Retirement the British way

A summary of the recently implemented British Union retirement plan

Marcus Dove is treasurer of the British Union Conference of Seventh-day Adventists, Hertsfordshire, England.

The British Union Conference (BUG), in line with General Conference/Trans-European Division retirement policy, has operated an apparently successful retirement plan for several decades. However, the pension scene in the United Kingdom has changed markedly over re cent years, leaving our denominational retirement policy significantly out of touch with current standards and practice. The otherwise commendable worldwide (more or less) denominational retirement policy is not flexible enough to properly accommodate country-specific changes. Accordingly, to address the situation, the BUG has sought an alternative to the existing retirement policy rather than simply a modification of it.

After considerable study, the BUG executive committee voted to replace the existing plan with a new defined benefit occupational pension strategy, exempt-approved by the Inland Revenue (for tax effectiveness on contributions). The new approach became effective April 6, 1998. In reaching its decision, the BUG recognized that both the old and the new systems have advantages and disadvantages. For example, it is widely accepted in the United Kingdom that the benefits/risks of good/poor investment performance accrue to the employee (through pension levels) in a defined contribution scheme,1 and to the employer (through contribution rates) in a defined benefit scheme.2

For the employer, the attraction of the defined contribution scheme is admittedly compelling, with its inherent control over contribution rates and thereby, pension costs, and its ready identification of these costs for financial planning purposes. For the employee, there is the prospect, but certainly not the guarantee, of a pension that outperforms its defined benefit cousin.

It is worth noting that the emphasis in a defined benefit plan is on length of service, thereby recognizing commitment to the church through long-term service, especially appropriate in view of the fact that an occupational pension is generally regarded as "deferred salary." This point takes on added relevance given the finding re ported in the North American Division Retirement Council Handbook (April 1997, 5) that "about half [of the employees surveyed] did not feel strongly that working for the church was necessarily a career-long calling." This raises a question as to what kind of employment our retirement packages should primarily aim at recognizing—the transient or the long-term?

As far as possible, the interests of both employee and employer in the provision of retirement benefits should be mutual. In this respect, and in addition to the external constraints particular to its situation, the BUG has deemed that the common interest would be better served by a plan that generally assures a defined level of pension, calculable in advance, out of which all pension benefits would be paid, and which favors long service. At the same time, to protect the denomination against the possibility of open-ended liability, the new system has the ability to provide for the burden to be shared, if need be, between employer and employee on either a temporary or more permanent basis, should the church's finances ever be confronted by a sudden and dramatic downturn. In an increasingly uncertain world, this remains a distinct possibility, and one that would, of course, be likely to adversely affect any kind of pension scheme.

The new package provides for a pension of 1 percent of final salary for each year of pensionable service worked within BUG territory from April 6,1998, onward. Retirement benefit rights already earned up to that date will be calculated in harmony with the terms of the old retirement policy, then re-expressed in terms of the new strategy (i.e., a percentage of final salary). They will finally be transferred into the new system as funds are available, starting with the employees closest to retirement, and in time involving each employee's retirement.

The new package, which includes the employee's investment of funds, will be operated by a group of trustees charged by law to act in the best interests of plan members, within the terms of the Trust Deed given them by the sponsoring employers.

The new retirement policy provides for additional voluntary contributions by the employee via a personal, defined contribution pension plan, attached to the main employer scheme.

Thus in the future, the retiree's total package will consist of (a) defined benefit pensions paid by the state and the employer and (b) the defined contribution benefit arising where an employee chooses to make additional payments through the denomination's plan. This and the recent denominational provision for permanent health insurance represents a significant improvement by the BUG in caring for its workers both during active service and in retirement.

1. A defined contribution scheme is basically one in which a set contribution is paid by the employer and, sometimes, the employee, into a group personal pension scheme. The amount of the resultant pension is dependent upon such factors as: (a) the level of and period over which contributions are made, (b) the investment return on the on-going fund, (c) annuity rates at the time of retirement when the fund is used to purchase a pension. Not until retirement can the pension be properly quantified.

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2. In a defined benefit scheme, the pension is determined in advance, normally as a percentage of final salary for each year of pensionable service. (In our scheme, final salary is defined as the actual pensionable salary being earned at the time of retirement or the highest average salary over three years during the eleven years prior to retirement, whichever is greater.)

Edited and reprinted with permission from the British Advent Messenger, Lincolnshire, England.


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Marcus Dove is treasurer of the British Union Conference of Seventh-day Adventists, Hertsfordshire, England.

August 1998

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