Article 2(6)
SCHEDULE 1Allocation of Investment Assets between Sections
Part I
1.—(1) This Schedule shall apply to such assets transferred by article 2 of this Order which are investment assets and any reference in the following provisions of this Schedule to assets shall be taken to be a reference to investment assets transferred by that article.
(2) In this Schedule—
“additional voluntary contributions” means any contributions paid under rule 11A of the transferor scheme;
“allocation amount”, in respect of any section, means the amount determined pursuant to paragraph 4(2) of this Schedule;
“investment assets” means any investment (within the meaning of the Financial Services Act 1986(1)), money (including foreign currency) held by or on behalf of the trustee and any land or interest in land;
“member of the transferor scheme” means any person who, immediately before 1st October 1994, had pension rights under the transferor scheme and whose pension rights are transferred by article 2 of this Order;
“member”, in relation to a section, means a member of the transferor scheme who becomes a member of a section under Schedule 2 of this Order;
“relevant pension obligations” has the meaning given by section 53 of the Transport Act 1980;
“Open Section” means the section of the transferee scheme to be established by the Board which adopts the Rules of the Shared Cost Arrangement set out in that Scheme;
“sections” means the 1994 Pensioners “A” Section, the 1994 Pensioners “B” Section and the Open Section of the transferee scheme;
“transferee scheme” means the Railways Pension Scheme;
“transferor scheme” means the BR Pension Scheme;
the “unfunded proportion of any pension rights” means a proportion of any pension rights in respect of which relevant pension obligations which have not been funded are owed by the Board, being the proportion determined for the purposes of section 52(1)(a) of the Transport Act 1980 in respect of those relevant pension obligations;
and (unless the context otherwise requires) the terms “guaranteed minimum pension”, “pay”, “pensionable pay” and “scheme pay” shall have the meanings they bear in the transferor scheme.
(3) For the purposes of this Schedule, subject to the provisions of paragraph 13 of this Schedule, any determination of the value of any asset, liability in respect of pension rights, expenses or contributions shall be made as at the time immediately before 1st October 1994.
(4) For the purposes of this Schedule other than paragraph 3, any reference to the value of any asset shall be taken to be a reference to the market value of that asset.
(5) For the purposes of this Schedule, the value of liabilities in respect of pension rights and the value of contributions shall be determined in accordance with the provisions of Part III of this Schedule.
(6) Nothing in this Schedule shall prevent the trustee of the transferee scheme from dealing with any assets in the ordinary course of its functions under or in relation to the transferee scheme.
Part II
2. The assets shall be allocated to sections by the trustee of the transferee scheme in accordance with the provisions of this Schedule.
3.—(1) Those assets which represent the accumulated value of—
(a)any additional voluntary contributions made by a person who, immediately before 1st October 1994, is a participant or deferred pensioner in relation to the transferor scheme; and
(b)any contributions made (or deemed to have been made) by the employer of such a person under rule 12A of the transferor scheme in respect of such contributions;
shall be allocated to the section to which the pension rights in respect of which the contributions were made are allocated by Schedule 2 to this Order.
(2) Assets having a value equal to the amount of any contributions, other than those referred to in sub-paragraph (1) of this paragraph, made by an employer in respect of any period between 1st April 1993 and 30th June 1994 shall be allocated to the Open Section.
4.—(1) The value of the assets allocated to a section shall be such proportion of the total value of the assets other than assets allocated under paragraph 3 of this Schedule, less the net cost to the trustee of the transferee scheme of carrying out the apportionment of the assets, which the allocation amount for that section bears to the total of all the allocation amounts.
(2) The allocation amount for a section shall be determined by carrying out the calculations required by sub-paragraph (3) or (4) of this paragraph, as the case may require, in relation to the amounts applied to that section under paragraphs 5, 6 and 7 of this Schedule.
(3) For the 1994 Pensioners “A” Section or 1994 Pensioners “B” Section, there shall be added together the amounts resulting from the following calculations:—
(a)48% × A × 3.5% ÷ (0.7 × GDY + 0.06 × NDY + 0.12 × EDY + 0.12 × PDY)
(b)5% × A × 4.1% ÷ GDY
(c)17% × A × X ÷ Y
(d)30% × A × Z ÷ W.
(4) For the Open Section, there shall be added together the amounts resulting from the following calculations:—
(a)80% × A × 3.5% ÷ (0.7 × GDY + 0.06 × NDY + 0.12 × EDY + 0.12 × PDY)
(b)8% × A × 4.1% ÷ GDY
(c)6% × A × X ÷ Y
(d)6% × A × Z ÷ W.
(5) For the purposes of this paragraph—
| A | = the total of the amounts applied to the relevant section under paragraphs 5, 6 and 7 of this Schedule; |
| EDY | = gross dividend yield at the close of business on 30th September 1994 shown in the FT-Actuaries World Index for Europe (ex-UK); |
| GDY | = gross dividend yield at the close of business on 30th September 1994 shown in the FT-Actuaries All-Share Index; |
| NDY | = gross dividend yield at the close of business on 30th September 1994 shown in the FT-Actuaries World Index for North America; |
| PDY | gross dividend yield at the close of business on 30th September 1994 shown in the FT-Actuaries World Index for the Pacific Basin; |
| X | = the price of £100 nominal of a notional British Government index-linked stock bearing an index-linked coupon of 2 ½% a year for 15 years, with an index-linked yield equal to the true annual yield on the British Government index-linked stock 2 ½% Treasury 2009 determined from the yield for that stock at close of business on 30th September 1994 published in the Financial Times, at the 5% inflation assumption; |
| Y | = 85.04; |
| Z | = the price of £100 nominal of a notional British Government Stock bearing a fixed coupon of 10% a year for a period of 5 years, with a yield equal to the yield at close of business on 30th September 1994 shown on the FT-Actuaries Fixed Interest Index for medium coupon stocks of 5 years' duration; |
| W | = 105.91. |
(6) In the event that any index or other publication referred to in this paragraph is not published showing a yield referred to in the relevant provision before 31st October 1994, the relevant provision shall be taken to refer to such amount in respect of yield as the actuary considers appropriate in all the circumstances of the case.
5. There shall be applied to the Open Section an amount equal to the total of—
(a)the value of contributions payable by any member of the transferor scheme of 4.52% of scheme pay (or, if greater, 2.26% of pensionable pay) from 1st October 1994 until 30th September 2003;
(b)the value of contributions payable by any employer of a member of the transferor scheme of 14.28% of scheme pay (or, if greater, 7.14% of pensionable pay) from 1st October 1994 until 31st March 1996 and of 6.78% of scheme pay (or, if greater, 3.39% of pensionable pay) from 1st April 1996 until 30th September 2003; and
(c)the value of contributions payable (or which would be deemed to be paid) by any employer of a member of the transferor scheme under rule 12A of that scheme in respect of additional voluntary contributions payable by such member throughout the period of his participation at the same level, expressed as a percentage of pensionable pay, as that at which such additional voluntary contributions are paid immediately before 1st October 1994.
6. There shall be applied to the 1994 Pensioners “A” Section and the 1994 Pensioners “B” Section an amount equal in value to the administrative and general expenses (other than those in respect of investment management) that may be expected to be incurred in relation to and met by the relevant section over its natural life.
7.—(1) There shall be applied to each section the amount calculated under sub-paragraph (2) of this paragraph in respect of that section.
(2) The amount referred to in sub-paragraph (1) of this paragraph shall be the value of the liabilities under the transferor scheme in respect of those pension rights transferred by article 2 of this Order and allocated to that section.
Provided that for all purposes of this paragraph
(a)the unfunded proportion of any pension rights, and
(b)any pension rights not in payment acquired by virtue of any additional voluntary contributions,
shall be ignored.
8.—(1) The assets allocated to the 1994 Pensioners “A” Section shall include—
(a)index-linked gilts whose value is no less than 12% of the allocation amount in respect of that section;
(b)bonds whose value is no less than 20% of the allocation amount in respect of that section.
(2) In this paragraph—
“bonds” means any investment, within the meaning of the Financial Services Act 1986, falling within paragraph 2 or 3 of Schedule 1 to that Act other than an index-linked gilt; and
“index-linked gilts” means loan stock, bonds and other instruments creating or acknowledging indebtedness issued by Her Majesty’s Government in the United Kingdom, the Government of Northern Ireland or the Government of the Isle of Man which under their terms of issue bear a rate of interest calculated by reference to fluctuations in an index.
9.—(1) Pending final allocation of the assets in accordance with this Schedule, the trustee of the transferee scheme shall allocate the assets to sections in such manner as they think fit.
(2) The assets to be allocated to a section under the provisions of this Schedule shall be adjusted to include income received on the assets to be allocated to that section, and to deduct payments made in respect of liabilities in respect of
(a)those assets; or
(b)liabilities in respect of the pension rights allocated to that section
within the period from 1st October 1994 until the date of final allocation.
Part III
10. Subject to the provisions of this Schedule, the value of liabilities in respect of pensjion rights shall be determined in accordance with the principles described as the “Projected Accrued Benefit Method” in the guidance entitled “Pension Fund Terminology” in section D of the Members' Handbook published in 1988 in London by the Institute of Actuaries.
11.—(1) Lump sum benefits which would be payable on the death after 30th September 1994 of a participant while accruing benefits in the transferor scheme shall be ignored to the extent that they would exceed the amount determined as a result of carrying out the calculation specified in sub-paragraph (2) of this paragraph.
(2) The calculation referred to in sub-paragraph (1) of this paragraph is:—
where
=
the lump sum benefit which would be payable on the death of the participant; and
=
the number of years of his participation up to 30th September 1994.
12. Service enhancements on death in service and ill-health retirement in accordance with the rules of the transferor scheme shall be ignored.
13. Without prejudice to paragraph 14(b) of this Schedule, increases in pay which are agreed after 30th September 1994 but back-dated to that date or before shall be ignored for the purpose of determining any amount which depends on the level of pay at 30th September 1994.
14. The valuation shall make use of the following actuarial assumptions:—
(a)the valuation rate of interest shall be 8.25% per annum in respect of pension rights allocated to the 1994 Pensioners “A” Section or the 1994 Pensioners “B” Section of the Railways Pension Scheme and 8.5% per annum in respect of pension rights allocated to the Open Section;
(b)pay shall be taken to be increased from its level immediately before 1st October 1994 by 6.5% per annum, with the first such increase on 1st April 1995, before allowing for increases due to promotion or seniority, except where an increase in pay which applies in respect of a period starting before 1st January 1995 is agreed and notified to the trustee of the transferor scheme before 1st October 1994, and in such a case pay shall be taken to be increased (before allowing for increases due to promotion or seniority) in the period up to the date agreed under the agreement as being the date as at which pay shall be reviewed annually or (if later) up to 1st January 1996 in accordance with the agreement so notified, and thereafter by 6.5% per annum, with the first increase of 6.5% on 1st January 1996 or such earlier date as may be agreed under the agreement as being the date as at which pay shall be reviewed annually;
(c)the basic state pension shall be assumed to be increased at 5% per annum;
(d)pensions in payment shall be taken to increase at 4.5% per annum except that any part in payment after the age of 65 (or, in the event of the death of the participant or person previously participating, in payment after such death) and attributable to the member’s rights to guaranteed minimum pension shall, to the extent that such rights accrued after 6th April 1988, be taken to increase at 3% per annum and shall otherwise be taken not to increase;
(e)deferred benefits and such pensions and benefits assumed to be awarded to members of the transferor scheme assumed to withdraw voluntarily in the future shall be assumed to increase during deferment at 4.5% per annum;
(f)pay shall be assumed to increase as a result of promotion and seniority in accordance with the scales given in columns 1 and 2 of Table 1 set out in Part IV of this Schedule;
(g)the probability of a participant dying while accruing benefits in the transferor scheme shall be assumed to be in accordance with the rates given in columns 3 and 4 of the said Table 1;
(h)the probability of a participant withdrawing voluntarily and being awarded deferred benefits while accruing benefits in the transferor scheme shall be assumed to be in accordance with the rates given in columns 5 and 6 of the said Table 1;
(i)the probability of a participant retiring on ill-health grounds while accruing benefits in the transferor scheme shall be assumed to be in accordance with the rates given in columns 7 and 8 of the said Table 1;
(j)the probability of a participant retiring early voluntarily with an immediate pension while accruing benefits in the transferor scheme shall be assumed to be in accordance with the rates given in columns 9 and 10 of the said Table 1. The factor to be applied to service is given in columns 1 and 2 of Table 2 set out in Part IV of this Schedule except that allowance shall be made for those members entitled under the scheme to more generous early retirement benefits than normal;
(k)all retirements other than early retirements on grounds of ill-health or voluntarily shall be assumed to take place on attaining age 65 in the case of males and age 60 in the case of females, or immediately in the case of females who are, immediately before 1st October 1994, over 60;
(l)deferred benefits shall be assumed to come into payment on attaining age 60, or immediately for those persons who immediately before 1st October 1994 are over 60, and such benefits assumed to be awarded to members of the transferor scheme assumed to withdraw voluntarily in the future shall be assumed to come into payment on attaining age 60 except that, in each case, allowance shall be made for a member’s right to draw benefits on favourable terms before age 60;
(m)the mortality of pensioners who retired or are assumed to retire on grounds other than ill-health and of those who withdrew or withdraw voluntarily with deferred benefits either before or after the pension comes into payment shall be based on the PA(90) Tables for Pensioners published in 1979 in London by the Institute of Actuaries with the following age adjustments:—
(i)expected mortality of those receiving pensions immediately before 1st October 1994:
| Males | none |
| Females | +1 year |
(ii)expected mortality of those with deferred benefits immediately before 1st October 1994:
| Males | -1 year |
| Females | none |
(iii)expected mortality of those accruing benefits immediately before 1st October 1994 after subsequent retirement or voluntary withdrawal:
| Males | -1 year |
| Females | none; |
(n)the probability of survival of pensioners who retired or are assumed to retire on grounds of ill-health, to any age after retirement shall be determined from Table 3 set out in Part IV of this Schedule;
(o)the proportions of members of the transferor scheme who shall be assumed to be married at death to a spouse entitled to an adult dependant’s pension are shown in Table 4 set out in Part IV of this Schedule together with the age difference to be assumed between the former member and spouse. Allowance shall be made for the likelihood of children receiving pensions. Pensions to other dependants of those dying in the future shall be ignored;
(p)the mortality of women in receipt of an adult dependant’s pension under the transferor scheme and of widows assumed to be awarded such a pension in the future shall be based on the WA 80 Table included in “Standard Tables of Mortality: the “80” Series” published in 1992 in London by the Institute of Actuaries(2) as applying in the base year 1980 with the following age adjustments for improvements in mortality since 1980—
(i)expected mortality of those year receiving pensions | -1 year |
(ii)expected mortality of widows of those receiving pensions | -1 year |
(iii)expected mortality of widows of those with deferred benefits immediately before 1st October 1994 | -2 years |
(iv)expected mortality of widows of those accruing benefits immediately before 1st October 1994. | -2 years |
Widowers shall be assumed to experience mortality at the rates set out in the PA(90) Tables for Pensioners referred to in sub-paragraph (m) above, with the following age adjustments:
(i) men receiving pensions and widowers of those receiving pensions | + 1 year |
(ii) widowers of those with deferred benefits or those accruing benefits immediately before 1st October 1994. | none |
Once commenced, an adult dependant’s pension to a widow or widower shall be assumed to be continued until he or she is assumed to die;
(q)for the propose of valuing contributions referred to in paragraph 5(a) or (b) of this Schedule, it shall be assumed that there will be sufficient new participants to keep the total pay of participants at the level at which the total pay is immediately before 1st October 1994 subject to the provisions of sub-paragraph (b) of this paragraph.
Part IV
TABLE 1
| Pay progression arising from seniority and promotional increases | Probability of dying in service | Probability of voluntary withdrawal with deferred benefits | Probability of retiring on ill-health grounds with immediate pension and lump sum | Probability of voluntary early retirement with immediate pension and lump sum at rate in Table 2 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | |
| Age | Males | Females | Males | Females | Males | Females | Males | Females | Males | Females |
| 20 | 105 | 105 | 0.0006 | 0.0003 | 0.0860 | 0.1050 | 0.0000 | 0.0000 | 0.0000 | 0.0000 |
| 25 | 133 | 133 | 0.0008 | 0.0003 | 0.0710 | 0.1470 | 0.0005 | 0.0001 | 0.0000 | 0.0000 |
| 30 | 149 | 149 | 0.0008 | 0.0003 | 0.0560 | 0.0990 | 0.0014 | 0.0009 | 0.0000 | 0.0000 |
| 35 | 164 | 164 | 0.0008 | 0.0005 | 0.0455 | 0.0750 | 0.0024 | 0.0020 | 0.0000 | 0.0000 |
| 40 | 174 | 174 | 0.0013 | 0.0008 | 0.0380 | 0.0600 | 0.0037 | 0.0041 | 0.0000 | 0.0000 |
| 45 | 184 | 184 | 0.0027 | 0.0013 | 0.0305 | 0.0450 | 0.0050 | 0.0073 | 0.0000 | 0.0000 |
| 50 | 190 | 190 | 0.0045 | 0.0021 | 0.0000 | 0.0000 | 0.0082 | 0.0126 | 0.0180 | 0.0400 |
| 55 | 194 | 194 | 0.0070 | 0.0035 | 0.0000 | 0.0000 | 0.0143 | 0.0214 | 0.0600 | 0.1100 |
| 60 | 194 | 194 | 0.0103 | 0.0058 | 0.0000 | 0.0000 | 0.0000 | 0.1500 | ||
| 61 | 194 | 194 | 0.0110 | 0.0000 | 0.0000 | 0.0000 | 0.1600 | |||
| 62 | 194 | 194 | 0.0118 | 0.0000 | 0.0000 | 0.0000 | 0.2000 | |||
| 63 | 194 | 194 | 0.0126 | 0.0000 | 0.0000 | 0.0000 | 0.2700 | |||
| 64 | 194 | 194 | 0.0135 | 0.0000 | 0.0000 | 0.0000 | 0.4000 Values for intermediate ages shall be taken to be intermediate. | |||
TABLE 2
Factor to be applied to service completed in calculating immediate pension and lump sum for those retiring early otherwise than on grounds of ill-health.
| (1) | (2) | |
|---|---|---|
| Age | Males | Females |
| 50 | 0.7500 | 0.7500 |
| 51 | 0.7800 | 0.7800 |
| 52 | 0.8100 | 0.8100 |
| 53 | 0.8400 | 0.8400 |
| 54 | 0.8700 | 0.8700 |
| 55 | 0.9000 | 0.9000 |
| 56 | 0.9200 | 0.9200 |
| 57 | 0.9400 | 0.9400 |
| 58 | 0.9600 | 0.9600 |
| 59 | 0.9800 | 0.9800 |
| 60 | 1.0000 | 1.0000 |
| 61 | 1.0000 | |
| 62 | 1.0000 | |
| 63 | 1.0000 | |
| 64 | 1.0000 |
TABLE 3
Determination of probability of death at age shown of pensioners who retired or are assumed to retire on ill-health grounds
| (1) | (2) | |
|---|---|---|
| Age | Number Survivorsa | Number Survivorsa |
| Male | Female | |
a per 1,000,000 lives at age 16. | ||
1. Values for intermediate ages shall be taken to be intermediate. 2. In the case of those accruing benefits immediately before 1st October 1994, the age used should be one year less than their real age. | ||
| 20 | 958,269 | 922,368 |
| 25 | 908,546 | 833,748 |
| 30 | 861,404 | 753,642 |
| 35 | 815,057 | 681,232 |
| 40 | 766,847 | 615,780 |
| 45 | 711,175 | 556,616 |
| 50 | 640,872 | 503,137 |
| 55 | 551,406 | 454,796 |
| 60 | 449,212 | 407,962 |
| 65 | 341,909 | 361,300 |
| 70 | 238,248 | 317,041 |
| 75 | 148,433 | 259,530 |
| 80 | 79,785 | 184,861 |
| 85 | 35,365 | 104,876 |
| 90 | 11,172 | 41,818 |
| 95 | 1,763 | 10,072 |
| 100 | 70 | 1,270 |
| 105 | 0 | 68 |
| 110 | 0 | 0 |
TABLE 4
Proportions married at death and the difference between the age of the former member and his or her spouse
| Age | Male Former Members | Female Former Members | ||
|---|---|---|---|---|
| Proportion married | Difference between former member’s age and spouse’s age | Proportion married | Difference between former member’s age and spouse’s age | |
1. Values for intermediate ages shall be taken to be intermediate. 2. For ages beyond the assumed vesting date of the member’s pension the proportion married at death shall be taken to be the proportion at the vesting date, reduced in line with the spouse’s assumed mortality over the subsequent period. 3. It shall be assumed that husbands were older than their wives. | ||||
| 20 | 0.050 | 0.0 | 0.600 | 3.0 |
| 25 | 0.500 | 1.0 | 0.600 | 3.0 |
| 30 | 0.750 | 1.5 | 0.600 | 3.0 |
| 35 | 0.850 | 2.0 | 0.600 | 3.0 |
| 40 | 0.875 | 2.5 | 0.600 | 3.0 |
| 45 | 0.875 | 3.0 | 0.600 | 3.0 |
| 50 | 0.875 | 3.0 | 0.600 | 3.0 |
| 55 | 0.875 | 3.0 | 0.600 | 3.0 |
| 60 | 0.875 | 3.0 | 0.600 | 3.0 |
| 65 | 0.875 | 3.0 | 0.600 | 3.0 |
1986 c. 60: see section 1(1) of, and Part I of Schedule 1 to, that Act. Paragraph 7 of that Schedule was amended by the Financial Services Act 1986 (Extension of the Scope of Act and Meaning of Collective Investment Scheme) Order 1988 (S.I. 1988/496). The note to paragraph 1 of that Schedule was amended by the Financial Services Act 1986 (Extension of Scope of Act) Order 1991 (A.I. 1991/1104).
ISBN 0 901066 22 2.