Spence & Partners, the UK pensions actuaries and administration specialists, today announced the launch of their new, fully integrated and tailored scheme management service for Defined Benefits (DB) pension schemes.
Marian Elliott, Head of Trustee Advisory Services at Spence, commented: “Running a DB scheme isn’t easy. Trustees are asked to decipher information about the covenant, investment strategy and actuarial funding–often produced at different times, from different sources and with no clear link between them. Added to this, they are often also dealing with inaccurate and incomplete data and poorly-defined benefit structures, leading to the wrong decisions being made.
“To help trustees cut through these complexities, provide them with co-ordinated risk management and to get them from where they are now to where they want to be, we have developed a fullyintegrated approach to better scheme management, combining leading-edge technology and specialist knowledge. This solution is revolutionary and, we believe, unique in the market. It moves away from multiple databases – one for actuarial work and another for administration records and uses a single database containing up-to-date live member data to manage the scheme and automate all administration and actuarial calculations. Read more »
Spence & Partners, the UK pensions actuaries and administration specialists, today said that The Pensions Regulator’s (TPR) new Code of Practice will mean advisers will have to go further in their efforts to advise trustees, by collaborating to present big picture advice and refining their processes and use of technology to deliver cost effective monitoring solutions.
Marian Elliott, Head of Trustee Advisory Services at Spence, commented: “By putting the covenant at the centre of the scheme’s decision making, the Code is essentially crystalising current best practice and encouraging trustees to adopt an integrated approach to risk management. This decision making and planning structure makes complete sense, as the covenant is the main driver of risk in the pension scheme. Investments can underperform, life expectancy can increase, the funding position can worsen – but the only circumstance in which members don’t get their full benefits is if the company can’t weather this negative experience.
“There will certainly be challenges in some sectors however. For trustees of smaller schemes, where budget and time to spend on governance is constrained, the requirement to obtain detailed covenant advice or to carry out asset liability modeling or stress test their strategies may mean they are spending more in this area. This is a good thing though, as the spend on advice to implement and monitor a sensible, coordinated approach to risk taking is far more valuable than spending too much on number-crunching ‘compliance’ work.
“For trustees of schemes with weaker sponsors, there will be a need to justify any investment risk taken or put in place contingency measures, which may result in more prudent investment strategies and higher deficit figures – leading to increased reliance on sponsor contributions for already weak employers. This will be a really difficult, but important, balance for trustees to strike.”
Elliott continued: “Whilst the Code is relatively lengthy, we would urge trustees to engage with this. It is absolutely the right way to think about risk management and should result in better outcomes for members and a better understanding from trustees and sponsors of the issues they need to overcome in order to get their scheme to a fully funded position. There is also no reason why the Code should present any difficulty for trustees, as with the right advice this integrated approach shouldn’t result in significant additional cost – and will almost certainly help make their decision making and monitoring processes a lot clearer.”
Spence & Partners, the UK pensions actuaries and administration specialists believe that, in opening his budget briefcase, George Osborne has unlocked Pandora’s Box for occupational pension schemes and has thrown the governance of DB schemes into a state of flux.
Marian Elliott, Head of Trustee Advisory Services at Spence, commented: “The Government recognises the risk of members transferring out of DB schemes into DC schemes and is looking at a range of possible restrictive measures. The impact of the announcements for DB schemes depends almost entirely on the outcome of the consultation regarding the restriction of transfers between DB and DC Schemes. Read more »
Spence & Partners, the UK pensions actuaries and administration specialists, today said that schemes should be in a position to react to changes to their funding position on any day, making the idea of only reviewing funding strategy at a triennial valuation date an outmoded concept.
Marian Elliott, Head of Trustee Advisory Services at Spence, commented: “With many schemes looking to implement a de-risking strategy or dynamic asset allocation strategy, there is a need for more accurate and up to date information. We are therefore supportive of the recent view from PWC that the Regulator’s objective to complete the valuation report within 15 months of the valuation date is too long a period – but we would actually suggest that schemes and advisors could go much further than simply cutting this time down as suggested.
“Trustees and sponsors need greater clarity to be able to make timely decisions with regards to changes to the funding strategy and need to be able to seek out opportunities based on up to date information and by assessing the current economic situation. The data being used should be accurate and the best technology in the market should be able to turn this into a full analysis of scheme funding on the spot – why settle for anything less than that? Our actuarial administration system already provides figures ‘on tap’, so that funding and investment decisions can be made at any time.”
Elliott continued: “We believe all-year-round governance is the way forward and that there is no reason not to be able to use the latest technology in terms of data management and actuarial modelling in order to deliver this. As well as greatly reducing unnecessary time and advisor costs for number crunching, this approach also brings clients more into line with TPR’s requirements on the monitoring of funding plans and makes them far more reactive to funding and de-risking opportunities.”
Spence & Partners latest blog for Pension Funds Online –
There are many terms used in the industry to describe the process whereby trustees and scheme sponsors agree a funding target and plot the path between where they are now and the attainment of that funding level – some call it flight paths, others journey plans or route maps.
Unless you spent the Christmas break in a remote location with no access to the pensions press, you will have also heard that the Regulator has issued a consultation document regarding its revised code of practice for funding defined benefit (DB) schemes.
The approach the Regulator sets out in this document is one which, arguably, trustees should already be taking – i.e. obtaining a real understanding of the sponsor’s covenant, the risks it is exposed to and its growth plans, and then using that information to determine a reasonable pace of funding towards an appropriate target. Any such plan should respond and adapt as economic conditions change, or as the circumstances of the sponsoring employer are altered. Read more »
Spence & Partners latest blog for Pension Funds Online –
In 2000, the result of an experiment designed to examine consumers’ reaction to choice was published in the Journal of Personality and Social Psychology. The experiment was conducted in a Californian grocery store, where researchers set up a sampling table with a display of jams. On the first weekend, they set out 24 different jams for people to taste; and on the next, they set out just six.
The results were staggering. Whilst more shoppers stopped at the display when there were 24 jams, only 3% of those who stopped went on to buy a pot. When there were six jams on display fewer shoppers stopped, but 30% of those who tried a jam made a purchase. Similar results have been found in other experiments since.
It seems that too much choice can be demotivating and the same effect can be seen in the investment industry. Read more »
This blog was written for Pension Funds Online by Marian Elliott of Spence & Partners –
There is a lot to look forward to at this time of year. The end of March will bring longer daylight hours, the promise of slightly warmer temperatures and, for many trustee boards and companies, the process of carrying out an actuarial valuation of their pension scheme will begin.
If the very mention of this sends shivers down your spine then read on. Whilst there are no magic potions which can shrink your deficit or take the sting out of the valuation exercise, there are actions which you can take to improve the way in which the valuation process is managed and deliver better results for both the company and trustees: Read more »