The Trustees were concerned about the financial outlook for members because if no significant new bonuses could be awarded, pensions from the Scheme would remain level until the current reducing bonuses had reduced to nil. So, after 2016, members were faced with the likelihood of no significant increases to total pensions until at least 2021, and possibly for longer. When the effect of inflation is taken into account, members would have been worse off. The Government was also concerned that under the Rules they could be made to pay significant funds into the Scheme which would not have been available to increase members’ benefits.
With this in mind, the Trustees and the Government agreed changes to the Scheme which meant that the surplus sharing and standstill provisions ceased to apply from 13 February 2015 (resulting in the removal of the Sub-funds), and the amount of pension members receive in future is guaranteed and no longer depends on the financial position of the Scheme. The Government Guarantee remains in place and the amended benefits remain covered by that Guarantee.
New Level Bonuses
In addition, it was agreed that three new level bonuses equal to 2% of Guaranteed Pension would be paid in 2017, 2018 and 2019.
Bonus awarded up to 2014
All bonuses awarded prior to 2014 were in standstill, which meant that, in the absence of any new bonuses, total pensions would have remained level for a considerable period. This was because the RPI increase to Guaranteed pensions was offset by a corresponding reduction in the pre-2014 bonus.
Bonus from 2020
No new bonuses would be awarded after 2019. At this point all existing bonuses in payment would be added together to form a level bonus, which would not reduce or increase.