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, the second Lloyds judgement says that historic transfer payments need to reflect GMP equalisation, the Pension Schemes Bill moves back to the Lords, TPR gets tough on AE compliance, the FCA surveys DB transfer advisers again and another buy-in is completed.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Endgame planning comes of age”, which looked at how long-term funding and investment plans are evolving and why companies are increasingly taking the lead in designing an endgame strategy. It also shows all the usual financial and investment analysis for the quarter ending 30 September 2020.
Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.
As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.
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