                                         Although the University believes that its proposals are appropriate, it may make
                                                                                         changes. See next question.

    3         The consultation letter states that no further changes are being           The University will consider all the questions asked and suggestions made at the
              proposed, yet members have been invited by the University to make          end of the consultation period. The University will then discuss with the
              alternative suggestions. Which is it?                                      UASLAS Trustees the final changes that are to be made and confirm to the
                                                                                         members of the scheme. If the University wishes to make significant
                                                                                                                                                                     1
Number Question                                                              Answer
                                                                             amendments to the initial proposals then a further member consultation may be
                                                                             required.

4      Will the University pay for Independent Financial Advice              The University believes it has provided staff with full details explaining the
                                                                             proposed changes to benefits. As noted in the answer to Question 1, the
                                                                             University is also preparing a modeller to help members see the impact of the
                                                                             proposals.
                                                                             In addition, the University has held a series of presentations to staff and intends
                                                                             to arrange a further round of meetings in October.
                                                                             If you have further questions about the changes, you can send them to
                                                                             UASLAS@abdn.ac.uk. If you prefer, you can also approach your Union
                                                                             representative or member of the Pensions Committee.
                                                                             The University is therefore not meeting the costs of independent financial
                                                                             advice. You should access www.unbiased.co.uk to find a local independent
                                                                             financial adviser.

5      If I defer my pension now will I be able to take it in future years   If you decide to stop contributing to UASLAS you will no longer earn benefits in
       based on the final salary arrangements?                               the scheme. Your pension earned to date will be calculated using current final
                                                                             salary and the benefits earned to date will increase broadly in line with inflation
                                                                             up to 5%, in the same way that they would for deferred pensioners. You should
                                                                             seek financial advice if you are thinking about stopping contributing to the
                                                                             scheme.

6      Why have the savings from Pensions Plus not been paid into the        Member savings have totalled around £90,000 a year as a result of Pensions
       scheme?                                                               Plus, while the University‟s saving has been around £85,000 a year. The
                                                                             University‟s savings have helped with the costs of running the scheme, such as
                                                                             administration costs and other expenses.

7      Has a pensions deficit happened in the past?                          The deficit was £6 million in 2007 and £7 million in 2004. The deficit is now
                                                                             expected to be at least £20 million.
                                                                             This worsening in funding position is mainly due to the falls in Scheme assets
                                                                             and uncertain prospects for future investment returns caused by the global
                                                                             financial crisis of 2008/09. Further details are set out in the letter and member
                                                                             consultation guide dated 9 September.



                                                                                                                                                             2
Number Question                                                               Answer

8       How long will it take for the shortfall to resolve?                   The scheme actuary is currently carrying out the triennial valuation of the
                                                                              scheme. This will determine the exact size of the deficit at 31 July 2010. The
                                                                              University and the Trustees will then decide over how long they are aiming the
                                                                              shortfall to be met. It is expected that this timescale will be significantly longer
                                                                              than the current recovery period of nine years.

9       What will happen if we do not make up the 25% deficit through         The University believes that these proposed changes provide the appropriate
        these changes?                                                        balance between continuing to provide a defined benefit pension for staff, and
                                                                              the need to reduce costs.
                                                                              As noted in question 8 the size of the deficit at 31 July 2010 is currently being
                                                                              calculated. The Trustees and University will then discuss how the deficit will be
                                                                              met, although in addition to these proposed changes this is likely to include
                                                                              extending the recovery period over which shortfall contributions are paid.
                                                                              The University and Trustees will continue to monitor the funding deficit and will
                                                                              agree the appropriate actions that may be required in the future.

10      Can the benefits revert to their current formula if the deficit is    This will be considered as part of the consultation.
        resolved?

11      What will the impact be on recruitment or attracting people to the    The University believes that it will still be offering a competitive pension scheme.
        University?                                                           Most employers, particularly in the private sector, do not offer a defined benefit
                                                                              pension scheme to new employees.


12      Will the current round of voluntary severance affect the scheme?      Although a large number of support staff are likely to leave the University as a
                                                                              result of the severance scheme, it will have no significant impact on UASLAS.

13      What about the high salaries in Public Service – why are we being     The University is considering many options to reduce costs, proposing changes
        asked to reduce our benefits?                                         to our pension benefits is just one area we are looking at. This consultation
                                                                              covers its proposed changes to pension benefits in UASLAS.


Questions relating to proposed benefit changes

14      Members are allowed to retire with the University‟s permission when   The University is not intending to change this rule for current members.

                                                                                                                                                               3
Number Question                                                                     Answer
         they reach 40 years. Will this continue?                                   Members with 40 years service (including if appropriate “bonus credits”) will
                                                                                    continue to be able to retire with the University‟s permission with no reduction for
                                                                                    early payment.
                                                                                    The University is intending to no longer offer this arrangement for individuals
                                                                                    who join UASLAS from 1 April 2011.

15       How will my benefits change if I retire at 60?                             If you joined the scheme on or after 1 August 1994, there will be no change
                                                                                    to the early retirement rules compared to now. On retirement at age 60, there
                                                                                    will be an early retirement reduction applied.
                                                                                    If you are a female Scheme member who joined before 1 August 1994, all
                                                                                    benefits built up before 1 April 2011 will continue to be payable with no early
                                                                                    retirement reduction applied at age 60. Benefits built up after 31 March 2011, on
                                                                                    the career average basis, will be reduced to reflect the fact they are paid five
                                                                                    years before Normal Retirement Date (age 65).
                                                                                    If you are a male Scheme member who joined before 1 August 1994, all
                                                                                    benefits built up between 17 May 1990 and 1 April 2011 will continue to be
                                                                                    payable with no early retirement reduction applied at age 60. Benefits built up
                                                                                    before 17 May 1990 will continue to be reduced to reflect the fact they are paid
                                                                                    five years before Normal Retirement Date (age 65). Benefits built up after 31
                                                                                    March 2011, on the career average basis, will be reduced to reflect the fact they
                                                                                    are paid five years before Normal Retirement Date (age 65).

16       Is the scheme subsidising Rowett? As a pre 1994 member I am                When Rowett staff joined UASLAS, the University was obliged to offer the right
         losing the right to retire at 60 with no penalty for my future benefits.   to retire at age 60 due to the “Fair Deal” rules for public sector transfers.
         Why are Rowett members exempt from this?                                   UASLAS also received a transfer of funds from the Research Council Pension
                                                                                    Scheme which provided for the benefits, assuming retirement at age 60.
                                                                                    Therefore there has been no subsidy to these members.

17       Will I get 2 separate benefits statements (ie pre and post 1 April         The exact design of future benefit statements has not yet been agreed. The
         2011)?                                                                     University will work with the Trustees and the administrators to make sure that
                                                                                    the benefit statement provides helpful information to scheme members. We
                                                                                    hope this will mean members will receive a single benefit statement, but that it is
                                                                                    clear which benefits have been built up before and after April 2011.

Additional voluntary contributions


                                                                                                                                                                   4
Number Question                                                                   Answer

18      Are the additional voluntary contributions run within the main fund       There are two types of AVCs.
        for the individual OR in a separate fund with another management
                                                                                  Scheme A (money purchase) allows members to invest in a range of funds
        fee on top?
                                                                                  administered by the Prudential. At retirement, members use the accumulated
                                                                                  AVC fund to buy a pension and / or take a lump sum. These funds are held
                                                                                  separately from the main UASLAS fund and there is an annual management
                                                                                  charge to cover the costs of administering the arrangement.
                                                                                  Scheme B (added years) allows members to build up additional years of
                                                                                  pensionable service within UASLAS and are therefore, kept within the main
                                                                                  fund.

19      I pay Scheme B Added Years AVCs. How are these going to be                As UASLAS will no longer be based on final salary after 31 March 2011,
        affected?                                                                 Scheme B (added years) will be withdrawn. Members who have been paying
                                                                                  AVCs under Scheme B will be awarded added years bought to date.
                                                                                  Members will be offered AVCs under the Scheme A – Money Purchase facility.


Pension increases

20      The pension increases are being capped at a low level. Why has            The proposed basis of increase is in line with new Government rules for
        the University chosen 2.5%, and why use CPI?                              workplace pension schemes. The Government‟s own target is for Consumer
                                                                                  Price Inflation to be at 2% a year.

21      Will there be a review option in the rules if inflation turns out to be   The University will consider this proposal.
        high?


Alternative proposals

22      Could change from 60 – 65 be phased in, like the state pension            This change would be administratively complex for a relatively small pension
        changes?                                                                  scheme such as ours.
                                                                                  The change to unreduced retirement age for UASLAS is only for future service,
                                                                                  and therefore the impact for members close to retirement will be much less
                                                                                  significant (see response to question 15). The change to state pension age
                                                                                  affects both past and future state benefits - therefore it is more important that

                                                                                                                                                               5
   Number Question                                                                  Answer
                                                                                    any such change to state pension age is phased in.
                                                                                    In addition, the state pension changes (from 60 to 65) are only relevant for
                                                                                    women.
                                                                                    If UASLAS changes are phased in over a period then this will not yield the
                                                                                    required savings for the University and there might also be age discrimination
                                                                                    issues if a particular age group was treated differently from others.

    23         Could contributions be increased to 10% to keep the same benefits?   The University considered a wide range of options, including increasing
                                                                                    members‟ contributions, before consulting on these proposals. The University
                                                                                    wants to encourage staff to join UASLAS so does not wish to increase further
                                                                                    the rate that members pay. Therefore, the University is not proposing to
                                                                                    increase member contributions.

    24         USS proposals are being phased in so that people over age 55 are     The USS consultation period has not yet started so the exact proposals are not
               not affected. Could that be proposed here?                           yet known. If UASLAS changes are phased in over a period then this will not
                                                                                    yield the required savings for the University and would introduce additional
                                                                                    administrative complexity. There might also be age discrimination issues if a
                                                                                    particular age group was treated differently from others.



Consultation process

The consultation process is continuing until 30 November 2010. If you have a question on the proposals you should email UASLAS@abdn.ac.uk or submit your
question to Suzi Laing, Pensions Administrator in the Finance Department. You can also contact your trade union representative with your comments or questions.
The University is also intending to arrange further presentations in October to give members additional opportunities to discuss its proposals.




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