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2018: £8.2M Pension deficit


#21

In the absence of any (promised) further update about the ‘legal error’ - to use the phrase in the Annual Report - we don’t know what action TWS is taking against the provider of the advice. That is one of the issues.

I take your point about ‘not a cash entry’ but nevertheless, from Notes to The Financial Statements, 13a:

The Society has agreed to pay deficit contributions of £1.25m per annum, payable by year end each year from 31 January 2018 to 2024 inclusive. in the year ended 26 January 2018 The Society chose to prepay £1m of the payment due in 2018/2019 taking total payments to the scheme this year to £2.3m (note 13c).

Presumably that is money which would otherwise be available to, for example, reduce prices?


#22

@MarkC thanks for an “industry insider” perspective.
As with other apparently single interest forums of which I’m a member it never ceases to amaze at the broad range of experiences brought by members. United by in this case a love of wine.


#23

The contributions schedule is generally agreed as part of the deficit recovery plan on a triennial basis, and there are lots of moving parts to this. It is a long term agreed schedule as can be seen above, and would form part of the financial budgeting process.
The ‘error’ only meant that there was a partial restatement of the liabilities which had been revised down slightly. It’s only one component of the overall picture.
I expect that there are good reasons why the Society chose to prepay the current year charge.
Not sure that it’s helpful to think about it in terms of money being available to reduce prices. By the same thinking, adverse or favourable year by year movements in the deficit would see prices go up and down every year!


#24

The mantra “not for profit” is now in context. Redress should be sought regarding “bad advice” From who? The WS should be a bit more transparent. I am sensitized by the closed doors decision about Montreuil. Not much democracy there. I’m missing my New Zealand wines, exiled here in France!


#25

TO THE MEMBERSHIP

I have given this matter some thought.
Given the debt to be repaid by the membership is GULP! £8.2 Million.
And assuming a participating wine buying membership of say 150,000.
That is a loss to every active member of £50+ each.
But the more active you are, the more the burden you WILL carry!
There is absolutely no attributable blame on the staff.
But I ask myself, who benefits from this error, and are they in fact the one’s who got us to this point.
And, are they the one’s who are “reporting” this situation to the membership.

I propose an inquiry, made up by members who have skills, such as lawyers or even a judge, those involved in the pensions industry and even the odd (sorry! lol) accountant. Along with a couple of members who have no idea of the industry for their “white eyes!” approach.

It is only an idea, but I do think that it is absolutely scandalous that on average 150,000 members should have to stump up £50+ each to rid us of a deficit that was not of our making.

Members could “vote” by liking this post.
Administrators, remove the "likes from my account, once the vote is complete in say 14 days.

The WS Management could alternatively and proactively initiate an inquiry, run along the broad parameters that I have set out.

Members could volunteer to be part of this inquiry group.
Travel expenses would be paid and local lodging would be provided at WS account.
2 days maximum.
An appropriate honorarium in the form of wine to each members taste might be supplied as thanks for time and effort made, on behalf of the wider membership.
I disqualify myself from membership of this group as an “interested” party.

Sorry, this is a bit like “the back of a fag packet on a Friday afternoon” idea, but if I didn’t write it now; I might lose my nerve tomorrow.

Vote, don’t vote.
It’s our Society and our money!

Thanks for your time.

Taffy-on-Tour


#26

You could consider an anonymous poll rather then counting likes that are attributable, in case that puts people off.


#27

If I could prevail upon you to do that, I would be eternally grateful.
Don’t know how to and off for an indefinite trip sorting out an oilfield problem first thing in the morning.

T-o-T


#28

Please vote if you would like an independent inquiry Group of members to be set up to look into the £8.2m pension deficit as explained by @Taffy-on-Tour in the main post above. Participation in this poll is anonymous.

  • Yes
  • No

0 voters


#29

Thank you.

T-o-T


#30

I fail to see the point of this. By this logic you could extend it to any other commercial decision made by WS management over a long period of time.

And we all know how wonderful referenda are…

We elect representatives already. Let them do their job. In any event, the governance of a DB pension fund is ultimately the responsibility of the Trustees, overseen by the Pensions Regulator.

As I have commented already, the reported deficit at Jan 18 is a lot lees than this figure which was based on the actuarial valuation of Jan 2017, over a year ago. The current deficit is about £2.3m on liabilities valued at £43m, and is about 5%. It would not take much of an (additional) move in long term real interest rates to eliminate the deficit altogether. The figures quoted in the original post have a lot of assumptions, some of which are questionable.

More fundamentally, what exactly would this enquiry seek to achieve? The adjustment last year for the ‘error’ only takes the liability value back to where it was pre 2010, and indeed part of the reduction then stays.

Sorry Taffy, but this does sound like the back of a fag packet on a Friday afternoon. Bit like pension fund accounting…:grin:.

A better exercise might be to ask how the volatility of the accounting and actuarial liability in future might be managed. The £8.2m figure arose mainly from changes in the liability discount rate, and fell last year for the same reason.


#31

fair dues though for the best “must dash” excuse I’ve ever seen…


#32

Thank you for raising the issue, which has been noted.

This category was created to gather members’ questions and comments for the Society and the Committee at the AGM. Members can ask any questions and provide representations, but since The Society has not had the opportunity to respond to the issue, it is the wrong time to make any specific suggestions or plans. For this reason, and to avoid any misunderstanding, I have closed the poll.

The question that has been raised here has been forwarded for review and The Society will respond as per the invitation.


#33

I think this is also a question to ask at the AGM.


#34

I can do that if you want - not in person but there is thread about that I think?


#35

This has been rather eye-opening for me, although not in the way intended.

Just out of curiosity, I went into Order History to tot up my spending for 2017, just to see what percentage of my annual spend £55 would be. I guessed beforehand that it wouldn’t be enough to trouble me in terms of the subject of this thread but good lord … :open_mouth: … let’s just say it was a worryingly insignificant percentage.

I spend far too much on bottled booze and really need to cut down on the whole buying-more-than-I-drink phenomenon. I’m gonna skip the 2017 claret thing and step back from the Hospices de Beaune club-together (is that still happening…?). I could easily keep the household in wine for the next six months without spending another penny, although I won’t go quite that far.

Time to give the basket a little rest after a busy 12 months…!

:heavy_dollar_sign::heavy_dollar_sign::chart_with_downwards_trend:


#36

IThankfully a pension deficit is not a debt that has to be repaid. It is just an actuary’s (person v clever at numbers) estimate of how much the fund owes to current and future pensioners, less how much It’s current investments are worth.

These chaps hands are tied by regulations that say they HAVE to value these future liabilities using CURRENT interest rates (well long term bond yields but let’s not go there) of about 2.4%. As we know interest rates are at an all time low. Upshot is that the estimate for what the fund owes current and future pensioners is MUCH MUCH bigger than is realistic. So the deficit is in part an illusion.

If interest rates were like they were before the financial crisis (5%) the estimate of what the fund owes current and future pensioners would HALVE and the fund would actually have surplus of about £20m. This can’t be repaid to TWS shareholders unfortunately but at least TWS wouldn’t have to contribute to the fund many years, if ever.


#37

@RichardN I agree that the discount rate has been distorted for a number of years, partly by the QE policies which helped bail out banks and borrowers.

It’s also absolutely right to say that the deficit is effectively a guesstimate of the current shortfall at one point in time between assets and liabilities. It’s accounting mark to market policy applied by actuarial valuation if that makes sense…and it does feed into the contribution schedule.

However, I’m not sure it’s right to say that the fund would have a surplus of about £20m if rates were where they were pre 2008, as I strongly suspect that the value of the assets would be significantly lower than present in that scenario. That’s not to say that there might not be a surplus, but I would bet it would be a lot less than £20m. You are right to note that any surplus is a one way street too, and can’t be returned to the WS.

For me, the Trustees and sponsor should be looking very closely at the volatility risk inherent in the current strategy, as the liabilities appear to be largely unhedged against discount rate risk. That may be a conscious decision now, taking a view that real interest rates may be slowly rising again (as they have in the last year). However, given that the deficit is now relatively small, it would seem prudent to me to be keeping a very close eye on this. Hence my suggested question several posts above. Back to wine now I think…


#38

Where does it stop? If people don’t die at the rate they used to, and rates stay low (both are likely imho) then what is to stop the liability ballooning further? I have heard actuaries in the past say “oh we’ve got it right this time” (BT shareholder!). Then the liability doubles.

Given a Tata-esque mass transfer would be in the best interests of TWS shareholders why is this not an option?


#39

@bs4oeno Trying to answer both…

Some evidence that mortality improvement (insofar as it affects DB pension funds) has plateaued. Depends also how prudent their current assumptions are and the demographics of the pension fund membership. Maybe how much wine they drink too!

I too believe that rates are likely to remain quite low. However, it’s the interest rate (yield) on long dated gilts that matters (30 year rates). It’s been suppressed for some time, by QE and by pension fund demand for matching assets.

Remember too that the scheme is closed so it’s a finite problem. At some point it may be sensible to consider a buy out of liabilities or even a partial one. You can now buy out longevity, rate and inflation risk separately. Quite a complex exercise for a small/medium sized scheme and might be quite costly. Not sure that what Tata did is an option.


#40

It was good, got my coat too…!
But also true.
Not overly concerned at my fellow members votes, at least a straw poll or the temperature taken.
I just would like the WS management to give a full and open explanation to the membership. This issue will inevitably have an effect on investment, prices and even salaries at the WS over the next few years. After all, the cake is only “so” big.
Hopefully this topic may be fully aired at the AGM.