Spence & Partners latest blog for Pension Funds Online –
In today’s world of technology, it is very rare for you to go through your daily routine without coming across an automated system – often without even realising it (that’s the beauty of automation).
But have you ever stopped to consider what it would be like if everything had to be done manually?
For example, imagine calling to book a hotel room and being told that a letter would be sent out within 10 working days to confirm your booking (of course this wouldn’t be acceptable!).
So why should a retirement request from your Defined Benefit (“DB”) pension scheme be any different? Read more »
Spence & Partners, the UK pensions actuaries and administration specialists, today advised that defined benefit (DB) trustees need to gear up to use the power they can now have at the touch of a button.
Alan Collins, Head of Trustee Advisory Services at Spence & Partners, commented: “With Pensions Freedom Day capturing the headlines, it would be easy to think that DB schemes have been left behind. But actually the development of technology in the past year has been such that trustees now have the potential to operate their schemes in a much more effective and efficient way.
“With the right system, trustees can now have daily valuation figures and actuarial analytics based on live administration data, daily asset feeds from investment managers and projected future cashflow information at their finger tips. The days of waiting for actuaries to provide complex reports and calculations are over – it is up to trustees to ensure they have the right processes and structure in place to use up to date information and speed up their decision making.” 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.”
Spence & Partners, the UK pensions actuaries and administration specialists, today commented that the recent news surrounding the availability of real-time valuations is a welcome step towards the delivery of a more pro-active service to pension scheme trustees and sponsoring employers, but that progress will be hindered if the link with scheme data and an audited benefit specification isn’t strengthened.
Marian Elliott, Head of Trustee Advisory Services at Spence, commented: “The facility to undertake daily valuations and become more responsive around the scheme’s funding position will certainly benefit trustees and sponsors in the management of legacy defined benefit schemes. It is absolutely right that trustees should expect to receive real time liability information. This is something we have been doing with our clients for a few months now and they have responded very positively to the streamlining of the process. We are therefore pleased to see the development of other such services being announced in the industry. Read more »
Even with the best advice decisions by pension trustees do not always work out as well as hoped for.
Employers can fail, transactions that promised to improve the employer’s position can look less attractive with hindsight.
The time horizon for pension schemes is such that it can be many years before issues are raised.
Sometimes trustees and advisers can be required to explain and justify themselves. Almost all of today’s written communication is electronic and while document management systems (whether these are electronic or paper based) are essential these should always be supported by secure email archiving – i.e. a searchable record of every single email into or out of the enterprise (obviously these days spam must be filtered out first).
One of the best investments we ever made was in our email archiving solution Mimosa Nearpoint (obviously operated in a virtualised environment as all servers should these days – see earlier article).
Lay pension scheme trustees should ensure that secure searchable archiving of all their personal email is in place. They should also ensure that they understand the email archiving and retention policies of their key service providers.
Brian Spence is a founder of actuaries Spence & Partners Limited and a director of independent trustee Dalriada Trustees Limited. You can follow him at @briandspence or @PensionsEndgame on Twitter or link to him on LinkedIn. Dalriada provides professional trustee services and Spence & Partners can provide support to employers in appointing an independent trustee. Brian has written a series of articles on appointing an independent trustee.
Follow @SpencePartners and @DalriadaTrustee on Twitter.