Pension liabilities have been cited as one of the main barriers to pursuing a merger, and it is understandable given the complexities of the legislation, HR issues and potential threat of triggering a significant financial burden.

It is no wonder then that the last two years has seen few mergers completed and a significant number being abandoned before conclusion.

Mergers are inevitable in the current market environment as a way of improving competitiveness, scale and efficiencies, but to navigate the pension minefield professional advice sought at an early stage of the negotiations is vital.

This advice would allow a full investigation of the implications of any change to ensure short term objectives are not being met at the expense of the long term security of the organisation.

Read the full article by David Davison at Civil Society.

Posted in: Blog
Tags: Charities, Mergers, Not For Profit, Pension deficits

Many years ago an old auntie used to tell me to be careful who I pointed the finger of blame at, as only one finger would point at them and the other three would point at me. Wise words indeed – and possibly something that the Pension Regulator should pay some heed to when making pronouncements.
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Posted in: Blog
Tags: Enhanced Transfer Exercises, FInancial Services Authority, FSA, Pensions Regulator, Transfer Incentives

The recent announcement about the improved funding position of the Social Housing Pension Scheme (SHPS), while good news on the face of it does warrant some further investigation and should encourage some questions to be asked by participants.
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Posted in: Blog
Tags: Charities, Not For Profit, Pension deficits, Pension Funding, Social Housing Pension Scheme, The Pensions Trust

David Davison explains to Civil Society readers how charities are still sticking their heads in the sand about future pension provision, despite the increase in comment on the issue.

Highlighted as far back as 2004 and one of the biggest issues charities will face, the elephant in the room can no longer be ignored.

Posted in: Blog
Tags: Charities, Pension deficits

Spence and Partners, leading actuaries, pension consultants and pension scheme administrators, has recently celebrated its 10th anniversary by posting record financials and increased staff numbers. This number continues to grow as Ian Morrice becomes the newest appointment to join the company on 9th June. 

Now recognised as a leading industry commentator Spence & Partners have been successful in carving out an enviable niche in a highly competitive sector. The firm’s in-depth understanding of the complex issues involved in the modern pension environment has taken them from an initial staff count of eight to more than 50 people today.

Joining the pension consultancy team Ian brings 23 years experience and specialism in risk finance, expertise Brian Spence believes supports Spence & Partners’ client’s objectives, “We are delighted to welcome Ian to the company. Ian’s areas of expertise will bring a rich new dimension to the service we offer our clients and continue to enable Spence & Partners to provide tailored advice based on our clients specific needs”. 

Ian, a qualified accountant, joins the company from Guy Carpenter where he led on all longevity-related business. Beginning his career as an actuarial trainee Ian spent eight years with ITT London & Edinburgh. Previously, Ian has held positions for JLT and has been involved in financial modelling for longevity based hedge fund as well as the origination, analysis, structuring and transaction of longevity-based business.

Ian’s role with Spence & Partners will include pension’s consultancy and advisory services and identifying business development opportunities. Brian Spence explains how the firm has adapted successfully to the major changes contained within the Pensions Act 2004, which had far-reaching consequences for the industry.

 “This decade has seen major changes in the way the pensions industry operates and the way pension professionals have had to adapt to new circumstances. The tightening of regulation and scheme governance has created new challenges and the establishment of the Pensions Regulator and lifeboat schemes has altered the landscape.”

“The continued acquisition and retention of quality advisors and consultants is crucial in meeting the growing demands of the industry and our clients, and the inevitable emerging challenges of the next 10 years.”

Spence & Partners is a leading firm of actuaries, consultants and pension scheme administrators.

Posted in: Media, Media Releases
Tags: Corporate

Spence & Partners continue to recruit experienced pensions professionals to boost their UK wide client services team. Following high quality actuarial appointments last year, the most recent recruit, Ian Morrice, joins to strengthen their consultancy and advisory services. Ian Morrice brings over 20 years experience in the financial sector and market leading expertise of scheme buyouts and terminations to the team.

A specialist in risk finance, Ian joined the company as a pension consultant on 9^th June from Guy Carpenter where he led on all longevity-related business.

Ian graduated from Reading University with a BSc in Pure Maths and has a diverse range of skills. Ian has an actuarial background and is also a qualified accountant. Ian has been involved in financial modelling for longevity based hedge fund as well as the origination, analysis, structuring and transaction of longevity-based business.

Ian will lead Spence & Partners consultancy efforts in London and the South and his role  includes pension’s consultancy and advisory services as well as identifying business development opportunities.

Brian Spence, managing director of Spence & Partners said, “Ian is highly experienced in his field and knows the industry exceptionally well. Ian’s areas of expertise will bring a rich new dimension to the service we offer our clients and further enable Spence & Partners to provide tailored advice based on our clients specific needs”.

Posted in: Media
Tags: Corporate

Brian Spence, Independent Pension Trustee for Dalriada Trustees, talks to PMI TV about GMP equalisation.

As the PPF and FAS bring this issue to the fore Brian explains what it really means and why he thinks, unlike many in the industry, it is not as complicated as some believe. The complexity often lies in the reluctance until now to begin the process and the need to rectify historical pension scheme data.

Brian’s message is for trustees to take appropriate advice from actuaries and lawyers, discover the issues and take the first steps to making all things equal. Brian warns however, the often unpredictable state of historical pension data might hinder the process presenting a perfect opportunity for a cleanup operation to run alongside.

Posted in: Blog
Tags: Data, GMP Equalisation, Professional Trustees

Rarely a day goes by without some press comment on the use of Enhanced Transfer Value Exercises as a legitimate (or not!!) form of final salary pension scheme de-risking. So we thought we’d get some informed comment from someone who actually has experience advising members on these exercises. Our guest contributor, Matthew Smith, is a highly experienced and qualified financial adviser, with leading Independent Financial Advisers Argyle Consulting, who has carried out a number of these exercises and outlines here what he considers are the real issues and choices members face.

(Argyle Consulting Limited is a leading firm of Independent Financial Advisers based in Scotland.)

Sponsoring final salary schemes is a pretty thankless business, and with a limited number of options open to employers to manage liabilities, an Enhanced Transfer Value (ETV) exercise conducted in an open and professional manner with employer funded IFA advice, remains an option worthy of serious consideration.

This is despite the entirely valid opprobrium heaped by the Pensions Regulator (among others) on some reported exercises that have bordered on sharp practice by employers at best.

Apart from the criticism of patently poor procedural conduct, there’s an undercurrent of hand wringing which seems to based on 1) that members need to be protected from themselves (and the big bad employer!) and 2) that there’s no way Joe Average can really understand or assess the value of the guarantees they are giving up.

It’s certainly not an IFA appetite for reckless endangerment which is encouraging members out of schemes.  The pensions review of the 90’s may be a fading memory, but final salary transfers remain the highest risk business an IFA can conduct from a regulatory, reputational and business survival perspective.  Get it wrong and you won’t be around for long!

As an IFA it’s meeting the personal objectives of the individual, not the protection of the many that gives a different starting point to our view, ever mindful of the fact that all transfer advice must start from the FSA stance that it is not in a member’s best interests to give up any guarantees.

But if the prevailing message from regulators is ‘beware of employers bearing gifts’ which right thinking member would take such an offer anyway, and why?  How can these exercises be done effectively for the employer, with proper governance and protections, and be balanced and not misleading to members?

Despite what the actuarial modelling might forecast about the value of the guarantees implicit in a final salary pension promise, each member places an entirely different ‘value’ on the real benefit of these guarantees to them, depending on their personal circumstances.

A few (real life) examples that can be taken in conjunction with a fair transfer offer and sensible critical yield would include early access, for example, the redundant employee in his 50’s who has been unable to find another employment and has used his lump sum to fund a business start-up.

Members do tend to underestimate their own life expectancy but the single member who is not in robust health is another example where a transfer giving up dependents pensions and possible increases can make sense.  Conversely the married member with a large pension entitlement from their spouse may feel no need of the guarantees or dependents benefits.

The reality is most members who decide to transfer with the benefit of balanced professional advice make an entirely rational decision on the basis of control of funds and greater immediate or future access flexibility.  Retirement is changing and pension entitlements for many deferred members are small and inflexible in relation to their other earnings, assets and entitlements, and are valued as such.

Much of the unease seems to be that somebody out there is duping Joe Average into thinking he’ll get a better pension on the basis that it’s an enhanced offer, rather than the reality which is that members in properly conducted exercises are making an informed choice to opt to transfer out of schemes in most cases for greater flexibility and control.

It’s not all about the numbers, and members are quite capable of making the value judgement, as long as a sophisticated professional adviser is explaining the issues to them in a way they can understand.

For employers thinking of spending the money on an ETV exercise our advice would be:

1) Make a fair offer, this is not a cheap option and setting enhanced transfer values that don’t get past the first base of a low critical yield to allow members to have a chance to transfer is a waste of everyone’s time.  Don’t offer cash, it’s difficult to assess its real value and could be regarded as an unfair inducement.

2) Engage with and appoint an IFA firm that has the relevant depth of technical experience, staff with the right qualifications, a robust process, and crucially the individual member communication skills to engage members at a high level on what can be a complex decision.  This will be critical to the success of any exercise and also to help reassure your trustees.

3) The employer needs to fund properly for the communications and member advice, and allow the member sufficient time with the adviser for decisions to be made. Members won’t transfer if the advice is generic or feels impersonal.

Sponsoring employers should not shy away from considering the merits of an ETV exercise, but the involvement of an experienced professional IFA practice at an early stage is critical to ensure it is money well spent.

Posted in: Blog
Tags: Bulk Transfers, Liability Reshaping

I read my colleague Val Hartley’s blog on post code mortality with great interest and it raises a number of important questions such as:

If you run a DB scheme in one of the areas in the first table (or indeed anywhere above the average mortality rating of 10%) and are using standard mortality tables you could well be placing a higher value on the pension liabilities disclosed in your accounts than might be necessary.

Another colleague, Ian Campbell, highlighted in his blog on FRS17, how companies were likely to see a rise in liabilities and deficits when preparing figures in 2010 and experience is proving him to be correct with numerous organisations concerned about the results they are seeing. Often, in the past, companies FRS17 figures have been provided by what is, in effect, the trustees’ adviser, and presented to companies as a fait accompli. However companies are increasingly seeking an independent view on their disclosures and the assumptions used.

Mortality is one of the key assumptions in any actuarial assessment of pension scheme liabilities and it can be worthwhile, and surprisingly cost effective, even for smaller schemes, to obtain a specific post code mortality assessment. Whilst not perfect, a scheme specific mortality rating will provide support for a specific level of mortality assumptions to be used in calculations. This, in turn will give you a better estimate of your liabilities. There is scope within FRS17 to adopt mortality assumptions more specifically aligned to a particular company’s circumstances which can have a material impact on the deficit ultimately disclosed.

The key point is don’t just accept what you’ve been provided with – a bit of digging and a second opinion may prove valuable.

Posted in: Blog
Tags: FRS17, Mortality, Pension deficits