Bangor University Pension & Assurance

Scheme (BUPAS)

Mike Davies

Director of Finance

Consultation on changes in benefits

27 February 2019

Robin Glyn

Pensions Manager

Agenda

• Current Bangor University pension provision

• Financial position – Bangor University

• Latest position – USS

• Current valuation – BUPAS

• Discussions with Trade Unions

• Proposals for changes

• Questions

Current Bangor University pension

provision

• USS – 1,000 + academic & related staff

• BUPAS – 400 + support staff

• Teachers’ Pension – small number of staff

• NEST – auto-enrolment scheme for support staff

Financial position – Bangor University

• Over last 6 year has been ‘reasonable’ at best, but not ‘sustainable’ with deficits

• Now under severe pressure due to recruitment downturn

• July 2018 projections missed by c400 students

• November 2018 review based on ‘flat’ recruitment at 2018 intake levels

• ‘Lost’ income of up to £15m pa over coming years

• All elements of cost under pressure, but growth options being pursued

Underlying Performance against 2017/18

projections for year

All figures £m

2017/18

Published

2017/18

One-offs

2017/18

Recurrent

2016/17

Recurrent

Total Income 164.9 (20.8) 144.1 142.7

Total Expenditure 145.4 (1.0) 146.4 148.1

Operating Surplus/(Deficit) 19.5 (21.8) (2.3) (5.4)

Pension/other gains 7.3 (7.0) 0.3 0.4

Reported Surplus/(Deficit) 26.8 (28.8) (2.0) (5.0)

Fee Income decline since

2016, 2017 and 2018 Plans

60,000,000

65,000,000

70,000,000

75,000,000

80,000,000

85,000,000

90,000,000

18/19 19/20 20/21 21/22

£

Academic Year

Tuition Fee Income

5YFF 2016 5YFF 2017 5YFF 2018 (July) 5YFF 2018 (Nov) Linear (5YFF 2016) Linear (5YFF 2017)

Financial Sustainability Plan –

November 2018 CouncilCost Pressure

18/19 19/20 20/21 21/22

Non-pay & Misc Income at 2017 levels (2,909) (3,229) (3,004) (2,700)

Tuition Fees reduction Sept 2018 (4,780) (9,390) (12,945) (15,275)

Halls Fees reduction Sept 2018 (1,200)

Total Cost Pressures at November 2018 (8,889) (12,619) (15,949) (17,975)

Savings Identified - Pay

Pay savings per 18-19 budgets 1,673 2,592 2,508 2,420

Academic savings post 18-19 1,600 2,500 3,000

Prof Services savings post 18-19 60 2,025 2,030 2,035

USS Cost increase of 1%

Total Pay savings identified

Savings Identified - Non-Pay

Main Arts (re-phased & HEFCW funded)

(640) (664) (669)

1,733 5,577 6,374 6,786

1,100

Estates backlog budget removed 1,000

Halls refurb deferral from 18-19 800

Non-pay per 18-19 budgets & later increases 4,322 5,122 5,750 5,750

Space savings based on reduced estates footprint

Total Non-Pay savings identified

Income Enhancement Opportunities

Diamond dividend per latest estimates

325 650 1,300

7,222 5,447 6,400 7,050

300 3,000 5,000

International Recruitment Growth plan 900 2,400 4,300

Non-pay costs of increased recruitment 0 (135) (176) (221)

Pay costs in academic delivery of growth

Net Income Growth identified

(350) (840) (1,540)

0 715 4,384 7,539

Total Improvements Identified 8,955 11,739 17,158 21,375

Excess/(Shortfall) against Cost Pressures 66 (880) 1,208 3,400

Latest position – USS

• 2017 Valuation is being signed-off on a basis that is unaffordable for

both staff and employers.

• Increased contributions will commence on 1 April 2019 but future rises

need to be avoided before 1 October 2019.

• Trustee has agreed to a 2018 Valuation to incorporate some of the JEP

proposals, but future benefits only released from age 66.

• Firm proposals on ‘contingent contributions’ still awaited, that would

trigger increases for both staff and employers in adverse

circumstances.

Current valuation - BUPAS

• 2017 Valuation showed that deficit had reduced from 2014 level of

£13.8m down to £3.2m.

• However, ongoing cost of future benefits had risen from 27.6% to 33%

• University finances cannot support an increase from 18.35% to 23.7%

in employers contributions

• Hence proposal to review future benefits only – no impact on any

existing accrued benefits earned to date.

Increases in employer contribution rates

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

01/04/1978 01/04/1982 01/08/1989 01/01/1992 01/05/1997 01/08/2003 01/08/2006 01/06/2010 01/08/2010 01/05/2016 01/08/2018

Member and Bangor University pension contributions - BUPAS

Member contribution Bangor University Contribution

Discussions with Trade Unions

• Working Group set up in July 2018 to meet monthly to develop

proposals ahead of any consultation process.

• Numerous options considered and discussed over Summer/Autumn.

• Proposal for an Interim Valuation made in November 2018.

• Unions wrote to Trustee (not employer), but Trustee Board felt unable

to consider this route given extensive previous advice from Actuary etc

• University made proposal in January over changes now being

consulted upon.

Proposals for change

Letter to all current and prospective members sent out 25 January 2019:-

• Consultation started 4 February 2019 and runs for >60 days

• Consultation closes on 5 April 2019

• Explains proposed changes (later slides) and some of the

alternatives considered

• Two open meetings arranged. Illustrative examples circulated.

• Feedback welcomed asap. FAQ will be available on intranet or

questions to Robin Glyn.

• Alternative ideas welcomed, all responses will be considered.

Proposals for changes

1. Capping pre-retirement revaluation at 2.5%

• All pension accrued to date is increased by inflation each year

• Proposal to cap inflation linkage at 2.5%

• If inflation is less than 2.5%, cap will not bite

• If inflation is higher than 2.5%, previous years’ pension will only

increase by 2.5%

• The higher inflation goes above the cap, the greater the effect of

this cap will be

Proposals for changes

2. Changing Normal Retirement Age (NRA) from 65 to 66

• This change brings BUPAS in line with State Pension and many

other Schemes (USS, TP, LGPS)

• All benefits earned after implementation date would be payable at

age 66 without reduction

• It can be accessed before age 66, but a reduction factor would be

applied to benefits earned after implementation date

• Currently 5.7% reduction factor per year early on pension, and

2.5% reduction factor per year early on tax-free lump sum

Proposals for changes

3. Changing accrual rate from 1/80ths to 1/85ths

• Each year, your salary is divided by the accrual rate to calculate how

much pension benefit you’ve earned e.g.

• £28,000 / 80 = £350

• Changing the accrual rate to 1/85ths would mean you earn less pension

benefit for each year of membership after implementation e.g.

• £28,000 / 85 = £329

• This also affects your tax-free lump sum

Any questions?

Useful contact details

Mike Davies, Director of FinancePhone: 3199

E-mail: mike.davies@bangor.ac.uk

Robin Glyn, Pensions ManagerPhone: 3261

E-mail: r.glyn@bangor.ac.uk

Consultation inbox

BUPASConsultation2019@bangor.ac.uk