Spence & Partners latest blog for Pension Funds Online –
“In a revolution, as in a novel, the most difficult part to invent is the end” – Alexis de Tocqueville
We’ve all been there. Stuck in a meeting, 30 minutes into an agenda item about IT spend, and even the most conscientious amongst us find our minds wandering. Let’s have a sneaky look at ft.com then, see what Osborne has done to the price of a pint. Bingo duty halved to 10%! Take that UKIP! Oh, that looks like an interesting link – “Chancellor’s Pension Bombshell”. He’s probably gone and slashed the LTA again. Click. “All tax restrictions on pensioners’ access to their pension pots to be removed, ending the requirement to buy an annuity.” Er OK. He can’t actually have done that. I’ll just move on to the BBC to get the real story. Expletive deleted, he has. Read more »
As part of the Scottish Independence debate the issues of regional life expectancy and the pensioner dependency ratio have become something of a political football. It is certainly difficult to remember points which have previously been regarded as niche topics which academics and politicians have become quite so exercised about.
Having carried out some research, the first interesting fact is that Scottish mortality rates were not always higher than their counterparts in the rest of the UK (rUK). Up until the 1950’s, Scottish life expectancy was broadly on a par with the rest of the UK. However, from that point, rates in Scotland improved more slowly. Whilst there is no definitive explanation, the cause has generally been attributed to increased levels of deprivation until the 1980’s. Read more »
This week’s surprise announcement from George Osborne is expected to provide a further boost to the DC pensions market whilst similarly re-energising design of long term income products.
First, there have been fears that Auto Enrolment opt-out rates will surge as the big social experiment moves downstream to the SME / micro employer market – with much of this concern based upon Joe Public believing that annuities represent poor value for money. This move could see more people taking the first steps to an improved retirement lifestyle as pensions shed their ‘inflexible’ tag.
The ‘at retirement’ market will see increased activity as firms consider innovative ways for individuals to optimise their retirement nest egg. Of interest will be how this market interacts with the Chancellor’s ‘guidance guarantee’.
And perhaps the loudest cheer of all: Read more »
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 »
At the beginning of this year, Pensions Minister Steve Webb called for pensioners to be given the power to switch annuity providers, in much the same way as mortgages can be switched. At the time, insurers protested that this was an unfair comparison, that annuities were much more complicated than mortgages. Well, they would say that, wouldn’t they?
Annuity providers had been rightly criticised, for confusing, less than transparent, products, and for charging unnecessarily high commissions.
Regulators have criticised the sale of these contracts, describing the market as not fit for purpose. In a report last month, the Financial Conduct Authority warned that middle-class savers were being left thousands of pounds out of pocket after being sold poor value or inappropriate contracts which, once signed, could not be changed.
Fast-forward less than three months, and Chancellor George Osborne has announced that savers will be able to withdraw their entire pension pot in cash from 2015. I did suspect that Steve Webb’s earlier announcement was only just a hint of what was to come.
Read more »
Spence Director David Davison provides evidence to the Scottish Affairs Committee on pensions and Scottish Independence in his role as a member of the ICAS Pensions Committee. A transcript of the evidence is available here.
On Tuesday Last week the Future Influencers came together for our second quarterly event.
The idea behind these events, for those new to the concept, is to bring together ‘up-and-comers’ in the pensions industry and give them an opportunity to learn from various firms as well as start building their own network of professional connections. You can read about our last breakfast here.
The day started off with a chance to catch up with fellow Future Influencers, followed by four, ten minute talks presented by Future Influencers themselves. Read more »
I presented at the second ‘Future Influencer’ breakfast seminar hosted by Spence & Partners, on whether closed schemes should behave like schemes in the Pension Protection Fund (PPF) Assessment Period. Here is an overview of my presentation:
The PPF assessment period is triggered when a scheme’s sponsoring company goes insolvent. Throughout this period, the Trustees of the scheme have to carry out a number of tasks (including data audits, equalisation reviews, benefit audits and rectifications etc.) to ensure that the scheme is up to standard for when or even if the scheme enters into the PPF. 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.”