This blog looks at how , following the closure of its charitable sponsor, another pension scheme is leaving the PPF and improving benefits for its members. The blog looks at the social cost of the Charity’s closure and asks whether some of these social costs could be reduced by using the PPF more effectively.
Insolvent charity secures £30m PPF+ buy-in with Legal & General
The headlines from a press release issued by Open Trustees and promoted by Jonathan Hazlett, their MD.
The John Townsend Trust Pension and Assurance Scheme (the Scheme) is expected to secure a buy-out next year having agreed a £30m PPF+ buy-in policy with insurer Legal & General (L&G).
The deal completed on 1 November 2021. The buy-in secures the liabilities of around 280 Scheme members to receive benefits at or above PPF levels of compensation.
The statement goes on to say that the funds to improve member benefits came from the sale of contingent assets promised to the pension scheme if the Charity went bust.
It has been a long process getting to this point as we negotiated all of the difficulties associated with the charity’s insolvency and, in particular, realising our interest in the School buildings.
So BSPS is not the only pension scheme to come back from the dead. Indeed, the PPF’s assessment period apparently houses a decent number of pensions that are ripe for being bought out by insurers or the new superfunds.
Is it worth it?
The 280 members of the John Townsend Pension Scheme will get better benefits than in the PPF but how much better – and at what cost? We partially know the answer to that question as the Kent coastal town of Margate no longer has a school for the deaf.
The John Townsend Trust had previously operated the Royal School for Deaf Children in Margate which had provided education, training, care, therapy, medical support and residential care for deaf children and young people.
The Charity collapsed after an investigation of abuse of residents in its Westgate College in December 2015. Clearly things went very badly wrong but there is little evidence that the Charity or its pension scheme were in financial disrepair.
Indeed the Charity owned buildings. These College buildings have been sold to Kent County Council to fund the buy-out. So ends a Charity established in 1792 which garnered a petition of 11,000 parents and local residents to keep it open. This is what is happening to those buildings
It has taken six years to get to the point of the announcement of buy out next year, with the pension scheme being run in the meantime by Barnett Waddingham, with legal advice from Gowling. We can only guess at the costs of their services and of the proposed buy-out by L&G but they are likely to be considerable.
It is hard not to conclude that the pension scheme has become one of the reasons the Charity could not continue solvently.
The alternative to buy-out would have been for the Scheme to have been taken over by the PPF. but without the accelerated benefits. The similarities between this case and the much larger Old and New BSPS schemes, both or which are heading for buy-out , are clear.
But I can’t help wondering whether the PPF itself, could be used to provide “PPF +” benefits. I don’t think it is allowed to , under its current rules, but if it takes so much heavy lifting to get the John Townsend Scheme off its books (the deal won’t be going ahead till the summer of 2022). Wouldn’t it be simpler in the future , for the trustees and the PPF to short-circuit what seems an agonizing process? Might there be better ways of preserving and improving institutions such as John Townsend?
We have in the PPF, a very solvent, well funded lifeboat which is their to provide relief where insolvencies occur. The Charity itself was until 2015 operating solvently and it’s pension was clearly reasonably funded (if contingent assets are taken into account)
There will be many more well run pension schemes like Old BSPS and this one, which are likely to come out of the PPF assessment period. Shouldn’t we be looking for ways for the PPF to use its muscle?
I appreciate that I will not make myself popular with the industry heavyweights that dominate the buy-out market , but I worry that in cases as small as John Townsend, the fixed costs of scheme management and the huge cost of buy-out have eaten into whatever chance there might of been of re-establishing this charity. The PPF now has the capacity to increase the efficiency of our pension system and we should be looking for ways to exploit its success for the public good.