I take on board everything you have responded with and agree to a point.
However I am almost certain that a large number of employees that have been paying into a final salary scheme for more than 20 years, have now been switched over into defined benefits/pension pot schemes on an accrual basis.
They used to quote their fantastic final salary pension scheme in almost every recruitment advert they put out.
It should be treated the same as other pension changes as you have indicated. They should agree to split the pension payment, on retirement according to how many years you paid in under final salary and how many under newer scheme. E.G. worked 44 years and for first 33 years paid into final salary scheme, then 3 quarters of pension should be based on your actual final salary and the rest according to the new sheme arrangements. Seems Dick Turpin rides again!
Cynyc; You may be right about past contribution holidays, I do not know. But you are wrong about dilution of benefits for contributions made. When pension schemes are changed (such as from defined benefit to money purchase) the benefits from past membership, up to the point of change, are preserved. Only future contributions and benefits are changed. And, like the company, employees have the choice of moving on if they dislike the change. This has been the case in terms of pension rules since the year dot.
In terms of the deficit, the pension scheme (if in deficit and unable to make contracted payments) would have first claim on company assets to make up the deficit. This is precisely why breaking up the company has been avoided by Hester. He prefers to address the deficit over time rather than realise value and give it to the pension fund.
I suspect that, even if we disagree on pension issues, we can agree that RSA is a basket case in terms of its management - probably for at least 20 years. Asking Hester to do any more than stabilise it was always an impossibility. I suspect the end game will be to address the pension issue over 5 years and then sell the rump to the highest bidder.
Regarding the huge pension deficit...... As with many other companies carrying huge deficits, it would not surprise me at all if RSA, or its constituent companies before merger, had benefitted for extended pension contribution holidays, whereby they made no contributions at all, as they felt there was already plenty in the pot to cover all future pensioner commitments. That should never have been allowed as it was a direct raid on the surplus generated by successful investments that would become the future pensions of its existing employees. As a result of the current deficit, RSA have diluted the previously agreed pension terms that employees signed up for and paid into. So you sign up for a great pension and agree the payments and just when you are about to retire, the rules are changed and you end up with bu**er all, while the execs fill their pockets and pension pots with obscene amounts in comparison to what the average Joe will get
It is also noteworthy that RSA have watered down their employee ShareBuild scheme massively reducing the incentive for staff to invest in their own company. RSA will now only match monthly ShareBuild purchases on a basis of 1:5 as opposed to the usual 1:1 offered by the majority of FTSE companies that operate the scheme. It is a real kick in the teeth for loyal employees who would have to hold onto the matching shares for 5 years to get the full benefit. I expect the top executives will still keep their additional bonus benefits intact rather than have them reduced by such plundering. They are also employing more and more people on these punitive temporary contracts at arms length via agencies, that act as the pseudo employer, treating the eager workforce like dirt with so many unfair working practices it is unbelievable. "I have to be at my desk with my computer up and running, having read all my emails and work messages, ready to take a call at my exact starting time. I do not get paid for the preparation, and must take calls right up to the very second my session finishes, even though calls can take a minimum of 2-3minutes and can last for up to 30 minutes. So ifI get a call 10seconds before my signing off time, I have to take it and finish it. I only get paid if it runs more than 8 minutes into my own time and I must contact my leader, before signing off to request the overtimact up to e to be logged, which is very difficult and time consuming to do in itself. So I end up getting away 20 minutes late with little chance of being paid" Companies can extract up to an extra 10% unpaid work from employees via such sharp practices and do it without any qualms as "they" are not the employer, that role is undertaken by an "umbrella" company. There is no doubt, however, who lays down the rules of how the employees will be treated, but who hide behind this "umbrella" arrangement in order that they can maintain their reputation as a "Times Top 100, employer as rated by its (permanent) employees" The way they operate is truly despicable!
RSA’s Hester awarded two-thirds of bonus despite missing targets: Stephen Hester, Chief Executive of RSA, has been awarded two-thirds of his potential annual bonus even though the FTSE 100 insurer missed financial performance targets.
It is interesting that, in the Smith dismissal tribunal case, RSA are focusing their denials of knowledge on the reserving of large cases under Smith. I do not know who is telling the truth although if case underreserving was common and not detected early by Group audits then that is a serious failure of Group management. However, RSA seem to be trying to put the focus on a side issue (although important to the tribunal case). The real issue is the release of reserves from Ireland over previous accounting years.
Smith claims 250m euro of prior year reserves were released (over several years) under instruction from London. This is a huge number in the context of the size of the Irish operation. It should also be very easy to do a retrospective actuarial analysis and determine whether such releases were reasonable at the time. Reasonable or not it is inconceivable that such releases were made without either approval from London or annual audit by London. I say this having been involved in looking at similar material in overseas subsidiaries for a global insurer. Spotting dodgy reserve releases and reserving patterns is not rocket science.
If the prior year releases were done with the knowledge of London then Smith has an iron clad case. If they were done without London knowing then Hester needs to sack the members of the board and executive who were around at the time. The best way forward on this would be to get Towers Watson (or similar) in to do a retrospective analysis and investigation into these prior year releases.
RSA considers Latin America sale: RSA is considering a sale of its Latin America business in what would be the largest disposal yet by the U.K. insurer’s Chief Executive Stephen Hester as he undertakes a wide-ranging restructuring.
RSA is beginning to worry me and certainly looking uninvestable until some issues become clearer.
Firstly, the following from the FT - which answers some questions from my previous post;
RSA Insurance's multibillion-pound pensions liabilities are putting the insurer off a break-up as it could be forced to hand over a large share of sale proceeds to staff retirement schemes, its chief executive Stephen Hester has said.
Secondly, the following from Reuters from the constructive dismissal case of the ex-Irish CEO;
"The reserving issues now being investigated in retrospect was always an open practice, not done surreptitiously or in a secret manner............. I recall that some cases were discussed with senior personnel at group level where the decisions were made collaboratively to post less than was being suggested by the external advisor." Obvious question is whether this included people such as Richard Houghton and David Coughlan? If Smith (the sacked CEO) is being truthful it also raises the question of what PWC found out but did not publish in their review, and if they did not know about this, why not?
I can only see this ending one way, break up after sorting the pension issues - but that may be some way in the future.
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