On Wednesday evening I attended one of the NAPF’s PensionsConnection events focussing on the management of DC schemes. We were served up the usual treat of insightful speakers and good audience participation. And impeccable timing too – both the DWP Command Paper (government response to ‘Better Workplace Pensions: Putting Savers’ Interests First’) and the FCA’s final rules for Independent Governance Committees were issued earlier in the day.
The meeting focussed upon one particular aspect of the new Trust Based DC scheme Regulations which are due to come into force in two months time: the requirement that DC trustees consider the degree to which their scheme demonstrates and delivers ‘value for money’. We heard about the many difficulties involved in such an assessment – not least the fact that a large slice of the assessment will involve subjective analysis. It was noted that DWP and TPR have left the actual mechanics of this to the industry to solve. Trustees’ advisers should have a central role to play in providing relative scheme assessments to help provide various benchmarks. But in summary, all agreed that this one area alone was destined to involve significant time and expense. Read more »
Spence & Partners latest blog for Pension Funds Online –
A bleak November Friday evening a few weeks ago.
“You are getting ready aren’t you?”.
But actually I wasn’t. Nowhere near ready. I may be a while and I think I’m going to need to spend a few brownie points.
What had delayed me was some breaking news which, if substantiated, could lead to the largest insurer consolidation deal in 15 years, sending shockwaves around the corporate pensions marketplace. The news item spoke of a potential offer by the giant composite insurance group Aviva for the specialist life and pensions firm, Friends Life Group. The last time we saw a deal of this size in the sector was 1990 when Aviva was formed from the marriage of CGU and Norwich Union. Such a deal might increase Aviva’s market capitalisation from c£15Bn to c £20Bn and could potentially usher the next round of market consolidation. But I need to get ready, so the bigger picture will have to wait. Just time tonight to check that the story has legs and then issue a heads up to my Aviva / Friends Life corporate pension scheme clients. More to follow. Read more »
DC scheme sponsors and trustees can now proceed in earnest to review their schemes and ensure that they are fit for purpose from April 2015.
A number of organisations will have been waiting upon this week’s announcement before moving forward. This revolved around the action that the Treasury would take to mitigate reduced tax receipts as older workers used the new freedoms to potentially draw their salary more tax efficiently from next year. There was a very small risk that the new pension freedoms might have been curtailed given the scale of the Treasury’s potential tax losses, but George Osborne has confirmed that this issue will be addressed by placing new restrictions on the level of future contributions eligible for tax relief once maximum tax free cash has been taken.
DC sponsors and trustees will be pleased to hear that the Guidance Guarantee will be provided by independent organisations (The Pensions Advisory Service and the Money Advice Service are mentioned as ‘lead’ organisations) with the costs being funded by a levy paid by the Regulated adviser community. The Financial Conduct Authority has issued a Consultation around the elements of the Guarantee for which it will be responsible. As such, we await further details before a clear picture of the mechanics of the Guarantee becomes clear. Read more »
There has been a lot of commentary in the press recently about employers’ obligations in relation to auto enrolling their staff into a suitable pension arrangement. Many of these articles seem designed to create panic at businesses who may not have got round to considering how they will implement auto enrolment yet.
We at Spence & Partners think panicking about auto enrolment is a very bad idea. Indeed, we think it’s such a bad idea that we thought we should put the words “DON”T PANIC” in big red letters at the top of this note.
Just so it’s clear where we stand on the point. Read more »
This week’s surprise announcement from George Osborne is expected to provide a further boost to the DC pensions market whilst similarly re-energising design of long term income products.
First, there have been fears that Auto Enrolment opt-out rates will surge as the big social experiment moves downstream to the SME / micro employer market – with much of this concern based upon Joe Public believing that annuities represent poor value for money. This move could see more people taking the first steps to an improved retirement lifestyle as pensions shed their ‘inflexible’ tag.
The ‘at retirement’ market will see increased activity as firms consider innovative ways for individuals to optimise their retirement nest egg. Of interest will be how this market interacts with the Chancellor’s ‘guidance guarantee’.
And perhaps the loudest cheer of all: Read more »