Wow – what a year 2016 has been. Brexit, President Trump, Hibs winning the Scottish Cup – who saw that coming? Seriously, Hibs won the Scottish Cup.
What have we learned? The dictionary definition of “pollster” might have to change to “people who predict things and always get it wrong”, said the actuary throwing stones from his glass-house. My lesson to the pollsters is to quote a much bigger margin of error and include lots of caveats.
At least when it comes to 2017, it is now a reasonable stance to say that I’ve got no idea what’s going to happen. Read more »
One thing you can be sure of is that there is no shortage of pension updates hitting your inbox on an almost daily basis – updates we don’t always get round to reading. Here at Spence we like to be helpful so to save you time, the team have scoured the news and developments which have impacted the pensions world in the last quarter and produced an update of the most topical, newsworthy and essential matters that you need to see to keep you updated and informed.
This quarters highlights include
- 5 investment questions to ask post Brexit.
- We are still in Europe so how does this affect risk assessment frameworks?
- Gilt yields have been detrimentally effected by Brexit but what does this mean for transfer values and funding?
- We explain HMRC’s latest announcement on VAT and pension schemes.
- What’s been happening with the Pensions Ombudsman and in the Court?
- Governance has been tightened up for DC Schemes. We explain how.
Read more »
Spence & Partners, the UK pension actuaries, investment and administration specialists, today welcomes the publication of The Pension Regulator’s (TPR) Integrated Risk Management Guide, and urges trustees to review scheme management in line with the new principles.
The guidance from TPR sets out practical help on what a proportionate and integrated approach to risk management might look like and how trustees could go about putting one in place. Spence already adheres to the guidance with its ‘Spence Approach’. Read more »
Effective pension scheme governance is a necessity for any well-run scheme and is an area the Pensions Regulator scrutinises closely. It covers a broad spectrum of controls that together build a framework to help Trustees create, manage and realise their long-term objectives.
For scheme governance to be effective it has to be constantly managed and assessed in a proactive way – it should not be a tick box exercise once each year. If managed in this way, it can have a significant positive impact on the ongoing management of the scheme.
Here are the five key areas we believe trustees need to focus on:- Read more »
It’s been an electric period in pensions… the freedoms has arrived, the Chancellor has heralded further developments on the horizon, the industry is awash with change.
But the Spence team have been keeping their finger on the pulse, monitoring industry changes and trends from the last quarter and condensed the information into a snappy report for you to download. This update briefly summarises everything you need to know, and clearly sets out the actions you need to take. Saving you hours of scouring through multiple reports, press releases, blogs and articles. Read more »
Following the horrendous suffering of WWI the French were determined never again to be invaded by Germany. There was a tremendous focus on fortifying the Franco-German border. A tremendous focus on building a line of concrete fortifications, obstacles, and weapons installations between themselves and the Germans. A tremendous focus on building the impregnable Maginot Line. In 1940 the German Army simply drove around it in their tanks and conquered France in about 6 weeks. Via Belgium.
Such is the folly of focusing on the wrong thing.
There has been a lot of worthy stuff going on around DC pensions of late. Regulatory guidance, upping governance, capping charges, auto-enrolment and, especially, pension freedom. Master trusts have a lovely new, shiny, impregnable assurance framework. You don’t have to hand your money to an insurance company any more. 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.”
The hallmark of good pension scheme governance is a pension fund whose affairs are managed robustly, seamlessly and effectively, with appropriate controls, free of abuse and with due regard for the law.
Just as medical check-ups make sense for the human body, occupational pension schemes, both Defined Benefit (DB) and Defined Contribution (DC) also need regular Read more »
I noticed the positive announcement this morning that Signature and Care Support is to merge with Choice Support to create more jobs.
This is clearly good news but from a pensions perspective the change does highlight a major issue for any bodies changing status (e.g. incorporating or merging) where they participate in multi-employer pension schemes such a those run by local government, the Pensions Trust or similar. Such a change in status can trigger the unwelcome pension consequence of terminating the participation of one (or both) bodies in the scheme with the requirement to pay a very significant debt contribution to the scheme. The level of debt can be many times the size of that disclosed in the organisations accounts and can frequently impact on the organisations future success. It could also be levied even where there is no change to the numbers of staff continuing to participate in any scheme post the change.
This is an area where great care is required and early engagement with the pension scheme is essential as problems can frequently be overcome but only if arrangements are made in advance of any change. I’m not suggesting that this is the case here as I’m unaware of the pension background but it is a general note of warning to be prepared where any change in corporate status is contemplated.