Making Sense of Pensions

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 »

David Davison

Taking the Strain

When faced with cost constraints, considering a reduction in staff is an obvious early consideration. However, for those employers with staff in LGPS great care needs to be taken as ‘strain costs’ imposed by the Fund could result in very significant payments, often well in excess of any salary savings made. So what do you need to look out for? Read more »

Neil Buchanan

The UK has made its choice, and has voted to leave the EU. What does that mean today for occupational pension schemes? In the wake of the result on 23 June 2016, significant market volatility ensued. With the yields on UK Government bonds falling, the majority of schemes will have experienced an increase in liabilities. However, the impact on funding will depend on a scheme’s investment strategy.

We therefore posed some of the questions which you may want answered to our own Chief Investment Officer, Simon Cohen. Read more »

Emer Cox

Cabinet reshuffles. Turmoil in the financial markets. The pound tumbling against the dollar. Not to mention, real concerns about Britain’s Eurovision future!  We have witnessed a lot since the EU referendum.

Trustees have already felt the impact of Brexit, with their defined benefit pension scheme deficits climbing as gilt yields have fallen to record lows. In truth, it isn’t surprising that the financial markets experienced significant turmoil in the face of such economic uncertainty.  As a result, the value of Sterling in relation to other currencies has plummeted to its lowest point in over two decades, having fallen 12% against the dollar. Read more »

Gillian Lister

21st Century Trustees

The Pensions Regulator’s 21st Century Trustee initiative inspired a previous blog by one of my Dalriada colleagues recently “Trustees in the 21st Century” and is now the subject of a discussion paper.  What should a modern trustee look like and is regulation required?

Let’s face it, being a pension scheme trustee was never an easy job but it just seems that it is becoming more and more demanding.  The demands being met by trustees require them to have a complex knowledge in the minefield that is now pensions and they are coming under increased scrutiny. This means that effective trustees need a high degree of knowledge and understanding. Trustees need to be knowledgeable of the whole pensions landscape, understanding such things as scheme funding, investment decisions, employer covenant and above all else the best interests of their membership in relation to that pension scheme. The wisdom of Solomon and patience of Job would seem apt for a trustee job description. Read more »

David Bogle

For those outside the world of pensions, triple lock is perhaps a term from the sedate world of canal cruising holidays. However for pensioners of the future it is a term they should acquaint themselves with and the impact it has on their future prosperity.

This fairly new chestnut of the pension triple lock raised its head recently. Baroness Altmann, former Pensions Minister in the Cameron Government, has voiced the opinion that the triple lock would not be affordable after 2020. Baroness Altmann has been vocal on pension policy in the past few weeks, (well since she left Government), with her earlier comments on Tata Steel and pension provision. Yet what does the pension triple lock mean and why should our future pensioners care so much? Read more »