Minutes of the Twentieth PCC meeting held on Wednesday 29^th March 2006 at Telent/Ericsson, Coventry.

Those present

PCC

Ericsson (Coventy)

S Leahy

A Lilley

S Requena-Rueda

I Wood

telent Field Force

R Hartt

J Leaney (MND)

D Slack

Deferreds

P Moloney (MND)

Pensioners

K Buckley (PCC secretary)

P Dronfield (PCC chair)

M Elliott

P Eykelenboom

M Symonds

C Walton

V Webster (MND)

Pensions Office

C Elsley

D Hampton

P Harris (part time phone link)

1. Apologies for Absence

   A Barker (MND), Beeston; A Cushing, Ericsson; P Waterhouse (Chorley); G Allen (Pensions Office)

2. Introduction

   It was explained that Peter Harris would be participating part time by phone line.

3. Minutes of the Meeting of 18^th January 2006

   P Eykelenboom noted that he is a pensioner. Otherwise the minutes were accepted.

4. Matters Arising From the Meeting of January 2006

   Mick Elliott noted that Peter Harris’s promised précis of the new legislation on PCCs and MNDs was still awaited. Vic pointed out that the legislation is still being finalised.

   Also, at the PCC meeting of 19/10/2005, Sean Leahy had asked how the Trustees of the new Ericsson Plan would consult with their scheme members. Peter Harris reported no progress as yet, as the appointment of the Trustees itself was still in progress.

5. Correspondence

   None.

6. Board and PCC Composition

   Peter Harris (by phone link) led the meeting for this item. He made it clear he was speaking for the Trustee, rather than from his position as Pensions Manager.

   He reiterated that at the last PCC meeting, it had been noted that the directors’ profile was reducing by natural wastage to 3 MNDs, 3 company appointees and 3 independents. The company appointees would remain at three on the basis that Andy Barker (MND) would not be replaced.

   This led on to how directors are to be appointed in the future. New related legislation, from January 2007, means that one of the MND directors must be appointed using a process involving the actives, or a body representing them. Another MND must be appointed through a process involving pensioners or a body representing them. In addition, although not mandated by the new legislation, the board would like the third MND to be appointed from the deferreds, or a body representing them.

   Peter then went on to give his initial thoughts on how the detailed mechanism for such appointments might work. He thought that although the PCC could continue as a single body (with Actives, Pensioners and Deferreds), it should operate separately to appoint the MND representing its own class of Plan member. This would be preferred to having direct elections, which would be an administrative nightmare, and probably result in a low poll anyway. Using the PCC to elect MNDs would also mean that if a replacement MND was unexpectedly required, this could be effected very quickly.

   As regards the PCC itself, he thought that it should continue to appoint Active reps through the present system of site voting. For deferreds and pensioners, Peter suggested that they could be notified through existing communications such as newsletters or annual reports that nominations were sought for appointment to the PCC.  Peter thought that if we had say less than twenty nominated, all could be appointed to the PCC. If more, then we could write back and see if any would drop out. Only if they would not would some form of selection then be needed. The relevant PCC groups would then nominate their MND.

   Peter said he was asking the PCC today whether it was happy with the principles he had laid out, and could it assist him with the detail and help also in the transition process.

   A lengthy discussion then followed within the PCC meeting about these proposals. The main points raised were as follows:

   • There was general concern about how many reps there might be. It sounded as if there might be up to sixty. If so, this larger body (referred to as an Electoral College) should perhaps only be utilised to select a smaller main PCC body.
   • It was generally thought that the main PCC body should be about twenty reps, with roughly equal numbers of actives, pensioners and deferreds. Perhaps only each of the relevant groups within this main PCC body should select its own class of MND.
   • It there were a lot more than twenty nominations for PCC reps, Mick Elliott suggested that there should be some regionalisation based on past historic businesses.
   • There was concern about possible conflicts of interest if a telent pensioner or deferred took up employment with another company, particularly if he was an MND It was thought that this situation could be covered by some sort of confidentiality agreement. Peter Harris didn’t think it a problem for deferreds, as long as the company had the right to decline a nomination for a deferred MND. Also, would such persons be able to get paid time off from their new employer?

   It was noted during these discussions that new legislation means that an employee, when aged over fifty five, can take his pension and continue to work for that company.

   Peter Dronfield asked for any further comments on this matter to be sent to Peter Harris.

   Peter Harris said that he will include notes about the new legislation in his proposals for the new methods of working for MNDs and PCCs and he would bear in mind what he had heard today.

   It was agreed that a PCC subcommittee should be set up to review the proposals and, as requested by Peter Harris, to consider the transitional arrangements. Vic Webster, John Leaney, Pat Moloney, Mick Elliott and Peter Eykelenboom volunteered for the subcommittee, although Sean Leahy thought this meant there was a problem for people who may not have decided to transfer their deferred pension to Ericsson. The first meeting of this group would be triggered when Peter Harris issued his draft paper. Vic volunteered to organise the meeting, probably at Stafford.

7. Directors’ Report

   This was presented by Vic Webster, covering Board Meetings on the 7^th February and 14^th March 2006. A summary of points raised is as follows:

   • Yields in conventional and index-linked gilts continue to decline whilst equity markets appreciate. A fall from 4.8% to 4.6% in yields would result in Plan liabilities increasing.
   • The Ericsson transfer arrangements were progressing with only a few matters outstanding. The method of protecting Bases 2 and 3 benefits had been agreed in principle.
   • Confirmation had been received from Siemens that they had the resources to meet expected enquiries relating to their NWOG, this not being a liability on the telent or Ericsson plans.
   • Mark Plato, MD of telent gave a presentation on the state of the Company and was optimistic about the opportunities available for its role in the Services market.
   • One value for Credited Interest at the minimum 2.5% was retained. SBS members were to be reminded that they may get a better return by moving their SBS to MLIM or SL.
   • Pension increases are to be 2.4% from 1^st May, as per the RPI figure for January. A request by the trustee to telent for a higher increase was declined.
   • The Early Retirement factors had been reviewed, but no change would be made due to the closeness of the values to existing ones.
8. Matters Arising from the Directors’ Report

   Vic Webster noted that following injection into the fund following the Ericsson deal, the agreed guidelines on investment strategy had been followed (85% bonds, 10% equities and 5% property).

   Pat Moloney noted that only £3m has been transferred out of SBS this year leaving £34m still there. The actuary has pointed out that the ongoing 2.5% SBS returns are unfair. Ian Wood asked what happens if someone now in Ericsson left their SBS with telent. Pat said this would be part of their cash pot when they took their pension. Dawn Hampton added that there may be the option to transfer their SBS to Ericsson, but details are awaited.

   Sean Leahy asked how often the Early Retirement Factors were reviewed. Vic thought it was every Triennial Review.

   Pat Moloney said that we were continuing to look at Credit Default Swaps as an alternative investment path. He had been at a presentation yesterday which covered this subject, looking at the risks and returns on different types of bonds (gilts and corporate).

9. Latest on Ericsson Plan

   (Secretary’s note. This subject was covered at various times in the meeting. Most points raised have all been consolidated in this section of the minutes.)

   • Pat Moloney said that he believed the new Ericsson Plan Trust Deed and Rules were now in draft, but could not yet be released. Andy Barker should have seen them.
   • The Marconi staff transferred to Ericsson are now paying into Ericsson’s plan for current service, but are still awaiting what happens to past service. Amanda Lilley noted that although May had been the target to enable deferred pensions to be transferred, she thought that this was now looking more like August.
   • Peter Dronfield was told by Dawn Hampton that those people who had been transferred to Ericsson, and expecting to leave within three months (ie before the option to transfer was available, would by default remain as deferred members in the GEC Plan.
   • Peter Harris believed that people who might be transferred to Ericsson after the 6^th March deadline could still be allowed into the new Ericsson plan if it was considered to be a genuine transfer.

   Sean was concerned that staff who transferred to Ericsson might be left with a deferred pension for their past service. He emphasised that it was very important to know the proposals as soon as possible, particularly with respect to the transfer of past service benefits being included on a year for year and month for month basis. Pat said that SPT Ltd were not holding anything up, and were awaiting documentation from Ericsson.  He added that Ericsson have said that they have bought the engineering skills of Marconi, and he did not think that they would want to do anything to upset the employees.

   Ian Wood added that he had heard that Ericsson had said they had not agreed that past service benefits could be transferred, but Mick Elliott pointed out that they would have to say that until any proposal to be able to do so had been agreed.

10. Latest on the Triennial Review

    Vic Webster noted that the review had to be signed off by this weekend. It showed a past service deficit of £180.7M (93%) as at 5/4/2005, as opposed to being 100% funded at the 2002 valuation. He reminded us that telent had paid £185M directly into the GEC Plan fund. HSBC were now the custodians of the additional £490M Escrow.

11. Any Other Business

    Bob Hartt said there were rumours going round in telent that Ericsson wanted to recover the £490m Escrow by taking over telent and outsourcing the pension. Pat pointed out that the £185m cash injection had been paid into our Plan yesterday. It was legally binding that the Escrow could only be used at the discretion of the Plan Trustee. If Ericsson, or any other company, somehow did, then the Pensions Regulator could make a charge on the company or its shareholders to recover money from them..

    Amanda and Sergio were thanked for their services in making the arrangements for meetings held on the Coventry site. John Leaney agreed to make future arrangements on the site.

12. Date and Venue of Next Meeting

    The next PCC meeting was scheduled for Wednesday the 12^th July at Coventry, 10.30am.

    (Post meeting note. John has booked the conference room in the dining hall).

Ken Buckley

8^th April 2006