Vertex Pension Changes

1. Vertex Pension Changes Dave Johnson, Senior National Officer Dave Faulkner, UNISON Senior Rep

2. Vertex’s Original Proposals • Close DB scheme to all accrual w/e 31 May 09 • Formers ESPS “Protected Members” excepted • Level 1’s to get a 6% max employer contribution in DC scheme. Level 2’s to get 10% employer max contribution. • DIS protection to reduce to 2 * salary. • A reduction in in-health protection, especially for Level 1’s.

3. What’s UNISON been doing? • Presence at all 6 consultation meetings • Requested “pensions experts” meeting • Sought specific independent legal and actuarial advice funded by UNISON • Considered campaigning through the media • Considered complaining to the Pensions Regulator

4. Vertex Alternatives Considered • A number of alternatives were considered alongside closure of DB plan to future accrual. These included: • changes to existing accrual and contribution rates • other cost-sharing mechanisms with employees (eg longevity risk sharing) • move to CARE (career average revalued earnings) • Whilst some of these addressed in part the objective of stabilising the escalating cash and P&L costs, they did not provide a solution that would: • remove the required risk and volatility from the business • eg, CARE would remove the risk of salary inflation only from the Company • provide a platform for achieving parity of remuneration for the workforce • Although the current market conditions can be seen as an unprecedented financial storm, they do have a longer-term impact • the company (like many others in the market) must choose longer-term solutions • some of the risks (eg longevity) are unlikely to be reversed

5. Vertex Alternatives Considered – Key:  meets objective meets objective in part or secondary impact  fails to meet objective

6. Statements we’ve made • Funding position is relatively healthy so no significant deficit contributions necessary • This is simply an exercise to reduce pension costs so as to protect and maximise profits • Vertex argue that a volatility reduction issue – we argued that long-term pension costs will be less than currently and received independent actuarial backing on this issue

7. Legal issues we’ve checked • Any breach of employment contracts? • Any restrictions within Scheme Rules? • Any TUPE transfer protection? • Changes comply with Section 67 protection? • Adequate consultation? • Redundancy rights?

8. Issues we raised during consultation • Other DB alternatives • Structural scheme changes for future service • Significantly increasing proposed employer DC contribution rates • Upwards equalisation of DC contribution rates • Redundancy, ill-health, survivors benefit protection and comparability

9. Consultation - Limited Success • Agreed to upwardly equalise DC contributions and benefits so that members can get a 10% employer contribution if they contribute 5% • Ill-health income protection scheme will also now apply to Level 1 members as well • Death in Service cover to increase to 4*salary for all

10. Redundancy Protection • We believe (which is supported by an independent legal opinion) that anyone previously TUPE transferred into Vertex should have full redundancy protection courtesy of Beckmann • Vertex disagree • Significant issue which we are continuing to raise with Vertex • Individuals should look to protect themselves – and we have standard wording for this purpose

11. Redundancy Protection Individual redundancy statements wording “Please take this as notification that in the event of being made redundant by Vertex, or in the event that my employment is terminated in the interests of the efficiency of its business, I fully expect to be provided with redundancy benefits (including retirement benefits) equal in value to what I would have been entitled to had I not, through no fault of my own, been denied future final salary service rights in the Vertex UK Pension Plan. Should a loss arise in the event of redundancy I reserve the right to issue proceedings in the Courts or to present a claim to the Employment Tribunal. The grounds of any such case or claim would include: (1)  That I am entitled to the same payments, including early retirement benefits, that I would have had in the event of redundancy or premature retirement in any previous employment  which was transferred to Vertex or a predecessor employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. (2)  Under the Rules of the Vertex UK Pension Plan I am entitled to early retirement benefits in certain circumstances, in the event that I am made redundant or my employment is terminated in the interest of the efficient management of the business before my normal retirement date, and those entitlements may not be removed without my express written consent.”

12. Redundancy Protection Individual redundancy statements wording Individual salary-linking statements for former LGPS members Clause 2.3.6 of the definitive deed of the Vertex UK Pension Plan (the Plan) prohibits any amendment that reduces the value of any accrued right calculated on a past service reserve basis. The service credit that I have been granted in the Plan following the transfer of my LGPS service has been calculated on the basis of my actuarially assumed final pensionable salary and not my final pensionable salary as at the date of the Plan’s closure. I would welcome your clarification that, if the Plan is amended to close it to future accrual, my entitlements will be based on my final pensionable salary at retirement or leaving (if earlier) and not the date of closure. If no such clarification is given then I will pursue this matter through legal avenues”.

13. Section 67 Protection • There’s an argument that members of WPS, MIS and LGPS sections should have redundancy, DIS and incapacity benefit protection. • This stems from the exact wording of the Trust Deed and Rules and it’s compliance with the legislative requirements in relation to “subsisting rights” • We are also checking the redundancy position for former ESPS “unprotected” members

14. Ex-Westminster/LG Workers • We believe that those former members of the LGPS that “bulk transferred” their benefits into the Vertex UK Pension Plan should continue to have these linked to earnings growth • This is supported by an independent legal opinion and we have specialist standard wording for relevant members to use in written submissions to Vertex

15. Miscellaneous • Have you received DC and DB projections from Vertex? • Have you received full details of the DC scheme? • Any further information members feel they need? • Rule of 85 protection for members of WPS, MIS, LGPS sections

16. UNISON Conclusion • We’ve done everything we can to try to protect and improve your position and will continue to fight for full redundancy protection • The bottom line, however much we don’t like it and think unreasonable, is that Vertex are within their legal rights to cease final salary accrual for most

17. Questions?