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Pension Funds

Administration Standards for Master Trusts – why are they needed?

As Auto-enrolment becomes embedded into the UK pension landscape, it's predicted that most employers will seek to comply with their regulatory responsibility by enrolling new members into Master Trusts.

Earlier this week, PASA announced that it had been looking at how traditional occupational pension scheme administration standards could be applied to these types of schemes, and had launched its first pilot accreditation process with a Master Trust, expected to complete before Christmas.

Why the focus on Master Trusts?

Most existing, and certainly all new Master Trusts, are DC. As the number of members in Master Trusts increase, so too will the pressure on the administrators to process multiple financial transactions, quickly and accurately and engage successfully with the members. These financial transactions must be reflected in the administration records through unitisation, member level and scheme level reconciliations, etc. making good use of administration and member friendly technologies.

A successful Master Trust must have top quality administration to achieve these requirements. The complexity of delivering multi-employer pension arrangements through a Master Trust is just as dependent on its administration processes as it is on achieving good investment returns if it is going to succeed in delivering good outcomes for its members,

Whilst there are other quality standards out there, none focuses entirely on administration or is outcomes-based like the PASA Accreditation. Although the Master Trust Assurance Framework is currently acknowledged as the primary standard by the Pensions Regulator (TPR), we have had positive discussions about how PASA Accreditation and its principles could fit into a future framework.

Progress to date

Over the past year, we have been working to fine tune the developed standards to address the differences in delivering administration from a Master Trust environment. There are many different types of Master Trusts focusing on different approaches to the provision of pensions, so standards should be useful and relevant to all, able to capture the nuances without compromising the quality and integrity of accreditation.

Through the pilot exercise, we will develop and improve the standards in this important area, as well as the assessment itself, so that we are ready to launch the Accreditation to the wider industry stage in early 2018. PASA is already in discussion with a number of Master Trusts wishing to achieve accredited status once the pilot is complete and we are very excited by this strong pipeline.

Written by Lorraine Harper, Chair of PASA's Accreditation Committee

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Pension Funds

ONS figures show improved disposable income for retired households

For the financial year ending 2016, 96% of retired households had an annual disposable income of more than £10,000, compared with 21% in 1977.

More than half the increase in income can be attributed to increased private pension income, which has increased nearly sevenfold over the period.

Despite the growth in average disposable income, inequality between retired households has shown increases in recent years, though they remain small relative to increases in income inequality for retired seen throughout the 1980s.

In the financial year ending 2016, retired households in receipt of a private pension had disposable incomes that were 1.6 times higher than households that were not.

Although since, FYE 2011. The average value of cash benefits for retired households has generally been increasing, those without any form of private pension income are not having their incomes supplemented enough by these cash benefits amounts to reduce overall inequality in income.

Morten Nilsson, CEO of NOW: Pensions, said the report is good news: "The positive news is that the number of workers enrolled into workplace pension schemes is at a record level as a result of auto-enrolment - employees are increasing their retirement incomes, which will give them a better standard of life in the future," he said.

"Over the next two years, increases will be made to the standard default contribution up to 8% and this is made up of 4% employee contribution, 1% tax relief and 3% employer contribution, which will benefit the many who take advantage of the scheme."

"The prospect of living on just the Basic State Pension, at less than £160 a week, is a salutary reminder for those that opt-out of workplace pensions, foregoing employer contributions and tax relief - as well as their own savings"

First published 10.08.2017

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Pension Funds

New PLSA council chairs elected

Chris Hogg, chief executive of Royal Mail Pensions Trustees, will replace Frank Johnson (non-executive director) as chair of the DB Council, and Carol Young (head of pensions policy and products, at the Royal Bank of Scotland) will replace Richard Butler (managing director of PTL) and DC Council chair.

The councils are responsible for representing the wider interests of the organisations 1,300 fund members and 400 business members as well as helping the PLSA to develop policy positions on relevant topics.

The new chairs will take up office from 20 October 2017 at the PLSA's annual conference and exhibition.

Carol Young leads the RBS teams responsible for the flexible benefits programme for more than 60,000 colleagues and DB and DC pension arrangements for more than 300,000 members worldwide.

She chairs the CBI pension panel and is a governor of the Pensions Policy Institute.

Carol's career has spanned 20 years across in-house and consulting roles and includes a decade as an investment consultant.

She has served as an independent trustee on several boards, and currently represents the sponsor at UK DB and DC Trustee investment committees.

Carol said: "The PLSA undertakes a huge amount of valuable advocacy work for the pensions industry and I am delighted to have been appointed to chair of the DC Council."

"At a time when increasing numbers of people are looking to automatic enrolment to provide them with a better standard of living in retirement, it is vital that we continue to work to create an environment where this is not only possible but encouraged."

As chief executive of Royal Mail Pensions Trustees Limited for more than four years, Chris is responsible for providing strong governance and risk management to the Trustee boards of all Royal Mail's pensions arrangements, across three well-established plans with an AUM of around £10bn.

Chris said: "DB pension schemes have over £1.5 trillion worth of assets under management and provide millions of people with a secure income in retirement.

"I am extremely pleased to be appointed to chair the PLSA's DB Council and to help shape the policy work that the organisation undertakes on behalf of these funds."

First published 10.08.2017

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Pension Funds

Buy-in and buy-out volumes almost double in first half of 2017

The increase indicates that the acceleration of de-risking activity by schemes since the EU referendum in June 2016 is showing no sign of slowing down.

Financial consultancy LCP has analysed insurer data for the first half of this year.

LCP partner Charlie Finch, said: "2017 has got off to a strong start with buy-in buy-out volumes almost doubling with around £12.5bn written in the past 12 months."

Finch said pricing has remained 'keen', driven by a high level of competition, especially buy-ins over £100m, with eight insurers actively participating following Phoenix Life's entry to the market.

LCP's analysis of the data found that Pension Insurance Corporation (PIC) wrote 37% (£1.9bn) of all business in the first half of 2017.

PIC specialises in securing the liabilities of Defined Benefit (DB) pension schemes.

The next highest market volumes were from Legal and General, with 30% (£1.5bn) of business.

Last year L&G wrote the largest volume of buy-ins and buy-outs with 33% market share, followed by PIC on 25%.

This year has also seen a record number of mid-sized bulk annuity deals, with fourteen transactions between £100m and £1bn – this compared to five in 2016 and seven in 2015.

The largest transaction was an unnamed £690m pensioner buy-in with PIC, while the largest named transactions are a £270m full buy-out for Tullett Prebon with Rothesay Life, a £250m pensioner buy-in by Cancer Research with Canada Life, and a £200m pensioner buy-in by 3i with PIC.

LCP predicts the trend will continue in the second half of the year.

Finch said: "2017 is well on track to exceed £10bn of buy-ins and buy-outs for the fourth year running, and has the potential to exceed the record £13.2bn set in 2014."

"There remains significant capacity and competition, even if a large back-book comes to market – providing attractive opportunities for pension plans to transfer longevity risk through a buy-in or buy-out."

First published 10.08.2017

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Pension Funds

New fund launched for emerging markets

The BMO LGM Global Emerging Markets Smaller Companies Fund will invest in small companies established in, or deriving a significant amount of income and profit from, emerging markets.

It may also invest a portion of its assets in frontier markets, in line with LGM Investments' benchmark agnostic investment style.

The new fund will have a long-term investment horizon and will look to invest in cash generative, high-quality companies at reasonable prices.

LGM Investments defines 'quality' under four criteria: sustainable business models, robust balance sheets, proven management teams, and a clear alignment of interest between majority and minority shareholders.

Thomas Vester, chief investment officer of LGM Investments, said LGM is excited about the launch.

He said: "The emerging markets smaller companies sector offers long-term investors a fantastic opportunity to find quality businesses that are not yet appreciated by the wider market.

"Our quality-focused process thrives in this kind of environment where we aim to identify great companies that have the real potential to grow at high rates in the long term."

Irina Hunter is the lead portfolio manager for the fund, with Claire Franklin as co-portfolio manager.

Irina Hunter, said emerging markets smaller companies are one of the few places left where a genuine information advantage can be achieved.

"Simply speaking, the sector lacks research coverage and, as such, price discovery – so as stock pickers, this gets us very excited and allows us to find fantastic businesses, achieving great things, which are simply not appreciated by the market yet."

First published 04.08.2017

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Pension Funds

Cyber risk at forefront of pension scheme concerns

Results of the firm's Pension Risk Management Survey 2017 showed that cyber security is a key risk area for both Defined Contribution (DC) and Defined Benefit (DB) schemes.

Cyber security is the fourth biggest concern for trustees of DC schemes, behind delivering value for members, fund design, and poor communication.

For DB schemes, it is the fifth biggest concern, after funding volatility, the strength of the employer covenant, implementing an appropriate investment strategy, and investment under-performance.

Eddie Hodgart, risk and assurance director at Crowe Clark Whitehill, said schemes are fully aware of the value of their data.

"There is an awareness within schemes that the personal data that they hold is a valuable commodity and that they need to act to ensure that their members' information is protected," he said.

"However, while most trustees are comfortable managing financial and regulatory risks, many feel out of their depth with non-traditional risks such as cyber security and more work is needed to educate them on managing the new and non-traditional risks that impact schemes."

The research also highlights that not enough time is being spent managing pensions risk.

Nearly 30% of pension schemes surveyed had not reviewed their risk register in the last six months, with 8% not having done so in the last 12 months.

Additional findings also showed that approaches to formally managing pension risk vary considerably within the pensions profession, with smaller schemes identified as spending the smallest proportion of time reviewing their pensions risks and rely heavily on their external consultants for support.

Hodgart added: "Despite significant political, economic and social change in recent months, many schemes have not reviewed their risks, and those who have, on the whole, are not making significant changes."

He urged trustees to get to grips with the risks posed by cyber security threats by fully understanding how their schemes could be affected – and taking steps to mitigate them.

"While resources for smaller arrangements may be limited, the end outcome of a poorly managed scheme is the same irrespective of size – members may lose a proportion of their pension.

"Effective risk management practices should apply equally to all pension arrangements irrespective of size."

First published 04.08.2017

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Pension Funds

LCP report shows FTSE 100 pension deficit increase over past decade

The 24th annual Accounting for Pensions report, by LCP, found that, despite the FTSE 100 companies having paid around £150 billion into their defined benefit (DB) schemes over the last 10 years, the surplus has increased.

LCP said the continued rise in liability values, driven by falls in bond yields, is responsible for the increase.

Bob Scott, LCP's senior partner and author of the report, said: "The fall in bond yields over the last 10 years has led to a sustained rise in liability values, more than 85% since 2007, meaning companies have effectively paid £150 billion to go backwards.

"Companies remain under increasing pressure to pay more into their schemes, and one can only hope that the contributions companies pay in future will have a bigger impact on the pensions deficit than in recent years."

Despite the overall increase, the data from the last year paints a more positive picture. UK pension liabilities have improved from £46 billion – the figure disclosed in last year's report.

LCP said the improvement in the net deficit since last year is due to strong returns on assets and a record level of contributions, with FTSE 100 companies paying a total of £17.3 billion to their defined benefit schemes in 2016.

This follows £13.3 billion of contributions paid in 2015, £12.5 billion paid in 2014 and £14.8 billion paid in 2013.

Following last year's Brexit vote, the combined FTSE100 pension deficit increased to almost £80 billion at the end of August 2016 – the highest level since 2009 – before steadily reducing over the remainder of 2016 and the first half of 2017.

By the end of June 2017, the combined deficit had reduced by £29 billion from the position at 31 July 2016.

Scott said: "The full impact of Brexit, direct and indirect, on companies who sponsor defined benefit pension schemes is yet to be seen - what we see at present is that more and more companies are paying substantial amounts to fund legacy defined benefit schemes whilst making modest contributions to their current employees' defined contribution schemes."

Graham Vidler, director of external affairs for the Pensions and Lifetime Savings Association (PLSA), said the report supports its own findings that the current DB system isn't fit for the future.

He said: "The need to pay for past promises could divert employer resources away from the investment necessary to ensure their firms' future, but, despite this, firms are running to stand still as deficit levels remain stubbornly high and members of schemes whose employers are most under pressure have just a 50:50 chance of seeing benefits paid in full."

"The current system is not fixing itself as it is too fragmented, manages risk inefficiently and has a rigid approach to benefits."

He added that PLSA believes consolidation has the potential to reduce risk to scheme members, as well as for sponsors and the wider economy, and a final Taskforce report is due soon, which will develop proposals for policy and regulatory measures needed.

First published 04.08.2017

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Pension Funds

Treasury thinking colonises the DWP

The latest MP to move into the hot seat of Pensions Minister, Guy Opperman, is commencing a steep learning curve – like almost all his twelve predecessors since the post was created in 1998.

If we except Steve Webb, who served for five years, the average tenure of pensions ministers has been just fifteen months. Like Mr Opperman, most have had no background in pensions and little time to get to grips with their brief.

Mr Opperman's new boss on the other hand, Secretary of State for Work and Pensions David Gauke, has transferred from HM Treasury, where in seven years as a minister he must have had some exposure to pensions policy - particularly the controversial subject of tax relief.

Mr Gauke was a senior colleague of George Osborne when in July 2015 the Chancellor threw all the cards in the air with his Green Paper on pensions tax relief. Thankfully, the outcome of that exercise was 'no change for now' (although Mr Osborne clearly felt miffed at being told there were some difficulties in reversing the EET – exempt-exempt-taxed – principle). All we suffered was the distraction of LISA in the March 2016 Budget.

The Treasury's dream has not evaporated though. The fact that we have an apparently slightly more pragmatic Chancellor in Philip Hammond doesn't mean the departmental culture has changed.

The sheer size of the annual bill for pensions tax relief (£38.2 billion according to the latest official published figures, for 2015/16) is too tempting a figure to be ignored by a government desperate to reduce the deficit.

Mind you, it's worth looking more closely at that figure. The lion's share of it, £22.8 billion, went on contributions from employers – and a good chunk of that was on deficit repair funding. Only £7.6 billion went to individual member contributions.

Bear in mind too that the Treasury received £13.4 billion of tax from pension payments in 2015/16, underlining the fact that pensions tax relief is in reality largely pension tax deferred.

I mention that because at an ABI conference on 4 July, in one of his first public speeches as Secretary of State, Mr Gauke acknowledged the idea of radically altering pension tax relief being "somewhat daunting" and that he "wouldn't expect to see any fundamental changes in the near future." Coming from a minister whose thinking about pensions was moulded in the Treasury, those words should carry some credibility.

Mr Gauke went on to suggest that there was no consensus on how pensions tax relief should be reformed: I would counter that there is a pretty strong consensus that it does not need radical reform.

A government serious about reducing the net figure of £24.8 billion without destroying the auto-enrolment programme and triggering a huge increase in future claims on state benefits might do better to focus on ways of reducing the burgeoning bill for defined benefit deficit funding.

But back to Mr Gauke, who while recognising the difficulty of "fundamental" reform, made no promises that the government would leave pensions alone, not even while brexitation is under way. As the minister ultimately responsible for ensuring auto-enrolment is not derailed, he also acknowledged the savings needs of the 4.8m self-employed and the rise of the gig economy.

Naturally, pension contributions are increasing.Pensions tax relief will never be on the back-burner at the Treasury.

The fear is that while thwarted in their bid to secure a massive chunk of additional income tax from taxable pension contributions, they will resume their salami-slicing strategy with further reductions to the annual and/or lifetime allowances.

Deterrents to pension saving are the last thing we need. We are on course already for a two-tier pensions society: defined benefit pension for public sector workers and money purchase pots for the rest – which is most of us.

So let's focus for a minute on the lifetime allowance, now down to £1m and widely regarded as a tax on successful investment. Any benefits crystallised in excess of £1m attract a tax charge.

With a £1m pot, a 65-year-old might buy an index-linked joint-life annuity worth around £33,000 pa. (Yes, I know most people these days wouldn't go down that route, but stay with me; I want to compare their position with a defined benefit scheme member.)

From a defined benefit scheme, a similar pension of up to £50,000 can be had without incurring a tax charge, because of the 20: 1 valuation factor. So wouldn't it be fairer to adjust that factor to say 30:1?

Or would that be too daunting?

Written by Ian Neale,Director, Aries Insight

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Pension Funds

Legal & General launches equity fund with Boots Pension Scheme

The fund is 'factor-based' – a style of investing that seeks to identify and harness underlying drivers of performance – or factors – to meet specific objectives.

It invests in a diversified portfolio of global equities that exhibit factor characteristics, such as value, low volatility, quality or size.

Launched as a pooled vehicle for UK institutional clients, the fund aims to reduce risk relative to the global equity market by diversifying effectively across regions.

Adam Willis, head of index & multi-asset distribution at LGIM, said: "Investors are looking for alternatives to traditional products and factor-based investing is growing in popularity because it can be used to meet different investment objectives in a cost-efficient manner."

Willis said LGIM has offered client-focused factor-based strategies for more than 10 years and worked closely with its clients to create products such as the L&G Future World Fund, which launched last year.

"We are excited to continue to develop our offering into multi-factor solutions on behalf of schemes such as Boots," he said.

LGIM has developed the Fund in partnership with Scientific Beta, the provider of factor-based indices established by EDHEC-Risk Institute.

The fund uses Scientific Beta's recently launched High Factor Exposure Indices as building blocks for its portfolio.

In November last year, LGIM launched the L&G Future World Fund, a multi-factor global equities index fund that incorporates a climate 'tilt' to address the investment risks associated with climate change.

The fund was selected as HSBC Bank UK Pension Scheme's equity default option within its defined contribution scheme.

The new fund will be managed by Multi-Asset Fund Manager Andrzej Pioch, alongside LGIM's broader Asset Allocation team, which currently manages over £37bn.

First published 27.07.2017

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Pension Funds

New PLSA chief executive announced

Julian is currently the commercial services director and acting chief executive at PLSA.

He joined in September 2013 has been "instrumental" in growing the organisation's commercial income by 29% and improving the overall quality and breadth of PSLA's offering, the organisation said.

Julian will continue to be supported by the other members of the PLSA senior team, including Graham Vidler, director of external affairs; Mark Cooke, director of finance and corporate services; and Edward Bogira, chief of staff.

Lesley Williams, current chair of the PLSA, said: "Having worked closely with Julian over the last few years, I am delighted to welcome him as chief executive."

"As an organisation that speaks about the importance of good governance, we considered who would be the most appropriate fit for the role, as well as consulting our strong succession plans, and Julian's appointment is a result of those."

"He has successfully led the team during a very uncertain time, ensuring stability and the continuity of our work, and I look forward to working closely with him to build on this success in the future."

Prior to joining the PLSA, Julian worked at the Chartered Institute of Public Finance and Accountancy (CIPFA) for 16 years, most recently acting as director of markets and product development, as well as at the Department for Education.

He said: "I am absolutely delighted to be appointed as chief executive of the PLSA."

"I want us to champion and focus on the areas that matter most to our members, and help us to provide a strong foundation for people's retirement income."

"The PLSA has a dedicated and extremely capable workforce, and I am really looking forward to us driving the organisation forwards."

First published 27.07.2017

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Pension Funds

Now: Pensions withdraws from auto-enrolment providers list

The company said the withdrawal is voluntary while it works to resolve some historic issues with processing contributions for a small percentage of its clients.

The issues are largely due to a change of third party administrator, Now: Pensions said, but it expects them to be resolved soon.

Morten Nilsson, Now: Pensions CEO, said: "We feel that while we work to resolve these historic issues and ensure that every scheme is up to date, it's appropriate to withdraw from the list.

"We are confident that this work will be completed shortly and providing our clients and members the best possible service remains our top priority."

As one of the largest players in the auto-enrolment market, Now: Pensions is in ongoing dialogue with The Pensions Regulator regarding all aspects of its scheme.

It said it has kept the regulator fully updated regarding its issues and accepts that getting some of its schemes up to date has taken longer than it should have done, due to the complexity of some of the cases, the poor-quality data that was sometimes involved, and the systems used.

Nilsson said the company should have told clients sooner about the problem.

"We should have been more proactive in our communications with affected clients and members regarding these issues and apologise wholeheartedly to those we have let down.

"In this instance, we have fallen short of the standard of service we aim to provide," he said.

To prevent a re-occurrence of the issues, Now: Pensions said it has invested, and continues to invest, in new systems, people and processes.

Over the past two years, it has been building a large internal operation out of its office in Nottingham and its own auto-enrolment site to upload payroll files called the Now: Pensions Gateway, which was launched for new clients at the end of last year.

First published 27.07.2017

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Pension Funds

CPS report on auto-enrolment recommends reforms

Reinforcing Automatic Enrolment, recommends giving people a stronger sense of personal ownership over their savings; ensuring that the opt-out rate remains low; broadening eligibility criteria - particularly for lower earners and the self-employed; increasing the potential retirement income of lower earners; incentivising contribution rates above the statutory minimums; radically simplifying the current pensions and savings system; and saving the Treasury £10billion per year.

The report, written by CPS pensions expert Michael Johnson, says that while auto-enrolment in workplace pension schemes has been a success, the government can do more to encourage saving, especially among young people and the self-employed.

The report says this can be achieved by scrapping all Income Tax relief and NIC rebates and replacing them with a 50% bonus paid on the first £2,000 of post-tax contributions (paid by employee or employer) and 25% on the next £6,000 (i.e. annual bonus cap of £2,500).

Graham Peacock, managing director at Salvus Master Trust, said that although of the ideas in the report are interesting, it's possible they could undermine the overall success of auto-enrolment.

He said: "With £38.2bn spent on pension tax relief in 2015/16, tax payers deserve a measurable improvement in retirement outcomes - particularly those most at risk of a bleak retirement.

"Johnson's proposals appear to be centred on the cost to the Treasury - rather than helping any group in particular.

"Some of the proposals are welcome in theory, for example, that barriers to saving such as the £10k tax threshold are removed," he added, "however, this needs to come as part of a wider package of tax reform, particularly around net pay arrangements, which unfairly favour high earners.

Lydia Fearn, head of DC at Redington agreed: "The suggestion that auto-enrolment contributions for under 50s should be eligible to be paid into a workplace LISA simply adds another layer of complexity to what is fast becoming a confusing space.

"As an industry, we need to continue to provide simple and easy ways for members to save for their futures and we need to think about incentivising lower earners and self-employed people to make sure they have a reasonable amount of savings to help them in later life."

First published 21.07.2017

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Pension Funds

Push for DB transfers, despite advice

The research also showed more than two out of five advisers (44%) have seen a rise in the past year in the number of insistent clients wanting to push ahead with defined benefit pension transfers, despite recommendations against.

About half of advisers with insistent clients (51%) say they have helped with the transfer after their recommendation was over-ruled.

The biggest concern advisers had (61%), the research said, was about the impact of defined benefit transfers on consumers is the risk of giving up a guaranteed income for life, while 56% fear clients will face unnecessary tax bills as a result.

Stan Russell, retirement expert at Prudential, said: "Our research shows that, although most defined benefit scheme members are wary of transfers, interest in transferring final salary pensions schemes has increased markedly over the past four years."

"Relatively high transfer values and the fact that pensions can be left as part of an inheritance are among the main reasons why clients might insist on a transfer, even if it is not in their best interests."

Russell went onto say that the trend leaves advisers with a dilemma.

"The valuable benefits of a defined benefit pension should not be given up lightly because it involves transferring investment and longevity risk from the employer and is irreversible once complete."

"Advisers needs to ensure their clients understand the risks of a transfer, including longevity, market volatility, inflation, taxation - and ensure it is in the best interests of clients."

The survey also showed that around 39% of firms, are concerned about the risk of future liabilities if advice they give is contested, while 17 per cent are concerned the cost of professional indemnity insurance will rise.

Prudential said firms are responding by ensuring they have the right Financial Conduct Authority permissions to conduct transfers.

Prudential's research found about 34% of firms are considering increasing the permissions they have while 17% say they already have the required permission.

First published 21.07.2017

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Pension Funds

DWP announces new timetable

Under the proposed new timetable, the state pension age will increase to 68 between 2037 and 2039, earlier than the current legislation, which sees a rise between 2044 and 2046.

The change will affect everyone born between 6 April 1970 and 5 April 1978.

Latest projections from the Office for National Statistics (ONS) show that the number of people over state pension age in the UK is expected to grow by a third between 2017 and 2042, from 12.4 million in 2017 to 16.9 million in 2042.

The DWP said failing to act now, in light of compelling evidence of demographic pressures, would be irresponsible and place an unfair burden on younger generations.

Keeping the State Pension age at 66 would cost over £250 billion more than the government's preferred timetable by 2045/46.

Secretary of State for Work and Pensions, David Gauke, said: "I want Britain to be the best country in the world in which to grow old, where everyone enjoys the dignity and security they deserve in retirement."

"Combined with our pension reforms that are helping more people than ever save into a private pension and reducing pensioner poverty to a near record low, these changes will give people the certainty they need to plan ahead for retirement."

Today's announcement agrees with the timetable set out by John Cridland CBE in March 2017, which proposed bringing forward the increase in state pension age to 68 between 2037 and 2039.

The review highlighted that under the previous timetable, by 2036/37 annual spending on the state Pension would have increased by 1% of GDP on 2016/17, equivalent to £20 billion in today's terms – or a rise in taxation of £725 per household.

The Pensions and Lifetime Savings Association (PLSA) said the proposal will affect more than 7 million people in their late 30s and 40s.

Graham Vidler, PLSA director of external affairs, said: "This group is also those most at risk of inadequate private saving – they have not had the same access to final salary pension schemes as their parents and are too old to enjoy the full benefits of automatic enrolment that their children will see.

"We call on the Government to follow up on one of Cridland's other recommendations and provide access to 'Midlife Financial MOTs', which will help those people who need to work longer before they receive their state pension to make smarter financial choices to boost their savings."

First published 21.07.2017

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