How are your benefits funded?
The IWMPS is established under trust and this means that the assets of the Scheme are held separately from those of the sponsoring employers. The Scheme is a multi-employer fully-segregated scheme which means that whilst there are multiple sections and many participating employers; the scheme is sectionalised so that each employer or group of associated employers has a separate section within the Scheme. Each employer is liable for the benefits accrued in its employer section. There is no cross-subsidy within the Scheme, which is not allowed under the Trust Deed or under HMRC approval requirements.
How is my pension funded?
Each sponsor employer (the “Company”) pays contributions so that the IWMPS Trustees can pay the pensions and other benefits to members as promised in the Scheme Rules. Contributing members also pay contributions to the IWMPS at a rate of 5.25% of Pensionable Earnings. Members do not have separate individual holdings apart from any Additional Voluntary Contributions they have paid.
As mentioned above, the IWMPS is a fully segregated multi-employer scheme. This means that the Scheme is divided into employer sections and that each section is completely separate from other employer sections. Contributions are credited to the relevant employer section and benefits are paid from that section.
The Trustees must obtain an actuarial valuation of each employer section at least every three years and actuarial funding reports in the intervening years for larger sections.
What is an actuarial valuation?
An ‘actuarial valuation’ provides an estimate of the assets needed today to pay benefits due for life to members and their dependants. The Scheme Actuary uses assumptions agreed with the Trustees and the Company about investment returns, price and wages inflation, and life expectancy. In accordance with the provisions of the IWMPS, the Actuary also determines how much the Company should contribute to remove any shortfall of assets against his estimate and in respect of benefits expected to be earned after the valuation date by members in contributing service.
Usually, the valuation effective date for each employer section will be the 31 December. There is a statutory requirement for trustees and employers to reach agreement on the valuation and subsequent funding requirements within 18 months of the valuation effective date.
Unlike the member contribution rate, as mentioned above the contribution rate payable by each employer is assessed at each valuation of the Scheme. In addition, employers are required to pay deficit contributions if the valuation shows that at the date of the valuation the employer section has insufficient assets to cover the section’s benefits in full. In this circumstance, the employer will be required to pay additional “deficit reduction contributions” which are usually a fixed amount of cash over an agreed period of time.
If the assumptions agreed at the valuation are borne out in practice, these deficit contributions along with expected investment returns are expected to remove the deficit revealed at the last actuarial valuation by a certain date.
The Company is also required to pay an annual charge to meet the Pension Protection Fund Levy (unless there is less than two members in the section) and to meet the administrative expenses of the section.
Additional documents available on request:
The Statement of Funding Principles
A document explaining the Trustees’ policy for ensuring there are sufficient assets to cover the section’s liabilities. This includes detail of the assumptions agreed with the sponsor Employer to calculate the section’s liabilities.
Schedule of Contributions
Sets out the level of contributions payable by the Employer as required by law.
Annual Report and Accounts
Includes the Trustees’ Report and the financial statements for the Section as at the last audited Scheme year-end.
Actuarial Valuation Report
The latest formal Actuarial Valuation Report for your Employer section which contains the outcome of the valuation.
The Statement of Investment Principles
Sets out the Trustees’ policy for the investment of the Scheme’s assets. A copy of the document is available to download.