The article below appeared in Pensions Expert on 23 November 2015, in the Informed Comment section of the publication.
The Chancellor George Osborne’s recent announcement that the Government’s objective to see the living wage increase to £9.00 by 2020 will have had many charity finance directors scratching their heads and wondering where the extra income is going to come from to fund this.
I suspect however that many will not as yet have got around to considering the pensions impact of the change, which for some will be very significant. Read more »
David Davison this week presented at the CFG Risk Conference on Changes in Pensions. With the new Government in place, the way we view pensions is changing. There are now opportunities to transform pension plans into more flexible and attractive benefits for employees, whilst reducing the costs and risks of pension provision for employers.
This session explored the practicalities of how this works, giving useful tips on how to make the most of pensions and also highlighted new issues to be aware of. You can view the slides here – CFG Presentation London November 2015 [Read-Only].
Those waiting for news of further seismic changes to the UK pension scene were made to wait yesterday when the Autumn Statement confirmed that the Government’s response to the pension tax relief consultation will be published in the 2016 Budget. Given the continued polarisation of views on the matter, and the impact that the changes could have, it is perhaps not surprising that the Government has paused, albeit briefly, for further reflection. Read more »
Well, if you thought that the world of pensions would take a collective pause after the activity earlier in the year think again. The last quarter was just as busy with new developments/consultations and a very proactive new Pensions Minister starting to make her mark.
To help save you time catching up on what has been going on, Spence have pulled together a handy (almost pocket sized) guide to the main developments in the pensions world in the last quarter. Read more »
Spence & Partners latest blog for Pension Funds Online
It’s been 7 months since the new pensions freedom flexibilities came into effect, completely re-drawing the landscape of retirement savings. During that period, around £5Bn of cash has been withdrawn from the pensions system, both from cashing in small pots and drawing income out of larger ones. However, with an average “cash-in” value of around £15,000, Lamborghini dealers are still waiting to join the party.
Concerns about profligate retirees blowing their retirement savings have so far not come to pass, with general feedback from the industry that people tend to be quite sensible in the decisions they are taking over their retirement income. This is not particularly surprising – it seems a little unlikely that someone who has saved all their working life would suddenly spend the lot as soon as it become accessible; hard-working savers deserve more credit than that. Read more »
Following the recent investigation by Friends of the Earth Scotland which found that the Scottish Parliament pension fund invests £3.2 million of its funds into tobacco, weapons and fossil fuels, I began to think about socially responsible investment and how it can impact pension funds.
I’ve always been quite sceptical about ethical investment for a number of reasons, mainly the question “What is ethical investment?” It’s a very subjective question, and many people will draw a different line about what they consider to be ethical or unethical. Tobacco was one of the sectors mentioned by Friends of the Earth Scotland in their investigation; it’s easy to see how different people can be on either side of the argument. There’s also the issue that restricting investment in these sectors prevents a fund from investing in a number of well established and stable companies – it seems that this would be detrimental to the performance of the fund. However… Read more »
FRS 102 – a quick recap
You may think I am a bit late to the party to be releasing a guide for Financial Reporting Standard 102 (FRS102) and its effect on accounting for pension costs, given that the first edition of the new standard was released in March 2013, and subsequently updated in August 2014.
However, as FRS102 only came into play from 1 January 2015 and we are now approaching the end of the transition year in which companies are required to restate the prior year’s disclosure under this new standard, many companies will only now be thinking about this in earnest for the first time, and so I believe there is no better time to consider the similarities and differences with the previous standard, FRS17. Read more »
Last time, I wrote about the latest mortality projections from the Continuous Mortality Investigation (“CMI”) and the effect this could have on pension scheme liabilities and that it may provide some relief for trustees and sponsoring employers. I then began to cover how mortality affects members of Defined Contribution (“DC”) schemes. This blog covers these issues in more detail.
In DC schemes, members pay contributions towards their own personal fund at retirement, referred to as the “accumulation” phase. When the member retires, they use that fund to finance their retirement, in pretty much whatever way they choose (i.e. the “decumulation” phase). The growing trend towards this process has prompted a joint paper by three actuarial bodies (the Australian Actuaries Institute, the Institute and Faculty of Actuaries and the American Academy of Actuaries), on the issue of longevity risk (“the Joint Paper”). Read more »
Over the past few weeks there have been some publications in the field of mortality that make for interesting reading. In this blog, I am going to focus on the Continuous Mortality Investigation (CMI) producing their latest mortality projections – which, quite surprisingly, showed that mortality rates were higher in 2015 than 2014.
In figures, because that’s what we actuaries like, 2015 mortality improvements are estimated to be around 2.3% p.a. lower for 18-102 year olds and around 3.2% p.a. lower for 65-102 year olds.
So, the 2015 figures alone show a slight reversal in the continual improvement in mortality seen over recent years, and highlight the slowdown in the rate of mortality improvements. We have seen this in previous versions of the CMI mortality projection model, with new models producing lower life expectancies than the previous iteration being the norm in recent years. Looking at the four year period from 2011 to 2015, average annual mortality improvements using the CMI model are estimated to be around 0.3% p.a. for the 18-102 age group and 0.1% p.a. for the 65-102 age group. Therefore, average life expectancy is estimated to have increased by around 3-4 months over the whole of the period between 2011 and 2015. In comparison, in the period from 2000 to 2011, life expectancy increased by around 3 months each year. This emphasises the potential slowdown in mortality improvements shown by the CMI model. Read more »