Making Sense of Pensions

Brian Spence

Who pays the dataman?

An announcement from accountancy giant PwC that two thirds of the schemes it deals with in company takeovers have significant deficiencies in their membership records, left me feeling a tad under-whelmed.

Put bluntly, the quality of historical pension scheme data held electronically is a disgrace and the industry, and not a few trustees, have known this for some time. Perhaps the only truly surprising point of note is that nobody has taken any steps to meaningfully address the issue. Read more »

Brian Spence

The Government estimates that over the next 10 years approximately 600,000 people will cease smoking as a result of the new ban on smoking in public places. However, there is an unexpected cost to this improvement in the nations’ health as the resulting reduction in smoking related deaths will distort mortality tables used to calculate pensions. This will mean a reduction in the annuity available for those with money purchase pension pots and an increase in the cost of providing pensions for those providing final salary pension benefits. Read more »

David Davison

There’s been a lot of press comment recently about companies offering staff what have been called ‘sweeteners’ to give up all or part of the final salary promise from their pension scheme.

Given the extent of the final salary pension problem, its potential impact on business and the likely timescale over which scheme deficits now need to be addressed I think that it’s hardly surprising that companies are seeking solutions which help them to manage their final salary liabilities more proactively. Read more »

Brian Spence

Money for nothing?

The Board of the Pension Protection Fund (PPF) has published its final proposals for the calculation of the PPF levy. The levy comprises two elements, a scheme based levy, calculated as a percentage of the scheme’s liabilities on a basis prescribed by the PPF, and a risk based levy calculated by reference to the risk of insolvency of the scheme sponsor and the underfunding risk in the scheme. The risk based element makes up 80% of the levy and is based on failure scores provided by Dun & Bradstreet which reflect the likely risk of insolvency of a business in the next 12 months. Read more »

Brian Spence

The new notifiable events regulations introduced as part of the Pensions Act 2004 and effective from 30th June 2005 could have a significant impact on all those involved in corporate transactions. The regulations require not only the trustees of Pension Protection Fund-eligible pension schemes to notify the Pensions Regulator (PR) of certain events, but also, in certain circumstances sponsoring employers. Read more »

Brian Spence

The introduction of new pensions legislation this year seems only to bring good news and opportunities for those insolvency practitioners who are prepared to become involved.

The first bit of welcome news is that following the introduction of Pensions Act 2004 from April 2005 Insolvency Practitioners no longer need to make a statutory appointment of an Independent Pension Trustee to the pension scheme. This move could result in IP’s taking even less of an interest in pension issues however to adopt this approach is not without risk and to do so I believe is to miss out on significant new opportunities. Read more »

Brian Spence

There has been much recent press comment about the continuing row between the Government and the Public Sector Unions over proposed pension reform. So why should we be interested in this local difficulty/skirmish? Well basically because it is us as tax payers who will ultimately pick up the bill for the decisions taken and ultimately any government climb down similar to that of John Prescott prior to the election could see us all with increased tax to pay. Read more »

Brian Spence

Pension simplification is becoming widely regarded as anything but simple and this impression was not helped by the recent publication of technical pages in the Registered Pension Scheme Manual on the Inland Revenue website.

Up to this point the one thing that did appear simple was that in order for a member to benefit from enhanced protection of their pre 5th April 2006 pension entitlement they could not accrue any further benefits under any arrangement post this date. However, the guidance now provided would appear to allow continued membership of final salary schemes and cash balance arrangements with additional contributions and further benefit accrual allowable within certain limits. Read more »

Brian Spence

Ostriches are notorious for burying their head in the sand when danger approaches and company directors need to be vigilant to ensure that they guard against replicating this type of behaviour in their Boardroom. Only an ostrich can have failed to notice a rise in the importance of company pension schemes to corporate activity and the commensurate increased role of pension scheme Trustees. Given the provisions of the Pensions Act 2004 and the risk based approach adopted by the new Pensions Regulator I can only see the level of Trustees’ corporate involvement increasing so any degree of optimism that it can be ignored as a passing issue is undoubtedly misplaced. Read more »

Brian Spence

The news that the planned £250m takeover of Uniq was in danger of collapse as a result of concerns over the £102m hole in Uniq’s pension fund, serves only to back up the view that pension scheme liabilities are definitely curbing M&A activity. Last year saw the collapse of high profile deals involving WH Smith and Marks & Spencer and recent research suggested that nearly half of FTSE350 Chief Financial Officers believe that deals are being adversely impacted. Read more »