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Pension Funds
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The Pensions Dashboard

The Pensions Dashboard is a government backed initiative which was first announced in the 2016 Budget. The aim is to provide all pension savers with the opportunity to access details of all their pension savings in one place, to aid decision making around retirement planning by improving their understanding of projected finances at retirement, the importance of financial advice and the benefits of actively managing retirement savings. An added bonus is that this should lead to improved efficiencies and lower costs for providers, fairer market competition and an improvement to the levels of consumer understanding in relation to long-term savings.

The journey from the 2016 announcement to the proposed delivery date in 2019 continues to take shape, with the prototype demonstrated to the Government and key stakeholders earlier in 2017 by the dashboard project group, managed by the Assurance of British Insurers ("ABI").

The General election in June 2017 has not surprisingly impacted on the government's engagement with the pension dashboard project, leading to recent calls from the ABI and other key stakeholders for "firm Government direction on its plans for pensions dashboard". The ABI has published a paper "Pensions Dashboard Project – Reconnecting People with their pensions" and within the paper has outlined the following key steps they feel will need to be addressed in order to achieve the target of providing consumers with all of their pensions in one place in a standardised digital format by 2019:

- Legislation to ensure all pension providers and schemes make data available
- An implementation plan/timetable and governance body which will lay the foundation for the required standards for all involved
- Produce a non-commercial platform, which government enables consumers to access their data via regulated third parties

It remains to be seen how the Government will react to the ABI's proposal but it is clear that in order to move forward with the project the Government will need to re-engage and decide whether delivering the ABI's recommendations is a priority and compelling schemes to make data available will become a legislative requirement. Without such commitment and support it remains to be seen if the pensions dashboard will be on target to be available by 2019. However, what is clear is that there has been an overwhelmingly positive support to ensure the pension dashboard is available, as this will improve the levels of engagement with consumers and hopefully result in improving retirement outcomes.


James Melsa, Pension Consultant at Quantum Advisory

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Pension Funds
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Cost Transparency


Johan Cras managing director of Kempen, speaking at the annual PLSA conference in Manchester on Thursday addressed some of the issues facing the investment and pensions industry once cost transparency becomes a regulatory act.

With effect from 3 January 2018, transaction cost disclosure in the workplace must be visible.

The regulations set out by the FCA will primarily effect those involved in the DC workplace pensions market.This includes those who provide services in that market, such as pension providers and asset managers, and the governance bodies of pension schemes, such as trustees and Independent Governance Committees (IGC)

But what effect will it have?

Johan suggests that once the "can of worms has been opened" the industry won't know what to do with the information and fears that terms and costs will be misunderstood.

Understanding costs are vital, it is therefore key to communicate costs in a relative way.

If an investment is costly it does not necessarily mean that schemes investments are operating inefficiently.

The cost needs to be placed in to some context, for instance it costs more to transact in an emerging market, but if the market is performing well the returns are value for money and that is key. Value for money is key and not cheapest is always best.

Alison Bostock, PTL, in a discussion earlier in the week also agreed that there might be a negative impact regarding cost transparency, in that there needs to be clear understating of what the costs are and why? but in the same breath see positive sees the potential in "shining a light" on things that might be wrong.

Alison says that taking a closer look into investment fees is important, schemes can check if they are paying the right cost for the services that they receive, are they getting value for money? They will be able to see trading efficiency and get a better sense of what's going on.

www.fca.org.uk/publications/market-studies/asset-management-market-study

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Pension Funds
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The importance of engagement

People know they need to save, but they lack guidance on how much to save. There is a higher level of people saving but the amount saved is at an all-time low. This could lead to many people disappointed in their retirement.

Speaking at the annual Pensions and Lifetime Savings Association conference in Manchester Guy Opperman, Work and Pensions Minister, said getting people to save more is crucial and "more is needed to be done" he "doesn't underestimate the problems but the fundamentals are positive"

And whilst auto-enrolment has had positive impact with "8.7 million people auto enrolled" it does not mean that people will be able to sit back and wait for retirement. "Auto enrolment is the first stage of engagement, basic payments will not get people a retirement" says Chris Curry, Director, Pensions Policy Insitute.

Speaking earlier at the conference Linda Gratton states that individuals would have to save 25% of their income from the day they start working to end up with a sustainable income from their pensions.

So how do we bridge the gap between too much and not enough? And perhaps more importantly, how does the industry ensure individuals engage with their own savings?

Ruston Smith, Chair, Tesco Pension Trustees, emphasises the importance of making communications simple.

"Simplify the jargon, we currently work in a regional sense when trying to make things simple" Individuals are reading a different set of words from different employers, and when people move jobs and location this can get very complicated. "The dashboard can be a centralised place to make things simple." Ruston says that the average person in an average 12-hour day consumes the equivalent of 35gb of information.

Richard Butcher, Chair PLSA, suggests that setting targets will help those that are disengaged to better understand what they are required to save.

These targets are laid out in the consultation paper – Hitting the Target.

The papers central proposal is that the UK should develop a set of 'national retirement income targets' The identification of a target annual income to achieve a desired standard of living would help savers by giving them a clear and understandable goal. On the basis of this goal, savers would then be able to calculate the amount of savings necessary to deliver the target income.

The paper states that there are three categories of saving; £10,000 to less than £15,000 is adequate to provide an individual with a 'minimum' standard of living in retirement; £20,000 to less than £25,000 is adequate to provide an individual with a 'modest' standard of living in retirement; and £35,000 or more is adequate to provide an individual with a 'comfortable' standard of living in retirement

Richard states that the minimum target of £10,000 a year needs to be realised by everyone. He invites responses to the detailed questions set out in the report by 12 January 2018 "and we'll be touring the country over the next six months, listening to anyone with an interest in helping people hit the target"

https://www.plsa.co.uk/Policy-and-Research-Document-library-Hitting-the-target-delivering-better-retirement

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Pension Funds
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The Troubles with DB Transfers

Read all about it

Paul Pettitt, Managing Director

Origo-logo.jpg

Origo is a not-for-profit, FinTech company dedicated to improving outcomes for consumers by transforming the financial services industry's operating efficiencies. By bringing together different organisations and groups in a non-competitive environment, Origo identifies and addresses cost and efficiency issues through the creation and maintenance of a range of industry solutions.

As a development partner of the HM Treasury's Pensions Dashboard project, Origo's Pension Finder service powers Pensions Dashboards, enabling consumers to safely find and return their pension information to their Dashboard screens.

Thanks to Origo's Options Transfers service, pensions transfer times have dramatically reduced to an average 11 calendar days, providing smooth, fast and safer transfers for consumers.

Find out more: www.origo.com


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Pension Funds
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Good governance?

Good governance is fundamental to the effective operation of pension schemes and to achieving good outcomes for members.

TPR is concerned that some schemes are not achieving the standards of governance that it expects, and has launched a new, targeted campaign to drive engagement with good governance practices.

The campaign will assist schemes by issuing publications that revisit the key elements of good governance in a clear and accessible format.

The approach taken in the first publication ("Good Governance" issued on 18 September 2017) is very practical, drawing out specific points to consider and using case studies.

All schemes should review the guidance, even where current standards are high, to confirm they measure up.

Governance is relevant to all aspects of a pension scheme.

It is a vast topic and not always easy to work out how to make a start on reviewing aspects of scheme governance.

It is therefore very welcome that TPR has approached 21st Century Trustee from a perspective of addressing key themes which are the basics of good governance.

Schemes will benefit from the structure of this ongoing campaign.

TPR's approach will give schemes the opportunity to consider each component as it is launched, enabling them to review, assess and decide whether changes would be beneficial over time.

Helen Baker, Partner at Sackers.

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Pension Funds
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Royal Mail staff vote to strike over pension scheme

Royal Mail announced earlier this year it would close its current defined benefit (DC) scheme in March 2018

Although the pension fund is currently in surplus, Royal Mail, which was privatised in 2013, said its current annual contribution of £400m a year would increase to £1.26bn.

The Communications Workers Union (CWU), which has 110,000 members, said the vote was "sparked by the company's attack on the pension rights of hard-working postmen and women and the refusal of the employer to engage seriously over pay, working hours, future job security and the need to improve and grow the service to the public."

Royal Mail said the current scheme must be closed because it is unsustainable.

Douglas Hamilton, head of pensions strategy at Royal Mail, said its proposals are fair: "We have never hidden the fact from our DB scheme members that the benefits they build up from April 2018 will be smaller than they are now.

"The company cannot afford the plan in its current form, but with our current DB cash balance proposal we have moved a long way compared to the defined contribution (DC) proposal we originally put forward.

"This is not about cost-cutting - Royal Mail will continue to pay broadly the same in pension contributions after its proposed changes as it does now."

More than 60% of Royal Mail employees in the UK are in a DB pension scheme, while the figure for the UK private sector is under 5%.

In place of an existing defined benefit pension scheme, which provides a guaranteed income in retirement, Royal Mail is offering a different kind of DB scheme that instead gives employees a cash lump sum linked to the value of their contributions.

First published 05.10.2017

Lindsay.sharman@wilmingtonplc.com

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Pension Funds
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PASA to mediate on administration service transfers

The service is designed to resolve the issues experienced by schemes during the transfer of administration services from one provider to another.

Margaret Snowdon, chair of PASA, said the service is a natural extension of its work in this area.

She said: "Changing administrators might be a relatively rare occurrence, but when it does happen the process must be smooth, safe and hassle free for all concerned - this is only possible when the ceding and receiving administrators work in co-operation."

"We have been very clear on its position in this area, publishing our Code of Conduct on Administration Provider Transfers in 2013 and requesting that all members adhere to it."

"The introduction of our mediation service was therefore a natural extension of our work here."

Snowdon added that PASA aims for trustees to be able to rely on the organisation as a means of indicating the quality of service provision.

She said: "As well as empowering administrators to be the best they can possibly be, we want trustees to be able to reply on us for quality of service, which starts with the appointment and exit processes."

From 1 January 2018, PASA members will be required to comply with the Code of Conduct and PASA will interceded if a need is identified around unreasonable delays, fees, or expectations."

PASA's mediation service will be voluntary and non-binding, seeking to bring all three parties; the scheme, ceding and receiving administration providers together for practical and fair solutions in line with good industry practice.

The mediators will be independent of administration firms to avoid conflict of interest and PASA intends to publish details of the scheme for formal launch in January 2018.

First published 05.10.2017

Lindsay.sharman@wilmingtonplc.com

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Pension Funds
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Annual ONS Pension Schemes Survey records highest ever membership levels

It is an increase of 17.1% on the 33.5milllion members recorded by the survey in 2015.

The survey, which looks at data on the membership of schemes and the contributions made, also found that active membership of occupational pension schemes was 13.5 million in 2016, split between the private (7.7million) and public sector (5.7million).

The OPSS covers both private and public sector occupational pension schemes registered in the UK.

It collects information about scheme membership, benefits and contributions from a sample of occupational (trust based) pension schemes consisting of two or more members – including those that are winding up.

The rise in Defined Contribution (DC) membership in recent years is likely to be due to the workplace pension reforms which meant DC arrangements (including group personal pensions), were the most likely route for employers to meet their new obligations under automatic enrolment.

Vince Smith Hughes, retirement expert at Prudential said: "The increase in the number of people joining company pensions schemes shows the success of auto enrolment and how people increasingly recognise the need to provide for their own retirement."

The number of people retiring without a pension has fallen significantly over the last 10 years and people retiring now tell us that they expect to live on about £18,000 a year.

"Our research shows auto enrolment is encouraging people to make better plans for retirement with nearly three out of ten saying they could save an additional £100 a month," added Smith Hughes.

"That's good news because over the past 10 years, responsibility for providing a retirement income has shifted from away from government to individuals and the best approach is to save as much as you can as early as you can."

First published 05.10.2017

Lindsay.sharman@wilmingtonplc.com

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Pension Funds
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GDPR juggernaut

I seem to remember that one of Steven King's early films was about a chap driving across America in the dead of night when, for whatever reason, a truck starts harassing him. Presumably it starts at a low level before stepping up to intimidation and then, finally, arriving at terror – it being a Steven King film, after all. Can anyone remember what that was called?

Mentally I have the image of impenetrable dark stretching in all directions shattered only by a steaming hulk of blindingly lit metal, bearing down in a cloud of snorting exhaust fumes and deafening noise. That's sort of how I feel about GDPR at the moment.

The General Data Protection Regulations, to give them their full name, come into force late in May next year. According to many they are a simple extension of the data protection rules we have lived, and possibly breathed, for many a year, updated to reflect the fact it is the 21st century now and we all communicate, store and exchange data electronically. There is, many will tell you, nothing to fear.

That might be a fair analysis (although it wouldn't make a very good horror film) but I am still in terror, for three reasons.

Firstly, a breach of the current data protection rules could, in the worst cases, result in a fine of up to £500,000. The worst kind of breach of GDPR could result in a fine equivalent to €20 million (or 4% of annual worldwide turnover, whichever is greater). That is a staggering, eye watering step up that scares me witless, even though I think I'm doing okay. The sword of Damocles just grew in length from, say, 1 meter to 40!

So, I think I'm okay, but this is what makes me sweat: I don't know that I'm okay. We use good service providers – large reputable firms that are already all over this, but it is not that core operation that scares me. It's all the little peripheral things where this could go wrong.

Does one of my co-trustees have a box of old pension scheme papers sitting almost forgotten in his study, his attic, or maybe even his garage? We archive old papers for schemes long wound up – someone has to keep this stuff in case there's a question later.

What happens if in box 12, somewhere toward the back of file 48, there is a bit of sensitive personal data that we don't need to keep anymore and that we haven't catalogued? How good are we and our service providers, really, at deleting data that is no longer needed?

Then there's all the unanswered semi-legal (or actually legal, I suppose) questions. Should we be in touch with ex-service-providers to find out what they are doing? Should our minutes record member names, or indeed any other identifier, any more and if not, how do we link our decisions to scheme governance? The list gets longer every time I talk with people about this.

Data protection is important – it should be cultural, not just procedural – but we have always held, and will continue to hold, a lot of personal data. GDPR rightly ups the ante, if for no other reason than we have the World Wide Web and email now. But the known unknowns and unknown unknowns scare me witless and, right now, I think I'd rather stare down a truck in the dead of night.

Written by Richard Butcher, Managing Director, PTL.

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Pension Funds
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Women leading the way in pension saving increase

Prudential's 'Class of?' research, has tracked retirement finances, plans, and aspirations of people retiring each year since 2008.

Data from the research showed one in four (23%) of those retiring in 2008 had no pension savings at all, but this has dropped to one in seven (14%) of those planning to retire in 2017.

Prudential said the data reflects the success of government and employer initiatives, such as auto-enrolment, to encourage savings.

Women have led the way in reversing the pension saving trend – in 2008 32% of women stopped work with no private pension savings, compared with 19% in 2017.

Just over one in six men retired without a pension in 2008 (17%) while just nine per cent will do so this year.

Prudential said the growth in pension saving rates has taken place against a backdrop of 'massive upheaval' in UK pension saving rules and worldwide financial volatility and political upheaval.

In the face of these challenges retirement incomes for new retirees have struggled to recover from the sharp fall they took immediately after the financial crisis of 2007 to 2008.

The Class of 2008 expected to live on £18,700 a year – a figure that fell to £17,800 in 2009 and continued to fall until it bottomed out in 2013 at £15,300.

Since then a slow recovery has taken place, but even now, retirees in 2017 expect to live on £18,100 a year – still £600 a year short of those who gave up work 10 years ago.

Vince Smith-Hughes, retirement income expert at Prudential, said: "The past 10 years have been a decade of constant change with pension freedoms, the new State Pension, the roll out of automatic enrolment and the abolition of the default retirement age, to name just a few."

"The financial crisis, the subsequent recession and ongoing political change have all added to the uncertainty, however, despite all of this, the message about the importance of retirement saving seems to be getting through, demonstrated by a significant increase in the numbers reaching retirement having saved for their future."

First published 28.09.2017

Lindsay.sharman@wilmingtonplc.com

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Inquiry into pensions freedoms 'critical'

The inquiry will assess whether the reforms are achieving their objectives and whether policy changes are required, following up on the first inquiry in 2015 shortly after the reforms were introduced.

The government said the inquiry has a 'wide scope' and will look at what people are doing with their retirement savings and how they make those decisions, the information and guidance available, and the way the pension market is working.

One of the major concerns about the new freedoms is the potential for scams – fraudster target people thinking about moving their pension pots.

Police data shows that more than £43million of people's retirement savings has been lost to fraud since the policy was announced, with some scammers even fraudulently using the Pension Regulator's anti-scammer kitemark.

The Committee has asked for written evidence and recommendations on a number of topics, by Monday 23 October, including: what are people doing with their pension pots?; Is there adequate monitoring of decisions?; Are people taking advice?; Will the pensions dashboard help consumers make informed decisions?; Is Pensionwise working?; Is there sufficient product competition in the market?; Are the government and Financial Conduct Authority taking adequate steps to prevent scamming?; and are the reforms part of a coherent retirement strategy?

The Pensions and Lifetime Savings Association (PLSA) said the inquiry was essential as the choice for consumers has increased.

"The freedom for people to spend their pension pots is a good thing, but the choices are now harder," said Graham Vidler, PLSA director of external affairs.

"Alongside the FCA's retirement outcomes review, we see this announcement of a Work and Pensions Committee inquiry as critical to making the market work in the interests of consumers."

Jon Hatchett, partner at Hymans Robertson, warned that pension freedoms have encouraged consumers to access savings early and expressed concern that it would lead to more 'pensioners in poverty' in the future.

He said: "Unless action is taken now, there's worse to come over the next decade or two – it is vital savers get the right advice if they are to avoid poor financial outcomes when they retire."

First published 28.09.2017

Lindsay.sharman@wilmingtonplc.com

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PLSA launches final DB Taskforce report

The report looks at a range of options for pensions schemes facing the challenges of underfunding, weak employer covenants, and lack of scale.

It makes three main recommendations: a new chair's statement for DB scheme trustees; making it easier to standardise and simplify benefits; and exchanging covenants for funding.

The chair's statement would be produced annually to demonstrate they are operating in line with best practice in areas including governance, investment performance, and cost transparency.

This would also provide the cultural impetus for trustees to consider consolidating services, investment or governance where it offers the prospect of improved outcomes for their members.

Standardising and simplifying benefits would enable schemes to retain member benefits while simplifying the structure of schemes.

The UK's 6,000 DB schemes manager tens of thousands of different benefit structures, PLSA said.

The report also proposes new measures to help schemes backed by weaker covenants, which would mean that schemes could benefit from turning the uncertain promise of future support into tangible funding.

To implement the changes, the industry and the Department for Work and Pensions would need to collaborate.

As part of the Taskforce work, PLSA also undertook employer research to ascertain the level of interest in consolidation.

Among surveyed employers, almost two-thirds (65%) said they would support the principle of consolidation with support for shared administration (72%), shared external advisers (66%), shared governance (64%) and pooling assets under one asset manager (54%).

Ashok Gupta, chair of the PLSA DB Taskforce, said: "More than 11 million people rely on DB pension schemes for some or all of their retirement income, but there is a real possibility that without change we will see more high profile company failures such as BHS or Tata Steel.

"It is vital that action is taken to address covenant risk, underfunding and the current lack of scale in the majority of schemes and our proposals have the potential to transform the industry – helping to ensure more members get their full benefits, reducing sector inefficiency, addressing the issue of stressed schemes and enabling sponsors to concentrate on growing their businesses.

Gupta added that the industry and government need to 'grasp this opportunity' and tackle serious flaws that threaten the security of people's retirement.

First published 28.09.2017

Lindsay.sharman@wilmingotnplc.com

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