Nest could prove to be a suitable reference point for other pension providers suggests Rudi Smith, Towers Watson
Recent legislation and regulator guidance has brought into focus the need to consider defined contribution (DC) scheme design and it is only natural for Nest to come under careful scrutiny. To what extent will Nest act as a benchmark for DC schemes?
Nest undertook a perhaps unprecedented degree of...
The DWP has sketched out the basic design for the default option to which schemes can add the detail explains Richard Parkin, Fidelity Worldwide Investment
We waited a long time for this year’s Department for Work and Pensions’ (DWP’s) guidelines for the design and governance of default investment options. These apply to defined contribution (DC) pension arrangements that are to be used for auto-enrolment from October next year....
Tim Banks, AllianceBernstein, argues for target date funds to be the new default for defined contribution schemes
The publication earlier this year of the Department for Work and Pensions’ (DWP’s) guidance for defaults in auto-enrolment defined contribution (DC) pension schemes has further raised the bar for pension providers and trustees. The principles laid down by the DWP, although not binding,...
David Blake and Douglas Wright, Pensions Institute, Cass Business School, on optimal investing
The purpose of any pension plan is to allow spending power to be redistributed from the plan member’s working life to retirement in a manner that is consistent with the member’s personal preferences and in a way that guarantees that this spending power lasts for however long the plan...
Which camp are you in when it comes to active member discounts? asks Steve Watson, Alexander Forbes
In the ongoing debate centred on the concept of active member discounts (AMD), there are two distinct camps which have emerged from the conflict: those for and those against. The voices of those who favour the latter are certainly getting louder, especially now that prominent political figures have...
Risk profiling in the DC market may be having a negative impact on retirement planning and adequate pension funding explains Stephen Watson, Alexander Forbes
In January 2011, the Financial Services Authority (FSA) issued a guidance consultation paper which raised concerns over the application of risk profilers and how, if inappropriate or inappropriately used, they can have a negative impact on retirement planning. This paper was issued at a time when...
Martin Hayward, DCisions, explains why the pension industry needs to start seeing things from their customers' point of view.
Many key principles of marketing have been developed over the years for the fast moving consumer goods (FMCG) industries, which represent the shops that we visit and the products that we regularly buy on the high street. These industries spend vast sums on understanding their customers through...
Jamie Winter, Towers Watson, considers the impact of auto-enrolment on group risk benefits
As part of the government’s latest pension reforms and the requirement to put employees into a qualifying pensions scheme, auto-enrolment will begin to impact upon UK pension schemes from late 2012 onwards. Yet, given the focus on the pension implications of Nest, it is easy to miss the...
The future is looking bright for workplace savings according to Daniel Smith, Fidelity International
The trigger for growth for the often but long talked about concept of workplace saving has been a while in the making, but now it is gaining real traction and finally employees are really catching on to its appeal. So much so that, with the momentum that is building, there is a feeling that we...
Dave Lowe, Zurich Financial Services, highlights some key considerations for DC scheme design in readiness for the introduction of Nest
With the slow demise of defined benefit (DB) schemes and the shift to defined contribution (DC) schemes, together with the introduction of auto-enrolment and Nest, challenges remain for ensuring positive retirement outcomes. This article seeks to address those challenges and outline some key...
Commitment underpins DC scheme success says Simon Davies, Standard Life
We are seeing relatively new defined contribution (DC) schemes, set up since the turn of the century, already being abandoned, with employers migrating to the next generation of DC.
The reasons are manifold. They include all the economic, political and legislative change we have witnessed over...
Jonathan Papier, Hymans Robertson, on the importance of good DC record keeping.
At one level the operation of a defined contribution (DC) pension arrangement is very straightforward.
A member has a level of contribution deducted from their salary, calculated on a basis they have agreed. Together with a contracted level of employer contribution, the combined payment is...
Tony Barnard, Capita Hartshead, examines the Regulator's proposals on how to improve DC provision
With the increasing growth of defined contribution (DC) pension provision, the Pensions Regulator (TPR) is taking the opportunity to update its approach to DC regulation, first outlined in 2007. TPR’s discussion paper issued in January is seeking feedback on a series of questions and TPR...
Flexibility is the key when it comes to designing lifecycle investment strategies advises Nick Smith, Towers Watson
Lifecycle investment strategies were designed some years ago to ensure that defined contribution (DC) plan members, who do not make their own investment decisions, have a reasonably appropriate risk/return profile over their savings life. Today, lifecycle is a well established part of the DC...
The Regulator may be about to prick the balloon of MasterTrust – but it could remain a viable option for trustees suggests David Bird, Towers Watson
Those of us who are long enough in the tooth to have seen the first coming of MasterTrust are asking themselves what the second coming might bring. Many people have some understanding of what happened in Australia, where MasterTrust now dominates the provision of retirement benefits. There seems...
Interactive modelling can help members with the challenge of achieving the retirement income they want suggests Clive Witherington, Towers Watson
This prophetic quote comes from the two-time former World Heavyweight Boxing Champion and Olympic gold medallist – George Foreman. George eventually retired, after several comebacks, with his last fight at the age of 49.
Retiring at 49 is, alas, not an option open to most, but the quote...
Will Aitken, Towers Watson, on the government’s proposals to increase governance requirements for contract based schemes
Next year, auto-enrolment into defined contribution (DC) pension arrangements will start in earnest. Research indicates that where auto-enrolment occurs, rates of investment defaulting can be as high as 90%. Consequently, quite soon, large swathes of the population will find themselves with money...
Sarah Welling, Pinsent Masons, on the key considerations of switching from a trust based to a contract based DC scheme
As well as closing defined benefit (DB) schemes both to new entrants and to future accrual, more and more firms are also looking to close their trust based defined contribution (DC) plans and offer a contract based version instead.
Pension benefits are part of the overall remuneration package...
The closure of final salary schemes has not put an end to pension risk explains Barry Mack, Hymans Robertson
Many companies closed their final salary schemes and opened defined contribution (DC) plans to achieve greater certainty of pension contributions. Although the move to DC has gone some way towards reducing the previous volatility of contributions, it has created a raft of other risks which...
Will annuities be the next mis-selling scandal? asks Paul Evans, Capita Hartshead
There is concern that the current retirement arrangements of many defined contribution (DC) pension schemes conceal a ticking time bomb. When it explodes it could lead to a huge number of compensation claims being submitted.
The concern centres on members who are not being offered the...
