Week ending 20 December 2019
The Court of Justice for the European Union (ECJ) has ruled that a reduction in the pension benefits of a member, in the event of their employer’s insolvency, is “manifestly disproportionate” if that results in the member being below the EU poverty threshold (£10,500 per annum). The impact of the judgement is far from clear but it may be that the PPF will have to provide 100% of scheme benefits in these specific cases, assuming this judgement is adopted in the UK (which is not certain given Brexit).
Prior to the Bauer judgement, the PPF confirmed its levy estimate for 2020/21 as £620 million, the amount proposed in its consultation in September 2019 and an increase on the £575 million it expects to collect in 2019/20.
The PPF has also launched a consultation linked to its forthcoming change of insolvency risk services provider, when it will move from Experian back to Dun & Bradstreet. Although work has been done to minimise the impact, in isolation this change is expected to mean that a third of schemes have a similar amount of levy and almost a half see a lower levy. However, one in five schemes will see an increase, particularly schemes with employers on scorecard 1 (typically large employers).
Guy Opperman retains his post at the DWP as minister for pensions and financial inclusion. Thérèse Coffey remains Secretary of State for Work and Pensions.
The Queen’s Speech on 19 December signalled the impending return of the Pension Schemes Bill, most likely in a very similar form to the Bill that was originally introduced in October 2019.
Equitable Life has announced that it has received final approval to transfer its business to Utmost Life and Pensions (re-branded from Reliance Life). The changes will take place on 1 January 2020. Most of its with-profits policies will then be turned into unit-linked policies.
The FCA has published final rules to increase the remit of Independent Governance Committees which oversee workplace personal pensions. The new duties, which come into force on 6 April 2020, cover:
- considering and reporting on the provider’s policies on environmental, social and governance (ESG) issues, member concerns and stewardship
- a new duty for IGCs to oversee the value for money of investment pathway solutions for pension drawdown.
The Electricity North West Group of the Electricity Supply Pension Scheme has secured an £805 million pensioner buy-in with Scottish Widows, covering the liabilities of around 4,000 members. The ESAB Group (UK) Limited Pension & Life Assurance Scheme has insured the liabilities of all 900 of its members via a £255 million bulk annuity with Rothesay Life. Meanwhile Zurich has insured £800 million of longevity risk for the pensioners of a FTSE 100 DB scheme.
In the news this week, there are two DB scheme closures, changes to the Coronavirus Job Retention Scheme and the FCA publishes new rules on pension transfers whilst the CMA reminds trustees about their compliance statements
Given the very company/scheme-specific impact of the Covid-19 pandemic, in this quarter’s Arena we simply show all the usual financial and investment analysis for what was a very turbulent first three months of 2020, plus a summary of key pension developments and Company pensions news over the quarter.
Over the autumn of 2019, BAC conducted an extensive survey of the actions which companies are taking to manage their defined benefit (DB) and defined contribution (DC) pension arrangements.
2019 marked 50 years since Neil Armstrong walked on the moon and this was obviously on the Queen’s mind in her Christmas message as she talked about a bumpy year but one with small steps of progress as well. In terms of pensions, it also felt like a year of small steps and occasional bumps. In this quarter’s Arena, we take a positive look back at 2019, as well as looking forward to some expected pension developments over 2020.
Despite the very different circumstances facing individual companies, bac‘s autumn 2019 survey reveals a surprisingly consistent picture of the actions which companies are finding most attractive to manage their DB and DC pension arrangements.
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