Making Sense of Pensions

Andrew Kerrin

Well, the wait is finally over. Horton v Henry has been decided. After hearing arguments in April and deliberating over this important decision for 6 months, the Court of Appeal released their much anticipated judgment on 7th October 2016. Unfortunately for me, this came a week after my summary of the case history was published in PMI News with a “wait and see” conclusion on the Horton decision. The Lord Justices clearly forgot to give me a heads-up… so rude!

Anyway, as mentioned in my article and earlier blog this decision has been a long time coming. A controversial and potentially devastating judgment for bankrupts (Raithatha in 2012) has been put to bed, meaning bankrupts can now breathe a sigh of relief that their entire pension pots post Pension Freedoms are not at risk of an Income Payment Order.  Read more »

Andrew Kerrin

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 »

Neil Buchanan

Our latest report details market movements over the 3 month period to 30 September 2016, and how this impacts the key financial assumptions required for determining pension liabilities under FRS102 or IAS19.

Major asset classes have had a strong performance over the 3 month period to 30 September 2016. This strong performance follows on from the similar growth experienced in the previous quarters. However, it is likely that any investment gains will have been more than offset by increases in schemes’ liabilities resulting in lower funding levels. To help draw attention to the practical implications, the effect of these market conditions have been illustrated on a typical pension scheme.

Download your report

Hugh Nolan

Schrodinger’s Retirement

So apparently we’re all living longer than ever before and the Government’s solution to keep State pensions affordable is to make everyone retire later.  That’s all well and good if your job is easy and you can keep doing it until you’re 67 or 70 (so MPs and Scheme Actuaries will be fine, thankyou very much) but it’s not so practical in many occupations where the physical demands are much higher.  In fact, recent research reveals that 12% of people within five years of State Pension Age are too ill or disabled to work.  According to the TUC’s report “Postponing the pension: are we all working longer?”, only half of people aged 60 to 64 are economically active.  The half that aren’t earning does include the lucky folk who have been able to choose to take early retirement but it also includes those who have been made redundant or are unable to find a job, as well as those too sick, so it’s a safe bet to say that far more than one in eight people in this age range are unable to work. Read more »

Rachel Graham

The result of the EU referendum on 23 June 2016 was a surprise for many of us. It was difficult to predict the detrimental impact on gilt yields which occurred in the weeks following the result! With many UK pension schemes invested in gilts, the historically low gilt yields which resulted has led to pension schemes being faced with significantly higher liabilities. Transfer values for deferred members of DB schemes have also increased. A transfer value is a best estimate of the cost of providing the benefits to the member in the scheme and these too are calculated with reference to gilt yields.

Trustees may be concerned if their scheme experiences an increase in transfer value requests post Brexit. Trustees are ultimately responsible for the security of benefits of ALL members- those who wish to transfer and those who remain in the scheme. Read more »

David Davison

LGPS Discretions

An issue often over-looked by employers participating in a Local Government Pension Schemes is that each admitted body is required to have a Discretions Policy in place.  This Policy must be published, kept under regular review, and a copy must be sent to the administering authority. Read more »

Matthew Leathem

The past few weeks have seen many interesting changes in investment markets as they attempt to find a new level following Brexit. Pension Schemes should take this into account when reviewing their funding and investment strategies. In some cases it may be worthwhile to expedite your investment review, although as pointed out by my colleagues, this will only be in exceptional circumstances as pension scheme investments will be based over a very long horizon.

We will look at some of the major changes that have happened to markets since the EU referendum, consider how these will impact Defined Benefit (“DB”) schemes and provide ideas to help manage risks caused by the resulting market volatility over the coming months. Read more »

Richard Smith

Nearly 2 years ago I bought a new mobile phone.  At the time, I was very pleased with the deal that I had signed up to – reasonably priced, a sensible allowance for calls, texts and data, and all the features and apps that I wanted, and it looked good too! However, over time the package has started to lose its lustre, as the mobile phone market has evolved with more flexible contracts, competitive deals, speedier apps, larger data storage and more modern-looking handsets.  In addition, many new apps are not compatible with my phone.  As well as changes in the marketplace, my own priorities and wish list have moved on as well. What was right for me then isn’t right for me now.

Parallels can be drawn with the defined contribution pension market. Many companies set up DC pension schemes a number of years ago on a “set and forget” basis. Frustrated with the onerous governance responsibilities and volatile costs associated with defined benefit, DC was a breath of fresh air – the sponsor could carry out appropriate due diligence, choose the product that was right for them, then hand over all ongoing management responsibilities to the insurance company or trustees. All they then had to do was write a cheque each month to pay for the contributions.  Often, an IFA was in place to give ongoing support in exchange for commission and access to the membership (i.e. for no material employer fee). Read more »

Ian Craig

It should come as little surprise that, given 2016 has been one of the most volatile in recent years, the amount of completed buyouts in the first half of 2016 is almost half that of 2015’s corresponding period.

The perceived fall in demand is, however, based on somewhat skewed figures as many insurers brought forward transactions to the tail end of 2015 ahead of the Solvency II requirements kicking in from January.  Solvency II is, of course, EU legislation aimed at harmonising the insurance regimes of its member states.  The trigger of Article 50 will be the trigger for those blogs… Read more »

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