Hot topics for trustees

03/2012

Many Trustees will most likely be aware of the key issues for them to address when appraising an Asset Backed Contribution (“ABC”) offered by an employer.

The Pensions Regulator’s statement of November 2010 in particular set out its expectations of Trustees when assessing an employer’s proposal to implement an ABC.

This newsletter looks at the implications for Trustees of the recent changes in the tax law for ABCs and the longer term running of these structures.

Pensions newsletter for Trustees: Asset-backed contributions

02/2012
The issue of whether members retiring from DC schemes are receiving adequate support is once again a hot topic in the DC world.

Recent research by PwC has shown that pensions arising from DC contributions are estimated, in some circumstances, to be 30% lower than they were 3 years ago. This is due to the double whammy of falling stock markets and falling gilt yields, which may be further affected by more quantitative easing (for example £50bn announced in February 2012).

DC Agenda: Are your DC Scheme members getting sufficient support at retirement?

01/2012
The PPF have published their final levy determination for the 2012/13 levy year, confirming the levy estimate of £550 million and the calculation factors.

Alongside this, guidance has been published to cover: general levy issues; the bespoke investment risk calculation; contingent assets; and full transfers. Trustees can now confirm their projected levies and potential levy savings via any risk reduction measures. Particular consideration should be given to whether related company guarantees remain effective in reducing the levy, and what effect the introduction of investment risk may have.

PPF Levy 2012/2013 - Final determination published

05/2011
Recent experience in the investment industry has raised questions over the safe custody of assets which are relevant to many pension scheme boards.

For example our experience as Lehmans’ administrator has highlighted the challenges of obtaining funds from particular jurisdictions (US and Germany) in the ‘shutters down’ scenario where local insolvency laws give priority to local residents.

Responsibility for organising and monitoring custody arrangements is often delegated to the investment manager.

Sharing the lessons of Lehmans

04/2011
With auto enrolment fast approaching for many employers, there has been an increased focus in recent months on the adequacy of governance arrangements for DC schemes.

Currently DC arrangements broadly fit into two categories: occupational pensions (trust based arrangements) or work-based personal pensions (contract based, for example Group Personal Pensions).

The governance requirements of the former are much greater, including the requirement to hold regular trustee meetings, review administration aspects and monitor investment performance.

DC Governance

03/2011
Trustees and employers will welcome the fact that the Chancellor's Budget 2011 raised no further immediate issues for employer-provided pensions.

Both can continue focusing on aligning their pension strategy to the new pension tax regime from 6 April 2011. The most significant change is the reduction of the annual allowance for pension saving to £50,000. The Finance Bill 2011 incorporated draft legislation for the reduced annual and lifetime allowance regime and associated changes.

Budget 2011 - What does it mean for Pensions?

02/2011
From April 2011, retirement options for defined contribution (DC) members are changing.

The requirement to annuitise by age 75 has already gone and a DC member will have more freedom in what they can do with their DC ‘pot’.

The government has confirmed that individuals will be able to draw an income directly from their DC ‘pot’, provided they satisfy a new income threshold, which will be known as the Minimum Income Requirement (MIR).

DC retirement reform from April 2011

01/2011
HM Treasury have announced plans for the new pension taxation regime coming into force from 6 April 2011.

Many have welcomed the proposals as being infinitely more workable than the previous Government’s legislation, based on a familiar structure using "A-Day" concepts of annual and lifetime allowances reduced from their current level.

However, while the new tax limits are at the higher end of the expected range, a substantial number of people could still be affected and this is expected to grow as there is currently no intention to increase the allowances.

What are the implications? - Forthcoming tax changes for Trustees

December 2010
UK accounting standards are giving way to a tiered system whereby ‘publicly accountable’ entities are required to report under IFRS.

Pensions Newsletter for Trustees - IFRS is coming to pension scheme accounts

November 2010
In this edition, we outline the costs of poor data to the Trustees, members and the sponsoring employer and the benefits of reviewing and improving it.

Pensions Newsletter for Trustees - The Pension Regulators guidance on record keeping: Does your data meet the mark?

Sept 2010
Trustees need to tread carefully if they are considering linking pension increases to the consumer price index.

Pensions Newsletter for Trustees - RPI RIP? Linking Pensions to Consumer Prices

July 2010
The importance of monitoring the employer covenant has been highlighted by the recession and the fast changing fortunes of many employers. As a result of this, the Regulator issued a consultation document in June 2010.

Monitoring employer covenant - “as important as monitoring investment performance”

June 2010
With cash still severely constrained many companies are looking to directly or indirectly fund their pension scheme deficits with non-cash assets, such as real estate, unlisted shares, intellectual property or copyrights.

Quite often the non-cash funding may lead to a benefit to the pension scheme only if there is a deficit at a later date, giving a measure of protection against overfunding which can also make it attractive to the employer.

If a transaction is to be successful a key question both sides need to agree on is “what is an appropriate value to recognise for the non-cash asset?”

Non-cash funding solutions are becoming more common: are you asking the right valuation questions?

May 2010
The Finance Bill 2010 confirms that from 6 April 2011 “high income” individuals face a new tax, the “high income excess relief charge” (HIERC), on their savings into UK pensions, making pensions considerably less tax efficient for them.

Finance Bill 2010: What it means for Trustees…

April 2010
In the two years since our last governance survey, trustees have been under almost unprecedented pressure as a result of the economic downturn and its challenges. Governance is more important than ever in these circumstances. Good governance is about more than just compliance; it pervades all aspects of how trustees manage their schemes and how they address the needs of all key stakeholders.

2010 PricewaterhouseCoopers UK Pension Scheme Governance Survey: What it means for Trustees

Are you managing your pensions business? - Full survey

March 2010
The aim of the Regulator is “working to improve confidence in work-based pensions by protecting members’ benefits and encouraging high standards and good practice in running pension schemes”.

In our newsletter this month, we take a look at 3 key areas of focus by the Regulator.

The Pensions Regulator - What’s on their agenda in 2010?

February 2010
In the current environment many sponsoring employers are looking to reduce their defined benefit pension obligations and reduce balance sheet risk by offering deferred pensioners financial incentives to transfer their benefits out of pension schemes.

How do these exercises work and what should trustees do when they receive an approach from their sponsor?

Enhanced Transfer Value Exercises (“ETVs”) - What is your role?