Once upon a time, there was a Scheme Actuary. He was very proud of his profession and his reputation as a prudent man of business. Trustees all across the land admired and respected him and queued up to follow his advice, for they all understood how clever and learned he was. Besides, the wise old King passed a law requiring them to appoint a Scheme Actuary so they had to have one anyway…
One day the actuary was counting out the gold coins in a pension scheme and a tiny fragment chipped off one and flew straight into his eye. From that day on, he could only see pensions through a gilt lens and his peripheral vision vanished altogether. However, nobody in the Kingdom knew about this incident, and everyone still trusted the Grand Vizier (surely “actuary”?) when he demanded a mountain of gold from every farmer, so he could look after all their cows should they go bankrupt… which many promptly did, since they didn’t all have a spare mountain of gold lying around.
Of course this is just a fairy tale and couldn’t happen in real life. Or could it? In fact, a similar story happens every day in pensions – albeit not as extreme or (hopefully) amusing. Read more »
For many Trustees and employers, reaching the point where you can secure your pension liabilities with an insurer seems like an impossible task.
The Pensions Regulator publishes ‘Scheme Funding Statistics’ each year based on various ‘tranches’ of pension schemes. As at May 2015, the average buy-out funding level was 58% for schemes with a valuation date between September 2012 and September 2013.
For the majority of schemes , the path to buyout is not an easy one but it is important to understand that there are measures you can take to move towards this goal.
I have set out below our ‘five steps to buy-out’ Read more »
The Pensions Regulator (“the regulator”) has laid before Parliament a revised Code of Practice 3 (“the Code”) for defined benefit (DB) scheme funding.
This new code takes into account their new statutory objective and reflects their developing approach and changing circumstances since they published the current Code in 2006. The Code emphasises the need for Trustees and employers to work collaboratively in order to achieve an integrated risk management approach which doesn’t compromise the needs of the Scheme or the employer’s plans for sustainable growth.
We have reviewed the revised Code and prepared the following summary for you. Read more »
The ONS consultation on inflation will not, against expectations, result in any major change to the calculation of RPI. Instead , yet another measure of inflation will be created. It will take time before we see what the new index will mean and where it will be used. This will no doubt lead to further confusion as to what inflation actually means, as it would appear we will now have (at least) three ways of measuring it. Read more »
Organisations participating in the Social Housing Pension Scheme (“SHPS”) will no doubt be experiencing that sinking feeling, perhaps mixed in with a little déjà vu, as the results of the 2011 scheme valuation hit their desks this month.
The communication will have brought the unwelcome news that the ‘on-going’ funding deficit has increased from £663m to £1,035m as at 30 September 2011 (having increased from £283m in 2005). Read more »
In an earlier posting (“Pension Funds and Executive Pay”), I expressed the hope that institutional investors such as pension funds would wield their collective muscle and not stand idly by while huge multinationals give their senior staff exorbitant pay awards. For years, major institutions, including pension funds, have effectively boycotted annual shareholder meetings, where the most contentious issues might be the quality of pasties on offer – even before the “pasty tax”.
With the AGM season almost upon us, we will soon see if the nationwide revulsion at boardroom excesses translates into action where it counts. Read more »
With recent market turmoil sending scheme funding levels tumbling, pensions present a potential Pandora’s Box for even the most enlightened Finance Director.
In this month’s issue of CA Magazine (pg. 56) Alan Collins, head of employer advisory services at pension actuaries Spence & Partners suggests 10 key questions that Finance Directors should be asking themselves about their defined benefit schemes and some guidance on each of these key issues.
Read more »
A little tale of everyday folk and how sharing and best intentions may not always achieve the results you expect……………..
Peter, Graham, Phil and Rachel have just started their arts course at University in London and are sharing a house. Being arts students they have a lot of spare time on their hands. One evening, after a hard day staring out of the window, they’re in the pub (unusual for students I know!!) and Graham mentions he really needs a car for a part-time job he has on the other side of the city, and can’t get there easily using public transport because of the timing but he can’t afford it with all his other bills. Read more »
I recently had a need to review the Regulator’s Guidance on Incentive Exercises which was updated in December 2010. While on the face of it the principles are not too different to the original guidance I thought it worth re-iterating a few of the main points.
An Incentive Exercise (formerly known as an Inducement Exercise) is where an offer is made by an employer to a Defined Benefit scheme’s members to transfer out or amend benefits, usually in return for some form of financial incentive, with the intention of reducing liabilities or risk in the scheme.
These exercises remain a viable starting point for any company tackling the funding levels of a Defined Benefit (DB) scheme and, as long as they are dealt with in accordance with the Regulators guidance and with the input of the Scheme’s Trustees, offer an attractive alternative to many members if pitched at the right level.
The Pensions Regulator tells Trustees Read more »
I noticed the announcement last week that the Scottish Federation of Housing Associations Pension Scheme (“SFHAPS”) has been renamed the Scottish Housing Association Pension Scheme (“SHAPS”).
I’m sure the strategic removal of the “F” from the acronym will re-assure members about why their pension scheme unding has allen from just below eighty-ive percent to less than sixty-ive percent in 3 years and less than ifty percent on the PP(F) basis!! Read more »