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Pension Funds
Insider

PIP infrastructure fund completes first equity investment

The acquisition marks an important milestone for Pensions Infrastructure Platform (PIP) because it is the fund's first equity investment.

PIP acquired the turbine portfolio from Golden Square Energy, a leading renewables business, and the turbines are at various sites across the UK.

Mike Weston, PIP chief executive, said the acquisition is another landmark in the organisation's development: "We are pleased to be able to work with Golden Square Energy and our advisors on this transaction, which provides pension scheme investors with the secured, long-term, inflation-linked cash flows they are seeking to support their accrued pension payment obligations."

"Revenue from the acquisition, combined with guaranteed availability under long-term contracts, will provide investors with 20 years of inflation linked cash flows," he added.

Following the deal, MSIF plans to continue to build on the investment, and its previous investment grade, inflation linked debt refinancing transaction, to deliver a broadly diversified portfolio of UK infrastructure assets for its pension scheme investors.

Baiju Devani, investment director at Golden Square Energy, said: "We are delighted to have worked with PIP to complete this transaction.

"The venture was established with the objective of developing and operating high quality renewables projects which bring value to the UK economy and our investors.

Achieving endorsement from a major institutional investor such as PIP is testament to the quality of the portfolio and our commercial relationships."

Dr Barbara Weber, founding partner of B Capital Partners, the acquisition advisors, says: "PIP's direct equity investment in this low-risk portfolio demonstrates the attractiveness to institutional investors of controlling key parameters such as holding period, leverage and contractual structures, which strongly influence the risk-return level of any given investment."

PIP is a dedicated infrastructure investment manager, which was established by pension schemes, for pensions schemes, to facilitate long-term investment into UK infrastructure.

First published 02.12.2016

Lindsay.sharman@wilmingtonplc.com

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Pension Funds
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Ban on cold calling

As my first blog after the much anticipated and long-awaited Autumn Statement last week, it made sense for me to talk about that and the impact it had on pensions. And what was that impact? Very little.

However it still managed to introduce some changes that will have a potential impact on administrators!

Ban on cold calling

The really good news is that the government has shown a clear intent to disrupt scams. It will consult on banning cold calling in connection with pensions scams.

This is a great first step, first proposed by the Pension Liberation Industry Group (of which PASA is a founder member) in its 'Options for Change' paper presented to government in May 2016.

However, banning cold calling must not be seen as the cure for all ills and it could tempt government and regulators to view it as "job done".

The devil will be in the detail, but what is clear is it?

• will take time to have effect
• will need communications drive to make it known to members
• may prove difficult against calls originating overseas
• will not stop internet lures, but will slow down the scams for a while.

Banning cold calling will reduce transfer workloads of course, but it will increase the acrimony for those who really want to transfer and administrators will bear the brunt of this.

The downside is that announcing the change as consultation gives the scammers an opportunity for a fire sale, so there could actually be a huge increase in calls and pressure to transfer before any legal changes get off the ground.

This is a real danger and could therefore increase the number of transfer request so much more due diligence is needed in the short term. Processes and communication with members on scam risks will need to change to refer to the ban, but, inevitably the stress of transfers will increase while it beds in.

While legislation is awaited, we should allow trustees to refuse transfers that arise from cold calling. Good guys (i.e. regulated advisers) do not cold call.

Administrators could simply ask the member for the source of their request (this is part of due diligence already, but could be asked at the outset when a transfer request is received).

This would be a discretionary refusal and therefore unwelcome as it introduces a risk of being challenged later, but the Ombudsman and regulators could accept this process and effectively create a special safe harbour from maladministration where cold calls are involved.

This could cut out a lot of due diligence on the provider if the cold calling aspect was viewed as seriously as government now implies it will be. Time to be bold.
Power to block suspicious transfers

Giving trustees greater powers to block suspicious transfers is welcome too, but it could mean either a discretionary power for non-statutory transfers or a change to the statutory right to transfer itself, perhaps to introduce an earnings link as recommended by PLIG and others.

Discretion

Discretion looks good on the surface and could work, because the trustees' role is to exercise judgment, but it takes a brave trustee to use it against suspected scams.

It brings the risk of challenge down the line if the decision is not liked and this would inevitably result in financial risk and hassle for the administrator associated with settling such a transfer.

Discretion (for non-statutory transfers only) would therefore need to come with a "safe harbour" from HMRC, PO and TPR. Discretion would still require due diligence on the receiving scheme and to determine whether a statutory right exists.

Earnings link

Introducing an earnings link to statutory right to transfer to an occupational pension scheme would give greater clarity. However, it needs careful thought to make it work and administrators would be required to check that the link exists and was not bogus.

Either approach would require new processes, training and potentially more work in the short term, but done the right way could eventually ease the workload and reduce the level of uncertainty and financial risk that administrators currently face.

The statement was a great step forward and over time the measures could make life easier for administrators and help protect members from the unscrupulous. The work needed to change processes and communications would be worth it to stop the flow of savings to scammers.

However, whatever emerges from the consultation, it must give greater assurance than the current good faith defence, which seems to be of little value, given the number of scheme sanction charges levied against administrators by HMRC.

The PLIG Options for Change paper can be seen in more detail on the website www.combatingpensionscams.org.uk

First published 02.12.2016

Lindsay.sharman@wilmingtonplc.om

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European pensions plans warn of post-Brexit risk

The report, by Create Research and Amundi, questioned 169 pension plans in Europe with combined assets of €1.76 trillion.

Schemes were asked about three key issues: how rising nationalism will affect financial markets over the rest of the decade, what asset allocation approaches are likely to be adopted, and which investment innovations are likely to deliver acceptable results in the volatile environment.

92% of survey respondents anticipate increased volatility over the next three years and 76% expect market prices to disconnect from fundamentals.

When it comes to how Brexit will impact their pension plans over the next three years, 54% said they expect investment returns to decrease, while 68% predict increased financial deficits.

The number of UK pension plans in deficit has already risen to 4,995 from 4,854 at the end of May 2016.

Pascal Blanqu?©, chief investment officer of Amundi, said: "Pension plans across Europe have come to realise that they have a stark choice in this era of negative yields – continue to do what they have been doing and march nobly off a cliff, or adapt and change.

"Central banks and markets appear caught in a tight embrace for the foreseeable future, and to survive the turmoil investors need to venture before financial theories to develop new insights into generating returns."

The report also found that in a political environment that includes a rise in nationalism, global equities and infrastructure are the asset classes of choice, favoured by 57% and 50% of pension schemes respectively.

Alternative credit is the next most popular choice (46%), followed by private equity (42%).

As asset values have become distorted by monetary policy, pension plans are viewing innovation to be essential for future success, the report found.

Low carbon strategies and environmental, social and governance (ESG) initiatives are seen to be game changers, because the markets will be increasingly pricing in the recent climate change targets.

First published 02.12.2016

Lindsay.sharman@wilmingtonplc.com

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deVere boss commends overseas pensions tax plans

Plans to more closely align Qualifying Recognised Overseas Pension Schemes (QROPS) with UK rules were announced in last week's Autumn Statement.

Under the plans, QROPS will be taxed in the same way as a UK pension for anyone who then later returns to the UK.

Currently 90% of income from a QROPS is subject to income tax, as opposed to 100% in a UK pension scheme.

Green said that as well as the tax alignment, member payment provisions will extend from five to 10 years, and the eligibility criteria for a scheme to be listed as a QROPS will be tighter.

"I welcome the government's plans as they will help ensure QROPS are not misused or mis-sold," he said.

QROPS are designed to provide an income in retirement for those permanently living outside the UK or planning to do so, as well as to offer all the many associated financial benefits of having an HMRC-recognised pension scheme based in a jurisdiction outside the UK.

Green says the move means clients are even more protected, which in turn makes QROPS an even more attractive option.

He said: "It further highlights that QROPS still keep the same standards or equivalent as UK pensions, that they are fully part of the retirement planning 'establishment', and the deployment of more and more government resources demonstrates the market it well-governed."

Green predicted the changes will trigger a surge in the number of people seeking to transfer their pensions out of the UK, before the new plans come into full effect.

"As the world becomes ever more internationally mobile, international pension planning is, of course, by default, an enormous growth area.

"As such, I welcome the plans to make the overseas pension transfer market even more robust."

First published 02.12.2016

Lindsay.sharman@wilmingtonplc.com

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Pension Funds
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Christmas comes earlier and earlier each year, but never early enough

I have just returned from our office in Australia where the streets of Melbourne are adorned with Christmas decorations.

They have been like this since the second week in November. Is this too early? Apparently not.

There were queues of people lined up to view the Christmas window displays of the Myer store in central Melbourne. Snowy images as people were walking around in shorts and flip-flops.

Definitely a degree of incongruity but what was undeniable was the excited faces of the children, full of anxious anticipation of what Christmas might bring. Do children still have to be "good" to get the full benefits of Christmas?

Naturally my thoughts went to their pension savings (in Australia, superannuation). What would need to happen to create the same anxious anticipation for their retirement day and the reward of a great pension?

What does being "good" look like in a pensions context? I'm sure for many parents they are only able to extract the value of "being good" in the few weeks leading up to the big event. Does it really mean anything to a 5 year-old to be warned in January "if you're not good Santa might not come this year!?"

The pension parallel is palpable. How do we expect to engage the behaviour of millennials by saying "be good now or you won't have a comfortable retirement"? To them the concept of retirement is so distant it might as well be a myth. It doesn't work on our children and it doesn't work on us.

As with our children, we need to change our communication. Parents break down the year into a series of short-term rewards to look forward to: birthdays with parties and presents, Easter with chocolate indulgences, holidays with fun in the sun, etc.

Let's start doing the same with pension fund communication. There is no point overwhelming a new entrant to the workforce with their savings destination of retirement.

Why not break down the journey with milestones and celebrations.

We call them pension opportunity points – celebrate each contribution with "congratulations you've been paid twice, you second pay is in your pension pot"; celebrate contribution milestones with "congratulations, you have just made your 50th pension contribution"; celebrate balance milestones with "congratulations, your pension balance is now more than your annual salary"; even better, encourage new behaviours with "if you increase your contribution by "£x" you'll reach £50,000 "y" months faster".

For me Christmas is way too close!

Peter Nicholas,Managing Director & CEO, AHC.

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Pension Funds
Insider

Pension cold calling to be criminalised

Under new rules, regulators will have the power to fine those responsible for calling up to £500,000.

The only people able to call pensioners with an investment opportunity will be regulated companies who have a previous relationship with the recipient.

Pension reforms introduced in April allow savers aged 55 and over to withdraw any amount of savings from a defined contribution scheme they want to, subject to tax.

This has seen an increase in opportunistic callers offering highly risky or spurious investment opportunities, which often begin with the promise of access to savings below the age of 55, or 'free' pension reviews.

Former pensions minister Ros Altman, praised the move: "We have to do whatever we can to protect the public against fraudsters and by making cold calling illegal,' she said.

"Now it is much clearer for the public that they just should not engage with such people."

Malcolm McLean, senior consultant at Barnett Waddingham, said the decision is long overdue.

He said: "Whatever the merits or demerits of pension freedoms, there is little doubt they increased the scope for the scammers to target many more vulnerable people, who in many cases for the first time had access to large cash amounts.

"We must continue to emphasise that individuals have to accept responsibility to protect themselves as best they can, and decline to deal with anybody they don't know or who contacts them out of the blue."

Pension Life, an organisation set up to identify and prevent pensions scams, also welcomed the move to close loopholes in pensions law.

Angela Brooks, Pension Life chairman, said the plans are a "golden opportunity" but the government could not afford to become complacent.

She said: "While I have no wish to detract from the good news, the government must recognise that cold calling is only one of the tools in the scammers' arsenals and that their tricks and techniques are constantly evolving.

"Sadly, it is not just unregulated scammers who are promoting such scams, but a few regulated UK firms as well."

First published 25.11.2016

Lindsay.sharman@wilmingtonplc.com

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New research shows pension expectations

The report, Retirement Income Adequacy: Generation by Generation, analysed the incomes for different generations – from so-called baby boomers to generation X, and millennials.

It found that of the 25.5 million people in employment, 1.6million are still at high risk of falling short of a minimum income standard (MIS) in retirement; and 13.6million are still at risk of not meeting their target replacement rate (TRR).

Millennials, or those born in the 1980s and 1990s, will be the first generation to experience the UK pension system as intended by the reforms of the last decade, including saving over a full working life through automatic enrolment.

To achieve TRR, millennials will need to make higher pension contributions and work slightly longer than previous generations.

By contrast, many in generation X, people born in the 1960s and 1970s, did not save into a pension in their early working lives.

Although many are now automatically enrolled, their pension contributions alone are unlikely to close the gap, and they are likely to need to work longer and utilise other assets to generate a higher retirement income.

Some baby boomers, those born in the years following World War Two, have a very good retirement income, but others are poorer by comparison.

Those without a defined contribution pension will be mostly dependent on the state pension, while others have some wealth in property.

Graham Vidler, PLSA director of external affairs, said the research showed that automatic enrolment will deliver a tangible improvement in the retirement incomes of millions of people, but there is still work to do.

He said: "For younger savers increasing their automatic enrolment contributions from 8% to 12% and working slightly longer puts them on track for their target replacement rate.

"For older workers, who have less time to save, achieving their target replacement rate may also require a choice to save more and using other assets, such as property, if they have them."

Vidler said it is clear from the analysis that minimum contributions under automatic enrolment need to increase to at least 12%.

First published 25.11.2016

Lindsay.sharman@wilmingtonplc.com

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Autumn statement announced

Pensions experts have largely welcomed the statement, with many agreeing that changes to employee benefits will offer an opportunity for employers to push their pension arrangements.

Daniel Taylor, director of pensions administration specialist Trafalgar House, said employers that are heavily reliant on benefit schemes to make National Insurance savings, will need to find new ways to fill the cost gap.

He said: "Employers have been motivated to promote the wider benefits schemes with a façade of staff empowerment and choice, but with the very real benefit of having an NI saving on their balance sheet."

"Now is the opportunity to turn the tide on the fall in popularity of employers encouraging pension savings through the workplace and start promoting the benefit of employees saving more for a safe and secure retirement."

Pension Funds could also benefit from some of the measures announced around infrastructure, including £23bn to be spent of innovation and infrastructure over five years.

These new projects and investments, could present opportunities for some funds to claw back their deficits, according to Vivek Paul, director of client solutions at BlackRock.

"Though no silver bullets exist, the Chancellor's announcement of new infrastructure projects highlights one avenue of opportunity for pension funds," he said.

"A natural advantage for pension funds, relative to many other investors, is their greater ability to hold illiquid assets – and we believe most pension funds should be holding a greater allocation of these assets than they currently do."

"Any increase in the future supply of infrastructure assets, accessible to pension funds, would be welcome," he added.

Despite the positive reception, some have pointed out the missed opportunities to make improvements to the pensions sector.

The Pensions Management Institute (PMI) said it believes more could have been achieved.

PMI president Kevin LeGrand said: "We are encouraged the Chancellor recognises that Salary Sacrifice is a legitimate mechanism for making contributions to registered pension schemes and we are pleased that its use for pensions has been excluded from the changes announced."

"But it is unfortunate the government has not heeded criticism from the pensions industry and has retained the tapered annual allowance as its removal would have been a welcome simplification for administrators and members."

He added that the company was "surprised" the government has not done more to encourage pensions schemes to invest in infrastructure.

The launch of a consultation before Christmas, that will look at ways to tackle pensions scams, including banning businesses from cold calling someone, was also announced.

The ban will include scammers targeting people who inadvertently 'opt-in' to receiving third-party communications.

First published 25/11/2016

Lindsay.sharman@wilmingtonplc.com

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Pension scheme inflation hedging increased

The quarterly Liability Driven Investment (LDI) survey showed inflation hedging grew from £23.2bn to £25.8bn, becoming the second most active quarter in the LDI survey's history.

This activity is mainly comprised of new client hedging activity due to a growth of client appetite to de-risk.

Switching activity, where pension funds move between equivalent assets in order to lock in a yield gain, accounted for the rest of the activity over the quarter.

There was also a continuation of a trend from the previous quarter, which saw pension schemes switching out of swaps into bonds, particularly into real rates.

As part of this quarter's survey, BMO asked respondents their views on likely policy and issuance changes to be announced in the Autumn Statement.

The survey, which polls trading desks of investment banks on volumes of hedging transactions, revealed an expectation of a modest loosening of fiscal policy, with a corresponding increase in the forecast gilt issuance.

The markets response to these policies, in terms of growth projections or issuance, could have a significant effect on long-term yields.

Rosa Fenwick, LDI portfolio manager at BMO Global Asset Management, said markets are still reeling from the result of the EU Referendum.

"Fiscal easing is expected from the government at the Autumn Statement, but the risks are finely balanced and the reduced liquidity often seen towards the end of the year could result in exaggerated moves in rates."

"Given the backdrop, our counterparties now predict a fall in the inflation rate and a rise in nominal and real yields, however with low conviction on each metric," she said.

"This highlights the uncertainty in the market and the impact that monetary and fiscal policy can have on the progression of rates"

First published 10.11.2016

Lindsay.sharman@wilmingtonplc.com

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Workplace pension savers back higher contributions

The survey of 2,000 people, who are currently paying into a workplace pension, found 52% said they would contribute more than 5% of their salary themselves, with almost a third (29%) saying they would pay in 10% or more.

Under auto-enrolment, the current minimum pension contribution for an employee and their employer is 2% of salary (including tax relief), rising to 5% in 2018 and 8% in 2019.

Employers are also willing to contribute more, according to research among Aviva's larger workplace pensions clients.

It found two thirds (68%) of larger employers surveyed said they would be willing to pay more than the 3% of an employee's salary that will be asked of them in 2019.

One in seven said they would be willing to contribute 10% or more to their employees' pensions.

Despite a perceived resistance to AE by smaller businesses, 43% of Aviva's small or medium sized (SME) clients surveyed also said they would be willing to pay in more than the minimum.

Andy Briggs, Aviva UK and Ireland Life CEO, emphasised the importance of continuing to develop auto-enrolment.
"Auto-enrolment has undoubtedly had a positive impact on the pensions landscape in the UK, but we are just at the start of this journey," he said.

"Now that AE is embedded in over 250,000 businesses we need to build on the success we've had already and work out exactly how we're going to crack this pension savings challenge."

Briggs said average contribution rates in DC pensions schemes have consistently fallen since 2012, as employers and employees adopt the minimum level of contribution by default.

He stressed the need for greater contributions to provide adequate funds for retirement for millions of savers.

"The government, regulators, the pension industry and employers now need to work together to address this and give as many people as possible the best chance of a happy and prosperous retirement."

First published 18.11.2016

Lindsay.sharman@wilmingtonplc.com

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Brexit pursued by a Trump

Nearly six months after the Brexit referendum, British politics continue to struggle with the consequences of its outcome.

Even now, there is a lack of clarity as to how and when the UK's departure from the European Union is to be implemented. Perhaps all that is known with certainty is that the Government was so confident of winning that it made no contingency plans for a 'leave' victory, and Theresa May now finds herself having to improvise an exit strategy.

The dramatic devaluation of Sterling has had an immediate impact on pension scheme funding, but the longer-term consequences for pension provision are harder to fathom.

For all the pro-Brexit hyperbole about the extent to which UK law has been dictated by Brussels, at this stage it seems unlikely that there will be much change.

Where a European Judgment has required changes to UK law, any subsequent change will require support from the Government, and it seems very possible that much European legal influences will be retained after Brexit.

In any event, any Great Repeal Bill is likely to focus on long-established shibboleths of the Tory right, such as preventing prisoners from voting, rather than recherch?© topics such as funding standards for Defined Benefit pension schemes.

There are; however, two subjects which are commonly mentioned where future UK pensions law might deviate from European requirements.

On 17 May 1990, the European Court judged that Douglas Harvey Barber had suffered discrimination on the grounds of his sex. The Judgment required that Guaranteed Minimum Pensions (GMPs) be equalised, although to this day it remains unclear as to how this might be achieved.

The dis-application of the Barber Judgment might remove the requirement for GMPs to be equalised, and if only from the perspective of pragmatism, this might prove an attractive option for the Government.

Another possible change might be the restoration of gender-based annuity rates. Ever since the Test Achats case introduced the requirement for equalisation, there has been an enduring criticism that the recognised differences between male and female mortality patterns had introduced a gender-based cross subsidy to the annuity market.

Reversing this might improve the image of an often-criticised sector of the pensions industry.

There is also a separate but related issue for the industry to consider.

One possible consequence of Brexit would be Scoxit, as momentum builds for a second Scottish independence referendum.

Were Scotland to secede for the existing UK, many existing UK pension schemes would become cross-border arrangements operating across the EU's border, and this would introduce new legal complexities.

The Brexit referendum had an unexpected outcome and has given rise to an unpredictable future. Its impact for pensions has been unsettling, and we should now prepare for perhaps a decade of uncertainty.

If nothing else, the lessons of June and November 2016 have taught us the importance of being able to expect the unexpected.

Written by Tim Middleton, Technical Consultant, PMI.

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Trump victory benefits DB schemes

According to data from its real-time analysis, Hymans Robertson said the deficit now stands at £825bn, down £200bn from a record high of more than £1trillion in August.

The reduction is due to rising bond yields, which are due, in part, to revived inflation expectations following the policy pledges made by the President-Elect, Donald Trump.

Hymans Robertson said this could create a significant opportunity for some schemes to reduce risk.

Calum Cooper, partner at Hymans Robertson, said the "Trumpflation" effect means growth-focused assets are likely to benefit from some of Trump's unexpected policies, such as spending on infrastructure, tax cuts and trade protectionist policies.

He said: "Following a significant rally earlier this year, positions in fixed income assets have been unwinding due to emerging signals from the Federal Reserve of higher economic growth and interest rate rises."

"This has been amplified significantly by what the market has been calling the 'Trumpflation' trade."

However, Cooper urged schemes to focus on a long term approach: "If the experience of the past year, and particularly the past six months has taught us anything, it's that deficits can be extremely volatile," he said.

"These huge gyrations in headline funding figures should not knock schemes off course and a long term focus needs to be maintained through short-term political fog and uncertainty."

Hymans Robertson estimates the reduction in the deficit means some schemes could reduce their growth asset allocations by 10% or 20%.

"Even when looked at through a long-term lens, this is strategically significant," Cooper said.

"But, given this risk and opportunity, it's really important that schemes are clear on the level and types of risks they're running; whether less risk can be taken given recent yield rises; and whether component risks could be better diversified."

"Overall this should lead to increased resilience to adverse cashflow and balance sheet events," he said.

First published 18.11.2016

Lindsay.sharman@wilmingtonplc.com

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FCA announces Lifetime ISA guidance

The LISA is a product to allow people under the age of 40 to save or invest – either to provide a deposit for a first home, or save for retirement.

The FCA wants to regulate the LISA in the same way other ISA products are regulated, along with some additional protections that are designed to reflect the dual purpose of a LISA and the restrictions on accessing funds.

The organisation said its three key objectives are - to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.

Under its proposed rules, firms will be required to give specific risk warnings at the point of sale, which include reminding consumers of the importance of making sure an appropriate mix of assets is held in the LISA.

The FCA has proposed that providers will have to offer a 30-day cancellation period after selling the LISA, and firms will also have to remind consumers of the early withdrawal charge – and any other charges.

Richard Parkin, head of pensions policy at Fidelity International, welcomed the guidance and said the main focus for LISA should be communicating the impact of the exit penalty.

He said: "We understand government's desire to discourage early withdrawals, but we remain unconvinced the penalty is necessary."

"There are clearly risks for firms from disgruntled investors who don't understand the penalty - no matter how clearly it is presented at the point of purchase – and it's important customers don't see the penalty as a provider charge or exit fee."

LISA was announced in the 2016 budget and the government plans to launch it in April 2017.

First published 18.11.2016

Linday.sharman@wilmingtonplc.com

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Protecting your greatest asset

Those of us with short memories may have thought the Pension Regulator's recent warnings about cyber security were a form of divine foresight given the very public data breach suffered by Tesco Bank shortly after it was released.

While the timing of this most recent cyber attack has reinforced the Regulator's warnings, it has more to do with hindsight rather than foresight and the mounting inevitability of a similar attack hitting the pensions industry.

Even those with only a passing interest in data protection issues will have noted the rise of cyber crime through the headlines.

Sadly, this is being borne out through the statistics, which are all pointing to the same conclusion: things are bad – and getting worse.

One pretty reliable measure is the number of security breaches reported to the Information Commissioner's Office (ICO), which rose from 1089 in 2015 to 2048 this year; showing an 88 per cent increase, with the primary reasons external attacks and data being disclosed in error.

This knowledge was obtained from the ICO by Huntsman Security through a freedom of information request.

So the Regulator is absolutely right to be reminding trustees that there is an active threat and that they should be alive to it.

But what questions should they be asking of their administrator to understand the measures in place to prevent and detect an attack? There's a lot to consider, and trustees often put off asking questions because of the risk of being bamboozled with a flood of geeky technical IT responses.

They shouldn't be, the starting blocks are really quite simple. They need to be assured that data is being stored and handled with care and that their administrator has experts in place to support, test and report on the measures in place.

If you're a trustee or a pensions manager, you can start the process by following these six (relatively) simple steps:

1. Find out where your data is

Trustees need to start by finding out where their administrator is storing their data – and that means all of it. They need to know the actual location of both physical and digital data and how it moves between different locations. This has become increasingly important with the widespread use of cloud-based administration systems and administrators putting offshoring arrangements in place.

2. Find out who has access to your data

It is highly unlikely that only your administrator has access to your data. To deliver a fully comprehensive service your administrator will inevitably need to share your data with system hosting providers, printers and specialist tracing agencies. Make sure you know who these agents are and that the measures they have in place to safeguard data are at least as good as your administrator.

3. Find out what happens to your data when it is processed

This can often be the part where it all gets too techy, so try to keep things simple. Fundamentally, you need to know what technology is being used to encrypt and back up your data.

4. Find out if any attacks or data losses have been experienced

If your administrator is not proactively reporting on this, you need to formally ask if they have suffered any attacks or losses that resulted in a report to the ICO. Most administrators only tell the individual clients affected by any potential or actual data breach, but having visibility over these events can better inform you about the risks to your own scheme.

5. Get a copy of test results

Your administrator should be testing the robustness of the systems and processes that have put in place to protect your data.

Tests should be performed at least annually and you should get a copy of the results to see if any gaps have been identified.

While much focus is given to external threats, a lot of cyber crime is committed by people within a business, so your administrator should also be testing internal processes and procedures to see how well they perform – even better if they pay for a third party specialist to independently test some or all of this.

6. Get specialist advice if you need support

Just as you would in any other area of pension fund management, turn to the experts for additional advice if you're not totally satisfied with the answers you're getting, or if you simply don't understand them.

There are plenty of specialist IT security consultancies who can help you review your administrator's systems.

Alternatively, you can turn to a specialist administration consultant if you need expert comment on any potential procedural failings.

The amount of data being harvested, processed and stored by administrators has increased massively over the last decade. What was once paper, is now digital, what was once locked away on private networks is increasingly being published to the web.

The frequency and sophistication of threats is growing, as is the appetite for trustees to bring more content online to their memberships.

Don't let your pension scheme be the next headline, take the time now to properly examine how exposed you and your members are to this mounting threat.

Written by Daniel Taylor, Director, Trafalgar House Pensions Administration.

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PLSA call for improved reporting on workforce

The letter asks the companies to provide fuller information with investors about their culture and working practices.

Supported by the Pensions Minister Richard Harrington, Newton Investment Management, and USS Investment Management Limited. The letter highlights how the management and engagement of the workforce can have a material effect on a company's long-term performance.

PLSA says it is "essential" that pension funds know more about how the companies in which they invest, manage and engage their employees.

Joanne Segars, PLSA chief executive, said: "We know that engaged workers make for stronger companies, and stronger companies make for better investment returns – creating an economy that works for everyone."

"So that is why we are calling on companies to make more information about their workforces available to pension funds and other investors."

Previous research cited by the PLSA has highlighted the limited detail that UK companies currently provide about their workforce.

Fewer than half of FTSE 100 companies detail their level of staff turnover in their annual report, while only 11 per cent break down their total staff by full-time, part-time or temporary employment status.

Pensions Minister Richard Harrington welcomed the move: "The status of a firm's workforce can be a key issue for investors such as pension schemes, so a toolkit that helps businesses give them the data they need is a good thing."

The PLSA toolkit, Understanding the worth of the workforce, was published in July and outlines the type of information about workforce-related issues that pension fund investors should request from the companies in which they invest, and how this information could be most helpfully presented to investors.

The toolkit identifies the key performance metrics for assessing potential risks and opportunities facing companies as a result of the composition, stability, capacity and engagement levels of its workforce.

It also recommends ways in which investors can encourage better reporting through private engagement and voting at company AGMs.

First published 10.11.2016

Lindsay.sharman@wilmingtonplc.com

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HSBC adopts new climate change risk fund

The Future World Fund, a multi-factor global equities index fund, incorporates a 'climate tilt' that reduces exposure to companies with poor environmental credentials.

The Fund has been chosen by HSBC Bank UK Pension Scheme, one of the largest corporate pension funds in the UK.

HSBC chose the fund for its equity default option, worth £1.85billion, in its Defined Contribution (DC) scheme.

It is one of the first schemes to adopt a multi-factor investment strategy incorporating a degree of climate change protection as its default fund.

Mark Thompson, chief investment officer at the HSBC pension scheme, says the fund represents a 'new normal' for the industry.

He said: "We believe this fund will offer our members a better risk adjusted return, incorporate greater climate change protection, and deliver improved company engagement – this is a mainstream fund."

The Fund tracks a climate change index, the FTSE All-World ex CW Climate Balanced Factor Index, and targets better long-term risk-adjusted equity returns.

Its 'climate tilt' reduces exposure to companies with worse-than-average carbon emissions and fossil fuel assets, and increases exposure to companies that generate revenue from low-carbon opportunities.

LGIM chief executive Mark Zinkula, said the Future World Fund retains the transparency and low-cost characteristics of a conventional index fund, but adds enhanced investment returns.

He said: "Climate change-related policies and new technologies will play an important role in shaping our future, and the companies able to adapt should be well-placed to deliver returns."

"Pension fund trustees need to make sure they are able to offer better risk-adjusted returns while helping manage climate change risk."

The Fund has also garnered support from the Chancellor of the Exchequer, Philip Hammond: "This ground-breaking new fund is a testament to our status as the world's leading financial centre."

The UK's ability to continually innovate, means it is well-positioned to benefit from the opportunities a growing green finance industry presents, he added.

Climate change has risen to the top of political, regulatory, and business agendas recently, following the landmark Paris Agreement from the UN Climate Change Conference in 2015.

The agreement, which came into force on 4 November, is the first-ever universal, legally binding global climate deal.

First published 10.11.2016

Lindsay.sharman@wilmingtonplc.com

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What should trustees do if approached by a bankrupt pension scheme member's trustee in bankruptcy?

The Court upheld the High Court decision of the Deputy Judge in Horton v Henry (2014) confirming that a trustee in bankruptcy cannot access uncrystallised funds in a bankrupt's pension arrangements (or force the bankrupt to access them himself).

To read this article please click here

For more information about the author Hannah Beacham please click here

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