Ian Mills, Partner and Head of DB Endgame Strategy at the independent consultancy, Barnett Waddingham said: “The Government announced this week that it will transfer the "investment reserve" fund for the Mineworkers' scheme to the trustees, to enhance members' benefits. This will undoubtedly be welcomed by retired miners, who have been campaigning hard for this for many years.
“It does, however, give valuable lessons to companies that may be considering running on their DB schemes in order to grow a surplus. When British Coal was privatised back in 1994 the Government agreed with the then Trustees that it would underwrite the Mineworkers' scheme in return for half of the then actuarial surplus, and half of any future surpluses. The other half could be used by the Trustees to enhance benefits over time. However, things generally went better than expected and the surpluses grew and grew and calls for members to receive more than half became stronger. The first lesson is that companies should not assume that just because scheme trustees are happy a deal is fair and reasonable that members will be too. The second lesson is that it would be wise to consider how the perception of fairness may change as conditions change, either positively or negatively.”
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