Archive for June 2014

Lauren Jones

After having run two successful Future Influencer breakfasts we thought it would be a good idea to spend a bit more time getting to know each other. So instead of the usual morning affair, with everyone rushing off to a full day at the office, we moved the event to late afternoon.

A touch of excitement was added as guests arrived at the @Waterloo, Alice in Wonderland themed offices, where they were confronted by a statue of a giant white rabbit! The presentations started promptly at 4:30, followed by some well deserved refreshment and catching up with a good mix of old and new faces.   Read more »

Kevin Burge

World Cup Fever

Spence & Partners latest blog for Pension Funds Online –

I, along with many I suspect, am watching the World Cup and personally cheering for England more in blind faith than any actual expectation of a real result. It was a good performance (against Italy) but the wrong result and I wonder if performance should be sacrificed for a result in the next game.

This brings me neatly onto experts and of course whichever newspaper you may read, TV or radio station you may listen to, everyone has an opinion and of course each person feels that their view is  right. How does a manager ignore all of them and make his own mind up knowing that he will be cheered by some, muttered at by others and downright vilified by a few.

Experts abound in the pensions world and like football experts they too are never shy of an opinion and how do you decide which one is right or indeed wrong, or maybe just has an element of truth about it? The short answer is that you can’t and as such you have to make your mind up but if the experts can’t agree how can anyone be truly confident. Read more »

Chris Roberts

As our company has expanded, along with my waistline, I began to wonder if I should use the increased player pool to organise a “friendly” game of inter-company football.

This was 2013, having discussed the potential ramifications and restrictions of such a venture with Human Resources, this was put on ice for some time.  Having had a fairly lengthy Sunday League career the lists of ‘Do Not’s’ appeared rather daunting, and nullified most of my footballing assets.  Fast forward to 2014, as the company expanded further (along with my waistline again!) and the World Cup approached it seemed like time to resurrect it again.

I discussed this with Barnett Waddingham who graciously accepted our challenge, the date was set.  Whilst Brazil prepared to take on Mexico in the Maracana, we limbered up for the battle for pensions supremacy in the footballing world at Powerleague Glasgow.  That does sound like winning best turned out at a donkey derby, but regardless losing was not an option.  Having chosen a day when Glasgow was in fact (an actual, not an exaggerated fact) hotter than the Maracana my inspired managerial decision of kitting the team out in all black to intimidate the opponents a la New Zealand, was met with some resentment.  With the marketing team kindly offering to procure Spence branded salmon pink tops, I am not sure my team fully understood the position. Read more »

Susan McFarlane

The Pensions Regulator (“the regulator”) has laid before Parliament a revised Code of Practice 3 (“the Code”) for defined benefit (DB) scheme funding.

This new code takes into account their new statutory objective and reflects their developing approach and changing circumstances since they published the current Code in 2006. The Code emphasises the need for Trustees and employers to work collaboratively in order to achieve an integrated risk management approach which doesn’t compromise the needs of the Scheme or the employer’s plans for sustainable growth.

We have reviewed the revised Code and prepared the following summary for you. Read more »

Alan Collins

Financially strong sponsors of defined benefit schemes should not follow the “easy path” of scheme funding following the Regulator’s new code.  The new code may tempt some employers to seek lower contributions, a more risky investment strategy and to take their foot off the gas when it comes to de-risking and buyouts/buyins.  This would be a dangerous move and may harm the sponsor in the long term.

The vast majority of defined benefit schemes will end up in one of two places – with an insurance company or with the PPF – they will not run on until the last pensioner dies.  Therefore, given that the second option is usually caused by the insolvency of the sponsor, the aim is surely to reach a buyin/buyout with an insurer at some point.

With recent improvements in funding levels and with companies beginning to strengthen post-recession, 2014 is a year when many employers have finally been able to look again at de-risking measures.  Whether that be liability management, selective buyins or full buyouts, my message is to continue to de-risk and ultimately to get out as soon as you can. Read more »

Marian Elliott

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.”

Alan Collins

The intention of the government to introduce collective defined contribution (CDC) schemes through the ‘Private Pensions’ bill was announced as part of the Queen’s speech today.

I am essentially pro-choice on pensions, so I welcome the CDC option for employers and members alike.  It won’t be right for everyone, but it is clearly going to be welcomed by some.  So, if this helps the overall pension savings culture by attracting new engagement from employers and individuals, then all the better.

Many commentators are suggesting the pace of change is too fast. The pensions industry has lost the right to dictate the pace of change by failing to react to clear warning signs from government and the obvious lack of confidence from consumers in the existing market place.  Instead, the industry must cooperate and embrace change and show that it can add value to consumers and employers. The temptation to over-complicate matters must also be avoided. Read more »

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