At a time when the prospects for the future success of many business’ is now affected by the level of their pension scheme deficit, companies are employing ever more innovative solutions to address the problem with which they are faced. The changes which the government imposed in June 2003 mean that it is now extremely difficult for solvent employers to escape from the liabilities they have already accrued. However, what is still possible is to control the timescale over which deficits are met and the finance methods used to fund them. One potential solution currently being employed is the use of bank lending to cap off the liability level as this re-financing can reduce cost, control risk and provide a degree of increased certainty for shareholders and employees alike. Read more »
Making Sense of Pensions
Divorcees – The Forgotten Victims
From next month, most members of final salary pension schemes will be able to sleep that bit more peacefully, secure in the knowledge that new legislation will significantly improve the level of protection their benefits receive. Yet one particular section of the public – the spouses of pension scheme members in the midst of divorce proceedings – will miss out on any benefits from these changes.
The most common method of dividing assets is for the party with the most pension (often the husband) to retain it with the other party (often the wife) receiving a higher proportion of the other assets to compensate. This seems like a sensible and pragmatic approach for many divorcing couples. Read more »
Posted in: Blog
Tags: Actuarial, Divorce, Legislation, Pensions, Scotland
Hobsons’ Choice at Hotel California
The great Eagles song Hotel California has the immortal lines “You can check in any time you like, but you can never leave” which perfectly sums up a growing crisis brewing between the public and private sector. Read more »
Posted in: Blog
Tags: Actuarial, Not For Profit, Pensions, Public Sector
Beware Trustee Trainers bearing gifts!
The new Pensions Act was published 12 th February 2004 and received Royal Assent on 18 th November 2004. It extends to 325 sections and 13 schedules with more regulation and guidance to follow. It will begin to take effect from April 2005 and whilst the legal position of trustees remains unchanged the Act will define the role of a trustee more closely. The establishment of a new code of practice will provide a benchmark against which trustees can be judged. Trustees therefore need to understand that they each have a personal, non transferable liability and that ultimately the buck stops with them. Read more »
Posted in: Blog
Tags: Legislation, Pensions, Trusteeship
Trustees flex their muscles on M&A activity
As illustrated by the failure of Philip Green’s bid for Marks & Spencer and Permira’s bid for WH Smith, the already complex process of negotiation that typify merger and acquisition activity has recently become that bit more complex as pension scheme trustees start to flex their new-found muscles to assume an integral role in determining the success or failure of a bid for the ownership of a company.
In the case of Mr Green’s bid for M&S, for example, a key determinant of its failure was the fact that trustees arrived at the conclusion that, with the company pension scheme having run up a substantial deficit, should Green’s bid be successful, M&S’s credit rating would fall. It would therefore be more highly geared and be considered by analysts to be a riskier business. Read more »
Pension Protection – The Forgotten Victims
From April 2005, most members of final salary schemes, and their families, will be able to sleep that bit more peacefully at night, secure in the knowledge that the level of protection from their pension benefits has increased substantially.
That comforting blanket of security comes courtesy of a couple of legislative changes: recently passed legislation making it more difficult for solvent employers to rid themselves of their final salary pension schemes without securing the full entitlement of members, and the introduction of the Pension Protection Fund which will provide a high degree of protection should employers become insolvent. Read more »
Posted in: Blog
Tags: Divorce, Pension Protection Fund, Pensions
A poison chalice – who’d be a pension trustee?
In business terms you always used to know when you’d arrived. A company parking space, the key to the executive toilet, first class travel and a seat on the trustee board of the company pension scheme. How times have changed.
You’d have needed to be living on a desert island to have escaped the mass of press comment surrounding what has now become one of the key issues, not only in the pensions arena, but also on the corporate agenda. The Pensions Act 2004 (“the Act”) received Royal Assent on 18 th November 2004. It extends to 325 sections and 13 schedules with more regulation and guidance to follow. It will begin to take effect from April 2005 and whilst the legal position of trustees remains unchanged the Act will define the role of a trustee more closely. Read more »
Posted in: Blog
Tags: Legislation, Pensions, Professional Trustees, Trusteeship
Qualify, or not to qualify, that is the question
A rare audit qualification relating to FRS 17, the financial reporting standard on pensions, at the UK subsidiary of the US drugs group Merck, recently raised a few eyebrows within the accountancy and actuarial professions.
In the accounts, the auditor, PwC, qualified its report on the basis that they believed that the company had used an inappropriate discount rate in valuing the pension scheme liabilities. Rather than Merck’s discount rate of 6.0 per cent, PwC suggested that a more appropriate rate would have been in the range of 5.25 to 5.75 per cent. The auditor took the view that, in the absence of an actuarial calculation using a more appropriate discount factor, it was unable to quantify the extent of the understatement of the pension liabilities. Read more »
Posted in: Blog
Tags: Accounting, Actuarial, FRS17, Pensions
Considering a new venture? Investing in IT can give you a head start.
The thought of starting up a new actuarial consultancy has probably crossed the minds of quite a few actuaries over the years. However, taking the next step and developing a successful business is the real challenge. New ventures (as compared to an established consultancy) have to have much greater focus on developing new clients. Working with a small team means that all key personnel will inevitably have to take a major role in generating new business. This can be quite alien to many actuaries who have spent their working lives providing services to clients who have been “delivered” to them.
There are many hurdles to overcome and existing acumen needs probably to be enhanced with not only new business skills but also new resources in order to make a success of a new start up. Read more »
Take the money or open the box?
Delaying decision-making to a later date is something that most company directors have probably spent much of their working lives battling against but, nevertheless, as the end of their own careers approach, it may be in many senior executives’ best interests to embrace this alien strategy, at least insofar as their pension arrangements are concerned.
Company directors and senior employees who are due to take benefits, or who opt to defer drawing any planned pension benefits until, after April 2006 could reap a financial reward as a result of the Governments pensions simplification legislation. Read more »
Posted in: Blog
Tags: Actuarial, Administration, Legislation, Pensions, Tax
