DEVON'S pension fund, like all final salary funds, is in deficit (The Herald, March 8). Management has and is continuing to take action to address three major problems and the fund is solvent and able to meet its liabilities for at least the next 25 years.
Problems: Benefits determined nationally were substantially increased in April 2008, partly paid for by changes in employee contributions.
The 1977 changes in tax laws affecting pension plans has a direct loss of over £10million a year and a further indirect loss as company dividends have been trimmed as those companies had to face up to their own pension problems.
The US and UK lead debt crisis has reduced income and damaged investment value.
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The 2008 agreement was that future funding problems would be shared equally between employers and employees.
Based on the last actuarial evaluation, employers' contributions have been increased so as to reach 100 per cent cover of liabilities by 2032.
The trustees have taken positive steps to maximise market opportunities and to change fund managers where performance is not acceptable. This has been possible by diversification and a willingness to invest in markets only marginally affected by the US/UK 'disease'. The value of the fund before the market crash was £2.3bn. This fell to £1.6bn at the worst point, but by December 2009 had risen to £2.2bn.
Ideally, the concept of a funded final salary scheme should be retained if both contributors are willing to sustain it. Certainly the local government scheme is more defensible than the police and fire schemes which are paid for out of current income, or the teachers' scheme which receives an annual Treasury grant for the lack of income and growth of its 'notional' investments – that is, investments it does not have!
Plymouth City Council Member on Devon Investment and Pension Committee