February 2012 | PensionsWorld

Analysis

INVESTMENT BRIEF Losing interest

Anthony Hilton, Evening Standard, on the unintended consequences of rock bottom rates

After the Bank of England had completed its first £200bn round of quantitative easing (QE) – buying gilts to lower interest rates, raise asset prices and stimulate investment in the economy – there were many who said the policy had...

POLITICAL STAGE Must try harder

The Regulator has made good progress in protecting members, but needs to focus more on DC schemes reports Ceri Jones, financial journalist

The Pensions Regulator (TPR) is being studied by the National Audit Office (NAO) regarding its effectiveness in protecting defined contribution (DC) pension scheme members. The report, to be published in the spring, is a follow up to the NAO’s...

POINTS OF LAW Spend now, pay later

Cash now or pension later? We cannot have it both ways warns Robin Ellison, Pinsent Masons

We all make foolish decisions. We marry people who are beautiful rather than good. We buy lottery tickets. We indulge in extravagant and expensive cars. And most of us, given the choice, prefer cash to pension. Many of the foolish decisions are...

Book reviews

Taking the bull by the horns

Cotter on Investing by John Cotter, £19.99, ISBN 978 0 857 190192 (193 pages) www.harriman-house.com

Taking the bull out of the markets: practical advice and tips from an experienced investor is the subtitle of this work from John Cotter, a veteran of 38 years with Barclays. He has a common sense approach; noticing the mushrooming of wheelie bins...

Who believes in the pension fairy?

The Trustee Guide to Investment by Andrew Clare and Chris Wagstaff, £35, ISBN 978 0 230 24424 5 (593 pages) www.palgrave.com

Sadly, there is no such thing as the pension fairy as chapter one of this lively and lucid work points out. Indeed, this is one of the best pensions books published in the past five years. All 120,000 trustees of UK pension schemes would do...

Dare to be different

Alternative Investments made simple, £365 (£18 NAPF members) ISBN 978 1 907612 13 8 (12 pages) www.napf.co.uk

One man’s meat is another’s poison and that is clearly true of alternatives: “investments that are new and outside of the mainstream”. This helpful little booklet steers trustees through the gamut of alternatives. It looks at...

Comments

COMMENT – The next scandal?

Most retirees simply do not understand the need to shop around for the best annuity, says editor Stephanie Hawthorne.

Could annuity misselling be the next financial scandal? Already, one fifth of all trust based defined contribution (DC) members are over 50. Additionally, with the arrival of auto-enrolment, millions will be faced with the prospect of buying an...

DC focus

DC FOCUS Flexible deadline

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...

DC FOCUS Better by design

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...

DC FOCUS Useful benchmark?

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...

Events

COURSES AND SEMINARS – February 2012

Auto-enrolment breakfast briefing www.lcp.uk.com 6 Mar (London) Auto-enrolment breakfast seminars ukevents@aonhewitt.com 2 Feb (Birmingham), 7 Feb (Manchester), 9 Feb (London) Auto-enrolment: turning fact into action emea.marketing@towerswatson...

CONFERENCE DIARY – February

1 Feb Implementing New Workplace Pension Arrangements in 2012, London alexandra.kelly@publicpolicyexchange.co.uk 9 Feb Blake Lapthorn’s 2012 Southern Pensions Conference, Eastleigh www.lcp.uk.com 29 Feb PMI administration summit, London...

Features

LAW - EU The opposite effect

The IORP Directive is likely to discourage rather than encourage cross border schemes warns Jane Marshall, Macfarlanes

Shortly after the millennium, the European Commission concluded that an EU framework for pension schemes was needed to complete the single market in financial services. Like other financial institutions, pension schemes were to be able to operate in...

DB Sweet dreams

Taking control of risk management will help trustees to sleep at night advises Maralyn Thomas, Castle Pension Trustees

Pension scheme trustees are not expected to become experts. And yet, more and more, they are having to become proficient in risk management, which is now a regular item on trustee meeting agendas. And, in the present circumstances, this is not...

E-COMMERCE Shall we dance?

Lessons can be learnt from the viewing patterns for Strictly Come Dancing relevant to online pension planning suggests Geraldine Brassett, Aon Hewitt

I was flicking through my copy of the Metro newspaper the other day when an article caught my eye. The piece was about the fact that the unseasonably warm autumn weather had substantially reduced the viewing figures for the X Factor and Strictly...

ANNUITIES Uphill struggle

Is open market option reform coming too late to save annuities? wonders Patrick Connolly, AWD Chase de Vere

Annuity product providers are doing a grand job in delaying the implementation of a universal open market option (OMO) facility for those looking to take pension benefits. Despite continued pressure from the financial press and lobbying from those...

AUTO-ENROLMENT Mark of quality

Branding is essential if you want your employees to value their pension, says Steve Herbert, Jelf Employee Benefits

Employer supported pension provision for all will become the norm within the next decade. This has many implications, but one that has largely been overlooked is the perception of company pension schemes. Historically, employers have voluntarily...

DC FOCUS Flexible deadline

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...

DC FOCUS Better by design

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...

DC FOCUS Useful benchmark?

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...

COUNTDOWN TO 2012 Waiting room

The introduction of an optional waiting period will ease the administrative burden for some employers explains Mark Folwell, Lane, Clark & Peacock

In our previous articles we have covered which employees have to be auto-enrolled, when they have to be auto-enrolled, into what type of scheme and the minimum quality requirements for the scheme. The good news for employers is that in late 2010 the...

NEST Growth phases

We must get people saving, keep them saving and make sure their savings grow quickly urges Mark Fawcett, Nest

For those in the pensions industry, it is easy to make assumptions about the general population’s knowledge levels when it comes to workplace pension schemes. But research has demonstrated that some of these assumptions are open to question....

NEST Picture this

Why behavioural finance matters and why it matters to Nest by Cathy Smith, Allianz Global Investors, and Helen Dean, Nest

Did you know that seeing a picture of yourself as you might look in 20 or 30 years could actually cause you to double your savings rate? Most people find it difficult to imagine the future, let alone picture themselves living in it. But that is...

AUTO-ENROLMENT Scale model

Denmark can teach the UK a thing or two about running large scale, affordable pension schemes says Lars Rohde, NOW: Pensions

With increasing life expectancy, falling birth rates and interest rates, the challenge of establishing an affordable and sustainable pension system is high on the agenda of many European governments. The taxpayer cannot meet this challenge alone and...

LAW – MONEY PURCHASE DC or not DC?

What constitutes a money purchase benefit could have wider implications for the administration of pension schemes explains Jeremy Goodwin, Eversheds

There has been a lot of fuss in the pensions press recently about whether something is or is not a money purchase (ie defined contribution – DC) pension scheme. It is tempting to see this issue as a mere technical point – something for...

Knowledge bank

BEGINNERS' PAGE Flight plans

Paul McGlone, Aon Hewitt, has some tips on plotting the investment route your scheme should take

In a jargon filled industry, it is no surprise that new phrases continue to be invented. The “flight plan” is a recent one – so recent, that there is still no consensus around the phrase, with alternatives including “glide...

TAX AND BENEFIT NOTES Duty calls

Managing conflicts of interest is an important issue for scheme actuaries explains Rosslyn Scott, Mercer

Conflicts of interest may be back on trustee and employer agendas as a result of a consultation paper issued by the Actuarial Profession’s Working Party in October 2011. The paper proposes introducing a new professional standard preventing...

PENSIONS PROGRESS Extra time

Helen-Mary Finney, Aon Hewitt, explains the amended regulations on employer debts in multi-employer pension schemes

Corporate restructuring can be inhibited by the rules which operate when an employer leaves a multi-employer defined benefit pension scheme. In April 2010, easements were introduced to the employer debt regulations, to help participating employers...

Napf update

NAPF – February 2012

News

In Brief – February 2012

Lifetime change On 6 April, the lifetime allowance, which limits the amount of pension that can be free from high tax charges, reduces from £1.8m to £1.5m. www.hmrc.gov.uk TPR April advice The Pensions Regulator (TPR) plans to issue...

Staff frozen out as pension drawbridge rises, says NAPF

Almost a quarter (23%) of defined benefit (DB) pension schemes are now shut to both new staff and to future contributions from people who were already in the pension, according to the latest National Association of Pension Funds’ survey. This...

Jargon damages your wealth, says Nest

The words people more strongly associate with pensions are “confusing”, “complicated”, “boring”, “difficult” and “off-putting”, so Nest’s new jargon busting phrasebook is welcome....

DWP to act on short service refunds and small pots

The Minister for Pensions, Steve Webb, has promised to protect the pension pots of people who move jobs often by abolishing short service refunds for defined contribution (DC) occupational schemes. These refunds allow individuals to get their...

ACA finds widening chasm between private and public sector pensions

The gulf between private and public sector pensions is set to widen. While over 5m public sector employees enjoy open defined benefit (DB) pension schemes, fewer than 2m private sector employees remain in largely closed DB schemes, according to the...

Pilkington in £1bn longevity deal with Legal & General

The trustee of the Pilkington Superannuation Scheme has insured against the risk of 11,500 current pensioners in the scheme living longer than expected, with around £1bn of associated liabilities, with Legal & General. At the...

One in ten employees has major money worries

Money problems affect the performance of one in ten private sector employees. This figure rises to one in five for those earning £20,000–30,000 according to Towers Watson research. The future of workplace savings shows that over 86...

£11m government advertising campaign gets under way

A multi-million pound government campaign aimed at getting millions of people saving more for their retirement was launched in the national press in January. The £11m campaign is aimed at educating individuals and employers about auto-...

"Youth" ends at 41

Age related discrimination and stereotyping remain rooted in British society. The findings are based on new analysis from the Office for National Statistics Opinions Survey. The report looks at the factors that are associated with age discrimination...

Govrnment suggests costly approach to equalising pensions

The government has launched a consultation on equalising pension benefits for the effect of unequal guaranteed minimum pensions (GMPs). Experts are concerned that its suggestions are very much at the expensive end of the spectrum. Commenting on the...

International news – February 2012

A roundup of recent worldwide news and developments in the pensions arena, by Anne Bennett, Mercer

Russia: more expatriates in Russia to pay social insurance charges Many more foreign workers in Russia will be subject to a social insurance tax payable by employers on their income from 1 Jan 2012, under a package of social insurance measures...

ASSOCIATION FORUM – February 2012

The Pensions Advisory Service New advisers The Pensions Advisory Service is always looking for volunteers to help with casework, which can be dealt with from home. It is not as time consuming as you may think and you may be pleasantly surprised by...

REGULATION ROUNDUP – February 2012

What does 2012 have in store?

2012 will no doubt be another year of change and challenge for the pensions industry, not least because the largest employers – together representing millions of UK workers – will reach their auto-enrolment staging dates, but also...

Statistics

STATISTICS - February 2012

STATISTICS

Surveys

INVESTMENT CONSULTANTS DC taking the lead

Allison Plager, financial journalist, looks at how consultants are getting on with investment issues for DC schemes as they gradually take over from DB

As the decline of the much loved defined benefit (DB) pension scheme continues apace, companies are offering money purchase schemes to replace them. The National Association of Pension Funds’ Annual Survey 2011 showed that 23% of final salary...

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February 2012 issue

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