May 2012 | PensionsWorld

Analysis

VIP VIEWPOINT Dangerous experiment

QE is hugely damaging for UK pensions says Dr Ros Altmann

The Bank of England’s policy of quantitative easing (QE) is a huge monetary experiment with dangerous and damaging side effects for UK pensions which are being insufficiently appreciated by policymakers. Having exhausted its capacity for...

INVESTMENT BRIEF A boardroom vacuum

Are the controls on top directors tough enough? asks Anthony Hilton, Evening Standard

This spring may go down as the time when shareholders finally lost patience with companies about executive pay. Hermes, the manager of the British Telecom pension scheme, together with the National Association of Pension Funds, announced that it had...

POLITICAL STAGE Targeting the rich

Labour is calling for tax relief for higher rate taxpayers to be capped reports Ceri Jones financial journalist

Labour leader Ed Miliband, in a speech at Eastpoint in Southampton in April where he was campaigning for control of the city council, called for pension relief for higher rate tax payers to be capped at 26%, with the extra revenue used to fund...

POINTS OF LAW Seeing red

Robin Ellison, Pinsent Masons, responds to Steve Webb’s red tape challenge

Would our lives be much improved if puppets were in charge, rather than politicians? We might remember in particular the wisdom of Statler and Waldorf, from the Muppet Show (S: Have you ever been to a Witch Doctor? W: They’re all witch! Ever...

Book reviews

The trillion dollar tool

Exchange Traded Funds made simple, £35 (NAPF members £18) ISBN 978 1 907612 16 9 (28 pages) www.napf.co.uk

They were first created in the United States in the early 1990s and today an estimated US$1.35trn is invested in exchange traded funds (ETFs) globally. Most ETFs are funds which track the performance of a market index such as the FTSE 100 index. So...

As safe as houses?

Property investments made simple, £35 (NAPF members £18) ISBN 978 1 907612 16 9 (20 pages) www.napf.co.uk

UK commercial property at the end of 2010 was worth £561bn. Put in context, UK government bonds amounted to £1,130bn and FTSE equities £1,952bn. This weighty asset class cannot therefore be ignored by pension trustees. Property...

A pensions classic

Pensions Pocket Book 2012, £47 ISBN 978 0 9567104 1 3 (288 pages) www.economicand financialpublishing.com

The Pensions Pocket Book 2012, published in association with Aon Hewitt, has 34 sections covering an amazing amount of information in a most compact size. Indeed, it is hard to think of another pensions book that contains so many useful and topical...

Comments

Relief all round

Mark Hyde-Harrison, NAPF chairman, on the Budget, Solvency II and infrastructure

As I write this column, the Chancellor’s Budget has just been delivered and, while much of the detail may now be a dim memory, it was a Budget that the pension industry should welcome. The two reasons for this are that we have moved a step...

DC focus

DC FOCUS How do you want your default to look?

The decision on the appropriate default fund is important. Financial journalist, Allison Plager reports

The future is defined contribution (DC). Indeed, Towers Watson’s FTSE Survey 2012 showed that one third of FTSE 100 companies offer DC schemes only to their employees, more than double the number in 2010. This trend is set to continue with...

DC FOCUS Shopping around

The new ABI code of conduct encourages customers to research the open market for the best annuity says Richard Parkin, Fidelity

Financial decision making is full of examples of people selecting inappropriate choices. Perhaps most notable is the process of converting accumulated retirement savings into an income. For many, this is an irrevocable decision, yet one which gets...

DC FOCUS Making plans

Guy Winter, Towers Watson, on auto-enrolment and DC governance

One of the clearest messages coming out of Towers Watson’s 2012 DC Governance survey is that most sponsoring employers are looking to use their existing defined contribution (DC) arrangement for auto-enrolling eligible employees not in a...

Debrief

DC FOCUS Making plans

Guy Winter, Towers Watson, on auto-enrolment and DC governance

One of the clearest messages coming out of Towers Watson’s 2012 DC Governance survey is that most sponsoring employers are looking to use their existing defined contribution (DC) arrangement for auto-enrolling eligible employees not in a...

Events

CONFERENCE DIARY – May 2012

16 May Engaged Investor trustee summit, Edgbaston www.engagedinvestor.co.uk 21 May PFS auto-enrolment event, London lynda.tahri@cii.co.uk 22 May Auto-enrolment conference, London phillipa.russell@xafinity.com 21–23 May Local authority...

COURSES AND SEMINARS – May 2012

Annuity Bureau educational seminar info@annuity-bureau.co.uk 26 Apr (Belfast) Caring for our future: supporting active ageing in the UK alexandra.kelly@publicpolicyexchange.co.uk 17 Apr (London) Data cleansing – saving you a fortune...

Features

PENSIONS ADMINISTRATION Getting it right first time

Maladministration is in no one’s best interest – and it costs more – argues Lesley Carline, PASA

The Pensions Administration Standards Association (PASA) is the new kid on the block for ensuring that members receive the best service and pension provision from their scheme and the administrator. With the best will in the world, can we currently...

LONGEVITY RISK The long and the short of it

Small does not have to be expensive when it comes to longevity risk suggests Nigel Barlow, Partnership

The principle of longevity risk will, at some point, have been the bane of most readers’ lives; yet thousands of small defined benefit (DB) pension schemes, representing tens of thousands of members are unaware of ways to understand longevity...

PENSION DEFICITS Making it clear

Pension deficit trackers need to be less ambiguous as they can confuse the message explains Hugh Creasy, Xafinity

Each month the Land Registry, the government, mortgage lenders and property experts all tell us what has happened to residential property prices. The sages tell conflicting stories. When it comes to house prices, each is looking at a different...

PMI SPRING CONFERENCE Marathon task

Ceri Jones, financial journalist, reports on the PMI spring conference and the staying power of the Pensions Minister, Steve Webb

Pension Minister Steve Webb gave the keynote speech at the PMI spring conference in March. It was aptly entitled "Pensions – always a marathon, never a sprint" and delegates seemed to appreciate having a minister in charge who...

LAW Wheels within Wheels

Schemes should hope for the best but prepare for the worst while awaiting the decision in the Wheels case advises Nick Warner, PKF Accountants & Business Advisers

Investment fund managers and their clients are carefully watching the progress of a European Court case which could mean VAT exemption for fees charged for the management of pension schemes. The case, brought jointly by Wheels Common Investment Fund...

GOVERNANCE Quarterly capitalism

Will Oulton, Mercer, on how the finance industry’s focus needs to be on long term sustainable growth rather than simply the next quarter’s earnings

The financial crisis and global recession have left champions of free market capitalism facing an increasingly sceptical global audience. The current debate regarding “fair” or “responsible” capitalism often highlights the...

INVESTMENT Value judgment

Tim Hodgson, Towers Watson, explains the thinking behind thematic investing

We believe thematic investing or even just thinking about investment themes has merits in shaping both the asset allocation and the risk management processes. The essential idea is to start positioning portfolios to benefit from tomorrow’s...

TRANSFERS Tempting offers

Schemes must be very careful when dangling the carrot of enhanced transfer values in front of members warns Martin Palmer, Friends Life

Since their inception, enhanced transfer values (or ETVs) have caused somewhat of a furore in the industry. Controversial because of the suggestion that they can exploit a lack of understanding of exactly what is being given up, ETVs – and the...

COUNTDOWN TO 2012 The pensions hokey-cokey

Stacy O’Sullivan, Lane Clark & Peacock, takes us through the steps for opting in and out

Not all employees will want to be automatically enrolled into a pension scheme and so it is possible for them to opt out, but only after being automatically enrolled. However, if an eligible jobholder opts out, they must be automatically re-enrolled...

VIP COMMENT The path to success

Auto-enrolment will fail unless DC members receive more practical help warns Kevin LeGrand, Society of Pension Consultants

Auto-enrolment has to work. The figures showing the number of pensioners in prospect over the next few decades display a yawning chasm between their increasing life expectancies on one side of the balance sheet and the levels of monies put aside to...

AUTO-ENROLMENT Paper weight

It looks like there will be more paperwork for trustees to do, with the arrival of auto-enrolment warns Lesley Browning, Norton Rose

learly, auto-enrolment is primarily an obligation of employers who employ "eligible jobholders", but there are still a number of issues which trustees will need to consider and agree with employers in advance of the employer’s...

Investment brief

INVESTMENT BRIEF A boardroom vacuum

Are the controls on top directors tough enough? asks Anthony Hilton, Evening Standard

This spring may go down as the time when shareholders finally lost patience with companies about executive pay. Hermes, the manager of the British Telecom pension scheme, together with the National Association of Pension Funds, announced that it had...

Knowledge bank

BEGINNERS' PAGE Who do I auto-enrol?

Phil Daniels, Capita Hartshead, on how to work out who is an “eligible jobholder”

The question of who needs to be auto-enrolled is commonly raised by employers and many have been surprised by the answer. Why? Because most employers thought that the rules would be relatively simple and that it would be easy to set up, administer...

TRUSTEE TOPICS Suitable lifestyle?

In the light of auto-enrolment, trustees need to look again at their default design suggests Saqib Hussain, PricewaterhouseCoopers

With the introduction of auto-enrolment, one of the biggest challenges that trustees are going to face is ensuring that their default investment option (DIO) continues to be suitable for members. A key principle of auto-enrolment is that...

PENSIONS PROGRESS All the sixes

The Pensions Regulator’s approach to DC outcomes in workplace pensions

The Pensions Regulator has set out its approach to maximising employer compliance with the auto-enrolment duties and supporting the pensions industry to deliver defined contribution (DC) schemes with the characteristics necessary for good member...

TAX AND BENEFIT NOTES Testing for ill health

The Green decision on payment of ill health pension could cause headaches for trustees explains Gareth Soanes, Allen & Overy

Reaching a decision on whether or not to pay an ill health pension can be a tricky and sensitive process. Competing issues are often finely balanced and the only certainty is that the outcome will have an immediate and significant impact on the...

Letters

To the Editor - May 2012

The emperor’s new pension Pensions for men and women were supposed to have been equalised in the early 1990s, following a number of cases in the European Court. It is extremely difficult to compare men’s and women’s pensions, as...

Napf update

NAPF UPDATE - May 2012

Napf Update - May 2012

News

In Brief - May 2012

Capita buys Bluefin Capita’s pension business, Capita Hartshead, is to acquire Bluefin Corporate Consulting from AXA. The deal, worth £50m, will see the two businesses merge. Bluefin Corporate Consulting’s chief executive Nick...

One third of FTSE 100 firms offer only DC plans

The number of FTSE 100 companies providing defined contribution (DC) pensions to staff has increased to an all time high according to a Towers Watson survey. One third of FTSE 100 companies now offer DC only schemes to all employees – more...

500,000 DB members get pensions from buyout firms

Over one million members of defined benefit (DB) pension schemes will receive their pension from insurance firms by 2017 as more companies and trustees de-risk their pension liabilities using insurance, according to the fifth annual LCP Pension Buy-...

Bankrupt’s pension no longer safeguarded

A bankrupt could now be forced to draw their pension and hand it to their creditors, following a High Court judgment of 4 April. Damon Watt, principal of EMW, says: "Until now a bankrupt’s undrawn pension has generally been considered out...

ACA welcomes pension minister’s conversion to defined ambition

The Association of Consulting Actuaries (ACA) has expressed its strong support for the pension minister’s initiative to back a range of "defined ambition" workplace pension schemes. Stuart Southall, ACA chairman, commented: ...

HMRC: salary sacrifice change

HM Revenue & Customs (HMRC) has made a salary sacrifice guidance change which means workers opting out of auto-enrolment cannot be left out of pocket. The change also provides much needed clarity to employers about the validity of salary...

Increase in part time workers could cause auto-enrolment nightmare

Millions of workers could be put off saving into a pension unless changes are made to auto-enrolment requirements for part time workers, says Bluefin Corporate Consulting. Official data shows that in the final quarter of 2011 the number of part time...

How to improve DC outcomes by 40–60%

Employers can improve member outcomes on average by about 40–60%, crucially without the requirement for additional employer and employee contributions, according to JLT research Business benefit or blind faith?, if they adopt JLT’s ten...

International news - May 2012

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

Japan: investment scandal prompts governance focus The inability of asset manager AIJ to account for most of its funds under management has led to a review of governance by corporate pension schemes in Japan. AIJ, which managed more than 90...

GMP equalisation could increase employers’ costs by £13bn

The government’s proposals to equalise guaranteed minimum pensions (GMPs) would create massive costs and administrative burdens, pensions experts warned. The National Association of Pension Funds (NAPF) argued that new legislation being...

Association forum - May 2012

The Pensions Advisory Service New advisers I am pleased to welcome Neil Dickey, Heather Mawson and Andrew Trowse as new advisers to TPAS. We are always looking for volunteers to help with casework, which can be dealt with from home. It is not as...

Regulation roundup - May 2012

Embedding the six principles of good design and governance into auto-enrolment products

Our ongoing dialogue with key providers, advisers and industry representatives from the defined contribution (DC) pensions market is giving us valuable insight into how the industry feels it can embed our six principles of good design and governance...

INTERNATIONAL NEWS – May 2012

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

Japan: investment scandal prompts governance focus The inability of asset manager AIJ to account for most of its funds under management has led to a review of governance by corporate pension schemes in Japan. AIJ, which managed more than 90...

FSA too busy, says Labour

The Labour Party would consider removing pensions from the Financial Services Authority’s (FSA's) remit, according to Shadow Pensions Minister Gregg McClymont. Mr McClymont said: “There is this concern that the FSA has too much on...

Supreme Court rejects age discrimination appeal

The UK Supreme Court has dismissed an appeal by a lawyer who claimed age discrimination when his firm forced him to retire on his 65th birthday, ruling that the partnership contract that mandated retirement at 65 was justified in this case. The case...

TPR's decision hits shares

The Pensions Regulator’s (TPR's) announcement, in its first annual funding statement of 2012, that it will cut no slack for pension schemes suffering from the government’s quantitative easing (QE) programme has already hit the share...

Seizing the initiative on small pots

The International Longevity Centre (ILC) UK has arranged a summit in June and invited Ministers from HM Treasury, the Department for Work and Pensions (DWP) and the Financial Services Authority in what it hopes will be a public forum to discuss...

Hutton to lead MyCSP

My Civil Service Pension (MyCSP) officially began operations on Tuesday 1 May. The part privatised venture – which ministers are keen to align with a John Lewis partnership model – is 25% owned by staff, 35% by the government and 40% by...

People

IN GOOD COMPANY May 2012

Pensions World keeps you up to date with the latest news of hires and flyers

Consultants JLT Pension Capital Strategies has appointed Martyn Phillips in a new role as head of buyout consulting. Prior to joining JLT, Martyn was a senior consultant at Lane Clark & Peacock where he focused on consulting with corporate...

Statistics

STATISTICS - May 2012

Statistics - May 2012

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