Sectionalisation of the Scheme
Background to the BTB Pension Scheme
The National Tourist Boards were established as non-departmental public bodies by the Development of Tourism Act 1969. This led to the creation of the British Tourist Authority, English Tourist Board, Scottish Tourist Board and Wales Tourist Board. A pension scheme for employees was established at the same time (the British Tourist Boards’ Staff Pension and Life Assurance Scheme) with a governance structure that reflected the conditions that existed at that time. This meant that the British Tourist Authority was the principal employer and oversaw the administration of the Scheme with the Chair of the British Tourist Authority acting as Chair of Trustees.
In the intervening 50 years a great deal has changed – with most changes taking place in the last 10 years. National Tourist Boards have merged and de-merged, the London Tourist Board joined the scheme and then was ‘bought out’ when VisitLondon ceased to exist in 2011; the Wales Tourist Board was absorbed into the Welsh Government but remained a member of the Scheme and VisitBritain has closed the Scheme to new entrants with effect from 1 April 2017.
The other significant change has been the increased scrutiny and supervision of pension schemes by regulators following some high profile failures by employers to meet their pension commitments. Today there is The Pensions Regulator with wide statutory powers to monitor schemes and intervene in the event of poor management or maladministration.
Why does this matter?
Each National Tourist Board employer is responsible for financing its share of the BTB Scheme and working with the Trustees to meet any liabilities – including any deficit that has built up. Changes to the structure of National Tourist Boards have meant that the profile of pension scheme members has diverged. For example, VisitScotland members are younger and have fewer years of service than VisitBritain members and VisitScotland has kept its scheme open to new members. This divergence means that each employer would like the freedom to develop their own funding and investment strategy in relation to pensions to reflect their different circumstances.
Splitting the Scheme into sections (sectionalisation) allows each employer this freedom as well as more clearly reflecting the liabilities that remain in each part of the Scheme.
The Superannuation Act 1972 deals with the pension rights of people employed in the civil service, local government, teaching and the health service. Pension schemes for these categories of public sector employees, such as the Civil Service Pension Scheme, are enshrined in primary legislation and, by extension, are ‘guaranteed’ by HM Government. Whilst the BTB Scheme has been the pension scheme offered by the four statutory National Tourist Boards, created by the Development of Tourism Act 1969, it is not – and has never been – a statutory pension scheme listed in the Act 1972. This is despite the BTB Scheme participating in the Public Sector Transfer Club, which facilitates the movement of staff within the public sector so that moving from job to job does not lead to unfavourable pension outcomes, and also having broadly the same characteristics such as the 1/60th annual accrual rate and a Normal Retirement Date at either aged 60 or 65.
In the course of discussions on the possibility of making any changes, the non-statutory basis of the BTB Scheme became more apparent as the Trustees identified that there was no Crown Guarantee in place. The Trustees considered that it was both desirable and necessary to get an explicit government guarantee from each of the National Tourist Boards’ sponsoring governments in place before any significant changes were made to the Scheme. The Trustees’ duty is to ensure that the Scheme is well run and that members’ benefits are secure. The Trustees have been working with the employers and the British and Scottish Governments to secure guarantees and this has now been done.
Pension Scheme Security
One of the new elements of the pensions landscape has been the introduction of the Pension Protection Fund (PPF) in 2005. All pension schemes pay an annual levy to the PPF and these monies are used to finance the pensions of people whose employer goes into administration. This offers great security to those paying into a pension, but it is a significant cost to pension schemes. In the absence of a Crown guarantee the BTB Pension Scheme has been part of the PPF and pays several hundred thousand pounds each year in levies. The PPF guarantees most, but not all, pension income and has a limit for higher earners. One of the benefits of the introduction of the Crown guarantee is that the PPF levy will no longer need to be paid. A more significant benefit for pension scheme members is the fact that the Crown guarantee ensures that any pension scheme benefits are paid in full with no cap or upper-earnings limit.
In summary the benefits of all these changes are:
- Greater security for BTB pension scheme members
- Government guarantee that benefits will be paid in full in the event of an employer not being able to meet their commitments
- Less money paid out of the Scheme as we no longer need to pay the PPF levy
- Greater flexibility for employers in managing their individual section of the Scheme
- Greater clarity about the assets and liabilities in each section of the Scheme.
FAQs on the sectionalisation can be found here.