The £11bn scheme has begun preparations to survive with a much-reduced membership, one of many large DB schemes managing a drop in active members
Mature schemes with low funding levels can find it very hard to recover deficits if the number of their active members dramatically reduces.
In March 2010 the scheme had 101,860 active members, 80,195 deferred members and 80,876 pensioner members out of a total membership of 262,315.
By March 2012 the scheme had 89,783 active members, 90,907 deferred members and 89,279 pensioner members out of a total membership of 269,969.
The lack of contributions coming in could lead to the risk of schemes having a constrained cashflow.
The increased contributions being asked of public sector workers, combined with a reduction in public expenditure from the government, have left many local authority schemes facing declining memberships.
"We have seen a number of members opting out and that will have a significant impact," said Peter Morris, executive director of pensions at GMPF. "We will also have some of our admitted bodies closing to new members."
He added: "We are on the more funded side of the spectrum and it will have a big impact for us. But the problem will be much greater for less well-funded schemes."
Schemes that make plans to manage their declining membership stand a better chance of weathering this drop in income.
Others, including the Universities Superannuation Scheme, are targeting specific communication material at those who have doubts about signing up, in an attempt to lift their proportion of active members.
GMPF's response to declining membership
Since 2010 the GMPF has seen its active membership reduce from 101,860 to 89,783.
If the membership falls in line with projected reductions in public spending, the scheme expects the decline could be as big as 25 per cent over the next three years.
The scheme has identified three reasons for this trend:
Public sector bodies having fewer employees as a result of reductions in expenditure;
The increased contribution rates for certain categories members resulting in many opting out; and
An increase in the number of employers closing to new members.
In response, the fund has set up a working group – made up of councillors, union representatives, plan professionals and the scheme's actuary – which has recently had its first meeting.
Morris said that, as an administrative body, the scheme could not try to persuade employees to remain members as this was a matter for the individual employers.
But he said the working group had been set up to decide whether a new investment strategy would need to be adopted to cope with the falling membership.
"We had our first meeting of the working group where we tried to get a better understanding of some of the complexities that will develop," he said.
How to deter people from leaving
The USS is set to send out a fact sheet to all new employees of its participating employers entitled Five Good Reasons to be a Member of USS.
Eifion Morris, communications and training manager at the scheme, said this was an attempt to reduce the proportion of eligible staff who do not join the scheme, which has been stuck at 16 per cent in recent years.
He said: "We are not trying to sell anything but we are trying to make sure people have all the information to hand to make a good decision."
The reasons the schemes give for joining include: the employer contribution, the ultimate retirement income, pension increases, as well as life and incapacity cover.
A number of people... picked up the phone and said they did want to be a member
It also lists reasons why members may not want to join the scheme, such as concerns on affordability, being too young or being unsure how long they will remain at the employer.
These are based on real answers from employees gathered by the scheme at seminars with potential members.
Morris added: "They’ll say, '[I] didn’t join because I didn’t think I could afford it'."
The leaflet then gives them more information that might allay these concerns, such as pointing readers to an online modeller that will give them an exact idea of cost.
As reported on schemeXpert.com in February, the South Yorkshire Pension Fund has attempted to stave off mass opt-outs through a strategy that includes using a calculator to show members what they were giving up.
Schemes can also attempt to lure those who opt out back to the scheme by showing them what they were missing out on through their absence.
Steve Sykes, communication consultant at Shilling Communication, said one client of his sent out “non-member statements” setting out the contributions and life assurance they were losing out on.
He added: "A number of people on the back of that picked up the phone and said they did want to be a member."
