1

CDP/05.09.29.19 21 Jul 14 TO: PS/SofS FROM: Air Cdre G Tunnicliffe, CDP- REM - Hd CREATION OF A GOVERNANCE STRUCTURE FOR ARMED FORCES PENSION SCHEMES

ISSUE 1. Agreement is required on the proposed governance structure for the Armed Forces Pension Schemes (AFPS). RECOMMENDATION 2. SofS is invited to:

a. Note that the:

(1) Public Service Pensions Act 2013 (the 2013 Act) directs SofS to be the Responsible Authority for Armed Forces Pensions, but that authority for action can be delegated to nominated individuals; (2) 2013 Act directs the creation of 3 other entities (Scheme Manager, Scheme Advisory Board and Pension Board) for which this Submission makes recommendations; and (3) Central Advisory Committee on Pensions and Compensation (CAC) will pass responsibility for pension scheme management and administration1 to the Pension Board wef 1 Apr 15.

b. Agree that:

(1) SofS should appoint himself as the Scheme Manager for Armed Forces Pensions and delegate management authority to the Scheme Advisory Board and the Pension Board; (2) the Scheme Advisory Board should be structured as described at Annex A; specifically, agreeing that:

(a) PUS should Chair the Scheme Advisory Board; (b) the Non Executive Director (NED) Chair of the Pension Board should sit on the Scheme Advisory Board; and (c) VCDS and CDP should be members of the Scheme Advisory Board, the remainder being DG Fin and D SP Pol.

(3) the Pension Board should be structured as described at Annex A; specifically, agreeing that:

1 AFPS 15 and all antecedent AFPS (AFPS 75, AFPS 05, Gib Regt PS, RFPS, FTRS PS, NRPS PS and the Gurkha PS). The War

Pension Scheme is a form of compensatory payment and, with the AFCS, will remain with the CAC.

2

(a) the Pension Board should be Chaired by an independent, voting, NED; (b) each Service should select an active member representative, rank-ranged from OR6 (PO/Sgt) to OF4 (Cdr/Lt Col/Wg Cdr), with an additional specific representative for the Reserves; (c) the other member representatives should be the Forces Pension Society (FPS), the Royal British Legion (RBL) and a single representative from one of the Forces Families’ Federations; and (d) the employer representatives should be: D SP Pol, Hd REM, D Res AHd Plans; AHd RFC Cap and the 3 single Service (sS) Pay Colonels.

TIMING 3. Routine. It is planned to have the Pension Board members appointed by Sep 14 in order to allow 6 months of training and induction before the Board assumes its responsibilities. BACKGROUND 4. Current Situation. Governance for the AFPS is loosely provided through the CAC, which Min(DPWV) chairs, for which the primary focus is compensation. The CAC will pass responsibility for pension governance to the new Pension Board from 1 Apr 15. 5. Reason for Change. The 2013 Act mandated that there would be a formal Governance structure specifically for public service pensions, with two new roles and two new boards. The Pension Regulator (tPR) is creating a Code of Practice to provide guidance over and above that already mandated in the 2013 Act. TPR’s proposals are not prescriptive because they will apply across Government and the structures of the various public service pension schemes are all very different; this lack of prescription gives MOD the freedom to decide its approach. 6. New Roles. The two new roles are:

a. Responsible Authority. The 2013 Act specifies that SofS must be the Responsible Authority2.The Responsible Authority will have the power to make Scheme Regulations. b. Scheme Manager. The Scheme Manager will be responsible for managing and administering the AFPS. Currently, most major Public Service pension schemes are planning to appoint the relevant Secretary of State as Scheme Manager. It is advised that SofS should appoint himself the Scheme Manager and then delegate the management of the AFPS to the two Boards. Authority will be delegated but not overall responsibility.

7. New Boards. The two new boards are:

a. Scheme Advisory Board. The Scheme Advisory Board will have responsibility for ‘…providing advice on the desirability of changes to the scheme when required to do so by the Responsible Authority.’3 The Scheme Advisory Board will only be required to make decisions on major changes to the scheme design. b. Pension Board. The Pension Board will be responsible for ‘…assisting the Scheme Manager to comply with the scheme regulations and other legislation relating to the

2 Schedule 2 Para 8.

3 tPR draft Code of Practice Para 22.

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governance and administration of the scheme and requirements imposed by the (pension) regulator’.4

The Scheme Advisory Board will have the authority to recommend, to the Responsible Authority, changes to scheme rules; the Pension Board will ensure that those rules are followed. 8. Frequency of Meetings. It is envisaged that the Boards will meet as follows:

a. Scheme Advisory Board. Because of the nature of its business, the Scheme Advisory Board will be required to meet rarely, probably only when quadrennial scheme valuations are conducted or when very significant policy changes are required. b. Pension Board. Neither the 2013 Act nor the Code of Practice mandate the frequency that a Pension Board should meet. The CAC meets at 6 monthly intervals; unless other factors come to light it would seem reasonable for the Pension Board to meet with a similar frequency.

9. Membership of New Boards:

a. Scheme Advisory Board. Potential candidates to sit on the Scheme Advisory Board have been considered; the analysis is at Annex B. The recommended membership is matched to the level of important decisions likely to be considered by the Scheme Advisory Board, as follows:

Appointment Remarks

PUS Chair of Scheme Advisory Board

CDP

VCDS

DG Fin

D SP Pol

NED Also acts as Chair of Pension Board

DBS, CLS, GAD Not Board members, but in attendance to provide expert advice when required.

b. Pension Board. The membership of the Pension Board has more permutations than the Scheme Advisory Board, the analysis is at Annex C. Based on the need for transparency to the AFPS members, the appropriate level of seniority to make decisions, and the requirement to have an equal number of employer and member representatives,5 the recommended balance of membership is as follows:

Appointment Remarks

NED Chair. Also sits as member of Scheme Advisory Board

D SP Pol

Employer Representatives

Hd Remuneration (REM)

D Res AHd Plans

RFC AHd Cap

RN Pay Col

Army Pay Col

RAF Pay Col

4 tPR draft Code of Practice Para 21.

5 The 2013 Act directs that a Pension Board should have an equal number of member and employer representatives.

4

Appointment Remarks

Forces Pension Society (FPS)

Member Representatives

Royal British Legion (RBL)

Single Rep from the Forces’ Families Federations

Reservist Members’ Rep

Members’ Rep from the RN

Members’ Rep from the Army

Members’ Rep from the RAF

CLS GAD, AHd FAFPS Not Board members, but in attendance to provide expert advice when required.

10. Potential for Combination with Existing Board(s). In an attempt to be efficient, officials explored the potential to combine either the Scheme Advisory Board or the Pension Board with existing MOD Bodies. The Scheme Advisory Board will meet so infrequently as to be ad-hoc, whilst the Pension Board will have well defined legal duties and a greater requirement for specialist knowledge. Investigations thus far have revealed no complementary MOD Board which could be adapted. FINANCIAL ASPECTS 11. The recruitment and employment of a NED, based on an estimated 10-20 days of work per year, at a rate of £500 per day is estimated at £5-10K pa. Irrespective of the Board structure, there would be additional travel and subsistence costs for military personnel and Civil Servants6 to facilitate meetings, estimated to be some £1k pa. These costs will be met from within CDP’s existing budget. [xxxx xxxxxxxx, Def Res Plans, 11 Jun] PRESENTATION 12. Internally, the creation of a Pension Board is a positive story and represents a good communications opportunity for MOD to demonstrate its commitment to the interests of Service personnel (SP). A Defence Intranet news article will be published giving particular prominence to the openness of the process and the inclusion of empowered Service representatives on the Pension Board. This will direct SP to more detailed information about the structure and Terms of Reference for the Boards. This material will be utilised by the single-Services to reach the intended target audiences. Externally, there has been no interest in this issue and it is unlikely to prompt any further media coverage. DMC will work with officials to provide a defensive newsbrief and ensure HMT press office is aware. [xxxxxx xxxxxx, DMC Internal Comms, 11 Jun, xxxxxx xxxx 12 Jun] G TUNNICLIFFE Air Cdre Hd REM Xxxxxx xxxxxxx Email: xxxxxxxxxxxxxxx Annexes: A. Governance Structure for Armed Forces Pension Schemes. B. Membership of the Scheme Advisory Board. C. Membership of the Pension Board.

6 But not for non MOD employees such as the FPS or RBL.

5

PS/ Min(AF) PS/PUS MA/AG

PS /Min(DPWV) MA/VCDS MA/AMP & C

PS/Min(Reserves) EA/1SL PS/DG Fin

PS/Min(DEST) MA/CGS D SP Pol

PS/USofS PSO/CAS SPADs

PSO/CDS MA/CDP DMC

DGT&CS MA/2SL DBS

A

Annex A to CDP 05.09.29.19 Dated 21 Jul 14

GOVERNANCE STRUCTURE FOR ARMED FORCES PENSION SCHEMES

FPS RN Rep

OR6-OF4 RBL

D SP Pol

DG Fin

GAD

CDP

Pension Board

Scheme Advisory Board

Hd REM

Employer rep

Member rep

AHd AFPS

CLS

PUS CHAIR

Advisor

NED (CHAIR of PB)

NED

Army Rep OR6-OF4

RAF Rep OR6-OF4

DBS

Fam Fed

RN Pay Col

Army Pay Col

RAF Pay Col

VCDS Uniformed

D Res AHd Plans AHd RFC Cap

Res Rep OR6-OF4

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Annex B to CDP 05.09.29.19 Dated 21 Jul 14

SCHEME ADVISORY BOARD

1. Neither the Act nor the draft Code of Practice place any legal requirement for Scheme Advisory Board members to be of a specific rank or seniority, or to have a specific level of knowledge or understanding; therefore, no specific training or development is required. The recommended membership is matched to the level of important decisions likely to be considered by the Scheme Advisory Board. Potential members of the Scheme Advisory Board have been considered and a summary of this analysis is at the Appendix to this Annex. The key judgements are:

a. Notwithstanding the lack of legal imperative for Board members to have knowledge and experience, some specialist pension knowledge will be required on the Board, but at the appropriate level of seniority. Specialised legal, technical and actuarial advice should be provided by CLS, DBS and GAD although not as Board members. D SP Pol would provide the appropriate overarching Service personnel policy perspective. b. Whilst there is no requirement for a specific Members’ Representative, it would be presentationally advantageous to have Service representation on the Board, particularly because important decisions about the future of Armed Forces Pensions will be considered. It is recommended that VCDS and CDP should be members of the Scheme Advisory Board. c. Given the weight of financial decisions to be considered there should be a senior MOD financial representative on the Board at around 3-Star level. DG Fin should therefore be a member of the Scheme Advisory Board.

2. Non Executive Director (NED). A NED's role would be to provide a creative contribution to the Board by providing objective criticism and relevant experience. The 1992 Cadbury7 Report said that NEDs ‘should bring an independent judgement to bear on issues of strategy, performance and resources.’ Whilst the use of NEDs has presentational benefits, the 2013 Act does not mandate their use. Given the nature of the decisions to be taken by the Scheme Advisory Board, the wider experience of a NED and the role of challenging and questioning would benefit the Board. Annex C to this MinSub considers the role of a NED for the Pension Board and recommends that the Pension Board should be Chaired by a NED. There would be clear efficiencies in employing the same NED to sit as a voting member of the Scheme Advisory Board. It is therefore recommended that the NED selected to Chair the Pension Board should sit on the Scheme Advisory Board. 3. Chair of the Scheme Advisory Board. The Chair should be appointed at the appropriate level to consider the important decisions that the Scheme Advisory Board will have to make:

a. Min(DPWV) could be considered as a potential Chair, since the Minister has responsibility for veterans. Major changes to Armed Forces pensions will have a political effect upon which Min(DPWV) would naturally be involved. However, the Scheme Advisory Board will make recommendations for major change to the Responsible Authority (SofS) so a political overview could be maintained at that level. b. PUS holds sufficient seniority to Chair the Board and has a sufficiently wide ranging portfolio to consider the implications of major changes to Armed Forces pensions.

The key consideration is the amount SofS believes Ministers should be involved in the process. On balance, given that any recommendations from the Board will be made to SofS, there is less need to

7 The Report of the Committee on the Financial Aspects of Corporate Governance published on 1 Dec 1992.

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involve other Ministers within the Scheme Advisory Board. It is therefore recommended that PUS Chairs the Scheme Advisory Board. SUMMARY 4. The recommended membership of the Scheme Advisory Board is:

Appointment Remarks

PUS Chair of Scheme Advisory Board.

CDP

VCDS

DG Fin

D SP Pol

NED Also acts as Chair of Pension Board.

DBS, CLS GAD Not Board members, but in attendance to provide expert advice when required.

Appendix: Summary of Analysis of Potential Members of the Scheme Advisory Board.

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Appendix to Annex B to CDP 05.09.29.19 Dated 21 Jul 14

SUMMARY OF ANALYSIS OF POTENTIAL MEMBERS OF THE SCHEME ADVISORY BOARD

Candidate For Against

SofS 2013 Act already directs SofS to be the Responsible Authority. Cannot therefore sit on the Scheme Advisory Board because he will be conflicted.

Min(DPWV) Already has responsibility for veterans.

Already directs pension policy through the CAC.

Lower profile than SofS for significant departmental spend.

VCDS Broad view of overall Defence priorities.

Whilst not appointed as a ‘member rep’, the Service audience will expect at least one uniformed Service person to sit on the Board.

As a scheme member, could be perceived as conflicted (although the law permits him to be a member of the Board).

CDP Note: post is quad-Service. CDP could be a civil servant

Logical, fits with overall role.

Whilst not appointed as a ‘member rep’, the Service audience will expect at least one uniformed Service person to sit on the Board (assuming CDP is military).

If CDP is military, as a scheme member, could be perceived as conflicted (although the law permits him to be a member of the Board).

PUS Broad view of overall Defence priorities.

DG Fin Necessary for important financial decisions which will be the responsibility of the Scheme Advisory Board.

D SP Pol Subject Matter Expert.

DBS

Ability of DBS to implement changes may be a factor in decision making.

Small potential to be conflicted under some circumstances. Should not be Board Member but can still provide specialist advice.

CLS Necessary for important legal decisions.

Already advises SofS so should be in attendance but not full member.

GAD Necessary for important financial decisions.

Could be conflicted, since GAD is also required to provide advice to the SofS, therefore should attend to provide advice but should not be a Board Member.

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Annex C to CDP 05.09.29.19 Dated 21 Jul 14

PENSION BOARD

1. Timing of Implementation. The Pension Board will be legally established on 1 Apr 15. TPR’s draft Code of Practice recommends that Pension Board Members be given 6 months from appointment to attain the appropriate level of knowledge.8 It is likely that some lay Member Representatives will require formal training and development. Therefore, it would be appropriate for the Board to be fully appointed from 1 Sep 14. 2. Training. Membership of the Pension Board requires the individual to ‘…be satisfied that they have the appropriate degree of knowledge and understanding to enable them to properly exercise their functions as a member of the Board.’9 Whilst most Board members will already possess the required knowledge and understanding there will be some who will require significant training. TPR is developing an online training course and any active member representatives should spend at least one full day with REM being briefed once appointed.

STRUCTURE OF THE PENSION BOARD

3. Aside from the requirement to have a balance of member and employer representatives, the 2013 Act does not prescribe the structure or membership of the Pension Board. This Annex analyses and recommends member, then employer, representatives, before considering the Chair. 4. Other Departments. With the exception of the Civil Service, most other Public Service Pension Schemes do not yet have Pension Boards. There are few suitable comparators as each Scheme has different structures; nevertheless, insights have been gained from discussion with other schemes on how, and why, they are building their Governance structures. POTENTIAL MEMBER (EMPLOYEE) REPRESENTATIVES

5. Member representatives must be transparently independent of the Chain of Command, be able to assimilate the information, understand the views of the wider Service population, including veterans, and articulate those views at the Board. The 2013 Act does not prescribe separate Active, Deferred and Pensioner representatives but, given that Active members constitute only 20% of the total membership, it would be logical to have separate representatives for Deferred and Pensioner members. The Code of Practice allows scheme members, including serving personnel, to be members of the Board, even as Employer representatives; they will not be automatically conflicted. 6. The AFPS 15 Consultation. The 2012 formal Consultation, which engaged over 25,000 SP, asked who the Service population wanted to act as member representatives on the Pension Board. The results showed a clear desire for representation by the FPS. In addition, the focus groups showed a desire for non-commissioned representation on the Pension Board. Active Members

7. Whilst a single ‘purple’ appointment could represent all 3 Services, it is highly likely that active members will wish to be represented by their own Service, implying at least 3 separate active member representatives.

8 The time delay is a legal requirement for private sector Pension Board Trustees. Pension Board members will not be trustees.

9 tPR draft Code of Practice Para 36.

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8. Potential Active Member Representatives:

a. Pay Cols. The sS Pay Cols already represent the needs of their respective Services’ personnel and already possess the requisite specialist knowledge. They could sit as Member or Employer representatives. The Consultation focus groups indicate that junior personnel would likely perceive the Pay Cols as representing the employer rather than the employees; therefore, they should not act as Member representatives. b. Service Families’ Federations (Fam Feds). The Naval Fam Fed currently sits on the CAC acting on behalf of all 3 Service federations. Of those who responded to the 2012 Consultation, 11% wanted Fam Fed representation on the Pension Board. The 2013 Act does not require member representatives to be scheme members. The Fam Feds aim to represent all Service personnel, but they are perceived by some to primarily represent married personnel which are 47% of the Service population. There is also a cohort of spouses of deferred and pensioner members who receive an Armed Forces Pension; the Fam Feds therefore represent the interests of a wide spectrum. Subject to achieving a balance of member and employer representatives, Fam Feds, or at least a single representative of all 3, should be considered as potential member representatives. c. Service Representatives. It is likely that each Service would wish to provide a representative, using a selection process appropriate to the individual Service. A balance needs to be struck between someone with sufficient experience to engage in pension issues, whilst at the same time being accessible to the wider Service population. The Services have requested that the role be rank-ranged from OR6 (PO/Sgt) to OF4 (Cdr/Lt Col/Wg Cdr) in order to provide the required authority and experience. The Services expressed a desire that the spread of member representatives should represent the range of the Service population. REM does not consider it necessary to mandate how this could be achieved because much will depend on the various selection processes undertaken by the individual Services. It is therefore recommended that each Service select a lay member representative, rank-ranged from OR6 (PO/Sgt) to OF4 (Cdr/Lt Col/Wg Cdr). d. Reserves. Given the importance that Defence places on the recruitment of Reserves, and the enfranchisement of Part Time Volunteer Reserves (PTVRs) into AFPS 15, there may be a case to have a Reserves employee representative on the Pension Board.

Deferred and Pension Members 9. Deferred members will include those who served for a relatively short period of time and will have small deferred pensions that they will not draw for as much as 40 years after leaving the Armed Forces. Pension members are those who are currently receiving pensions. The organisation that has traditionally represented these cohorts, particularly at the CAC, is the Royal British Legion (RBL). Therefore, the RBL should be invited to sit as a Member representative on the Pension Board. POTENTIAL MODELS FOR MEMBER (EMPLOYEE) REPRESENTATION 10. Based on the deductions above, five potential models for Member representation were examined as follows:

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Option 1 Option 2 Option 3 Option 4 Option 5

Minimum Mid range (-) Mid range (0) Mid range (+) Maximum

FPS FPS FPS FPS FPS

RBL RBL RBL RBL RBL

1 x purple Service rep

1 x purple Service rep

3 x sS Service reps

3 x sS Service reps

3 x sS Service reps

1 x Reserve rep

1 x Fam Fed 1 x Fam Fed 3 x Fam Feds

Total 3 4 5 7 8

POTENTIAL EMPLOYER REPRESENTATIVES 11. Potential employer representative candidates for the Pension Board have been considered and a summary of the analysis is at the Appendix to this Annex. The key judgements derived from the analysis were:

a. Amongst the potential candidates, Min(DPWV), CDS, PUS, VCDS and CDP are too senior; whilst their presence would show top level support it could also overshadow and undermine the independence of the Active member representatives. Therefore, Min(DPWV), CDS, PUS, VCDS and CDP should not be members of the Pension Board. b. Due to the financial significance of pension issues, it is important that DG Finance be represented at the Board. The rank of other potential members of the Pension Board indicates that representation at B1 or SCS level would be appropriate. Therefore, D Res AHd Plans should represent DG Fin on the Pension Board. c. D SP Pol will sit on the Scheme Advisory Board. He looks across CDP’s entire portfolio and will have a broad overview of Service manning; as a 2-Star he or she will have sufficient seniority but will not be so senior as to overwhelm the active member representatives. Additionally, Hd REM would provide subject matter expertise across the Remuneration arena, particularly where pension matters interact with other aspects (e.g. AFCS and Pay). It is therefore recommended that D SP Pol and Hd REM should sit on the Pension Board.

d. The Pay Cols represent a valuable source of experience; as subject matter experts they would also act as the voice of the PPOs. If minimising the size of the Board becomes a significant concern, a single Pay Col could be nominated to represent the single Services, on a rotational basis. It is therefore recommended that the Pay Cols sit as employer representatives on the Pension Board, ideally with all 3 present, but as a minimum with a single Pay Col representing the 3 Services. e. If a specific Reserves employee representative sits on the Board, there should be a concomitant employer representative. REM is already well represented; a broader perspective would be achieved if the Reserves representative came from RF&C. Option 4 below introduces the potential for a Reserves employer representative if the size of the Board permits. f. Specialist legal and actuarial advice should be provided by GAD and CLS, although not as Board members. DBS should not have a place on the Board since one of the roles of the Board will be to hold DBS to account for its delivery of pensions within the scheme rules. g. AHd AFPS should attend as the Subject Matter Expert and the policy lead. However, given that D SP Pol and Hd REM will already attend it need not be necessary to have AHd AFPS as a voting member. Instead, it is recommended that he or she attends as an advisor in the same manner as GAD and CLS.

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12. Based on the judgements above, a range of models for Employer representation were examined, with the subsequent recommended options as follows:

Option 1 Option 2 Option 3 Option 4 Option 5

Minimum Mid range (-) Mid range (0) Mid range (+) Maximum

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D SP Pol D SP Pol D SP Pol D SP Pol D SP Pol

Hd REM Hd REM Hd REM Hd REM Hd REM

Purple Pay Col AHd AFPS RN Pay Col AHd AFPS

Purple Pay Col Army Pay Col RN Pay Col

RAF Pay Col Army Pay Col

AHd RFC Cap RAF Pay Col

AHd RFC Cap

Total Voting 3 4 5 7 8

CLS CLS CLS CLS CLS

GAD GAD GAD GAD GAD

AHd AFPS AHd AFPS

Total Non-Voting

2 3 2 3 2

Grand Total 5 7 7 10 10

CHAIR

13. As Min(DPWV) is currently Chair of the CAC, which will cede responsibilities to the Pension Board, it may initially appear reasonable for Min(DPWV) to Chair the Pension Board. However, Member representatives and some Service personnel may perceive the Chair of the Board to be an Employer representative. 14. Independent Chair. It is important that the Chair of the Pension Board is perceived by the members (Active, Deferred and Pensioner) to be impartial. Most of the centrally administered Public Service Pension Schemes are recruiting NEDs to act as independent Chairs. Presentationally, recruiting a NED would demonstrate that the Board was impartial and the right NED would bring external expertise. Ministers would be able to objectively consider key decisions presented by a more independent body. Conversely, although Ministers would influence the selection and appraisal process for the NED, once in post the Chair will be, de facto, independent. On balance, the presentational benefits of having an independent, empowered, voting Chair are judged to have more merit than the potential reduced control. Departmental influence could still be provided by the Employer’s Representatives and this is the model being adopted by most other centralised public service schemes. Governance would be more efficient if the Chair of the Pension Board also sat on the Scheme Advisory Board. It is therefore recommended that the Pension Board should be Chaired by an independent NED, who should also be a member of the Scheme Advisory Board.

DISCUSSION

15. Combining the options for Employer and Member representatives creates the following models:

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RECOMMENDED Model 1 Model 2 Model 3 Model 4 Model 5

Me

mb

ers

FPS FPS FPS FPS FPS

RBL RBL RBL RBL RBL

1 x purple Service rep

1 x purple Service rep

3 x sS Service reps

3 x sS Service reps

3 x sS Service reps

1 x Fam Fed 1 x Fam Fed 3 x Fam Feds 1 x Reserves

Total member 3 4 5 7 8

Em

plo

ye

rs

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D Res AHd Plans

D SP Pol D SP Pol D SP Pol D SP Pol D SP Pol

Hd REM Hd REM Hd REM Hd REM Hd REM

Purple Pay Col AHd AFPS RN Pay Col AHd AFPS

Purple Pay Col Army Pay Col RN Pay Col

RAF Pay Col Army Pay Col

AHd RFC Cap RAF Pay Col

AHd RFC Cap Total employer 3 4 5 7 8

Non Voting

CLS CLS CLS CLS CLS

GAD GAD GAD GAD GAD

AHd AFPS AHd AFPS

Total Non-Voting

2 3 2 3 2

Total Voting 7 9 11 15 17

Grand Total 9 12 13 18 19

16. All the models would be legally sound within the 2013 Act and the draft Code of Practice. It is likely that Model 1 would be too small to properly represent the full range of membership of the AFPS10 and the employer. However, experience from the CAC has shown that Model 5 would be too disparate; it would be very difficult for such a group to achieve consensus on any difficult decision; Model 4, with 15 voting members, should represent the upper limit. Therefore Models 1 and 5 are discounted. Having a single ‘purple’ member representative would be unlikely to satisfy the Service audience; whichever Service the representative came from, the members of the other two Services would feel un-represented; therefore Model 2 is discounted. 17. The difference between Models 3 and 4 is the inclusion of a Fam Fed rep for the members and the 3 single Service Pay Cols for the employer. The Pay Cols will provide vital knowledge, skills and experience to the Board; their responsibilities cover the entire remuneration area and they will represent the views of the PPOs and Service Chiefs. A model which includes the Pay Cols will provide a more skilled Pension Board than one which does not. Therefore, Model 3 is discounted and Model 4 is the recommended design for the structure of the Pension Board. The recommended structure is represented graphically, with the Scheme Advisory Board, at Annex A. Appendix: Summary of Analysis of Potential Employer Representatives on the Pension Board.

10

Active members across the 3 Services, Deferred Members and Pensioner Members.

Minimum Mid range (-) Mid range (0) Mid range (+) Maximum

Chair NED Chair NED Chair NED Chair NED Chair NED Chair

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Appendix to Annex C to CDP 05.09.29.19 Dated 21 Jul 14

SUMMARY OF ANALYSIS OF POTENTIAL EMPLOYER REPRESENTATIVES ON THE PENSION BOARD

Candidate For Against

Min(DPWV)

Already has responsibility for veterans.

Already directs pension policy through the CAC.

Probably too senior for this level of Board.

Appointing a NED to Chair the Pension Board would allow Min(DPWV) to maintain a strategic position whilst still being directly involved in Pensions policy through her primary role.

VCDS

Broad view of overall Defence priorities.

Probably too senior for this level of Board.

As a scheme member, could be conflicted (although the 2013 Act allows this).

Unlikely to have prior knowledge, significant pre-briefing required.

Could be perceived to have undue influence over serving member rep(s).

CDP Note: Post is quad-Service. CDP could be a civil servant.

Logical, fits with overall role.

Probably too senior for this level of Board.

As a scheme member, could be conflicted (although the 2013 Act allows this).

As a senior officer, could be perceived to have undue influence over serving member rep(s).

PUS Broad view of overall Defence priorities.

Probably too senior for this level of Board.

DG Finance Necessary to be represented for important financial decisions.

Probably too senior for this level of Board; could be represented by D Res AHd Plans.

D SP Pol

Could provide more continuity than Ministers or military personnel.

Subject matter expert. Knowledge covers all aspects of Remuneration which interacts with AFPS (e.g. Pay).

Hd Rem

Chairs Pension Steering Group.

Subject matter expert. Knowledge covers all aspects of Remuneration which interacts with AFPS (e.g. Pay).

As a senior officer, could be perceived to have undue influence over serving member rep(s).

AHd AFPS Deep subject matter expert.

Could provide more continuity than Ministers or military personnel.

Pay Cols Knowledge covers all aspects of Remuneration which interacts with AFPS (e.g. Pay, AFCS).

Have also been considered as Member representatives, but discounted.

RFC Rep Specific focus on Reserves issues.

Possibly AHd RFC.

Not part of RFC’s core business. Remuneration for Reserves is the responsibility of REM.

CLS

Subject matter expert. Could be conflicted, since CLS is also required to provide advice to the Scheme Manager, therefore should attend to provide advice but should not be a Board Member.

GAD

Subject matter expert. Could be conflicted, since GAD is also required to provide advice to the Scheme Manager, therefore should attend to provide advice but should not be a Board Member.

DBS Ability of DBS to implement changes may be a factor in

Could be conflicted; since the Pension Board is required to hold DBS to account for delivery of

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decisions.

pension services. Therefore DBS should attend when required, but should not be a Board Member.