Week ending 24 January 2020
The Association of Consulting Actuaries has published the final report from its 2019 pension trends survey. The survey found that, if the Government were to decide to increase AE contribution rates form April 2021, the median acceptable level supported by employers is a minimum total AE contribution rate of 10% (of which members would pay 5%). There is also general support from companies for widening the remit of auto-enrolment, with 82% supporting contributions calculated on the first £1 of earnings and 85% supporting a reduction in the minimum age of eligibility to 18.
The report also found that 75% of employers want the current pension tax regime reformed even if this means that some people are worse off, whilst 69% want the tapered annual allowance scrapped. In addition, 70% oppose the launch of pension dashboards if they don’t include State pension benefits. Finally, 43% of employers said it was their perception that employees were experiencing difficulty in finding IFAs prepared to advise on pension transfers from DB schemes (a marked increase from 28% last year).
The Money and Pensions Service has launched its ten year strategy for financial wellbeing, which aims to help people make the most of their money and pensions. There are five agendas for change, with specific targets to be reached by 2030:
- Financial foundations – 2 million more children/young people getting a meaningful financial education
- Nation of savers – 2 million more working age ‘struggling’ and ‘squeezed’ people saving regularly
- Credit counts – 2 million fewer people using credit regularly to pay for food or bills
- Better debt advice – 2 million more people accessing debt advice
- Future focus – 5 million more people understanding enough to plan for, and in, later life.
Plans to achieve these goals will be developed throughout 2020. MaPS will work with companies, charities and other organisations to deliver this strategy.
The AA is reported to be consulting on stopping DB accrual for the 2,800 active members of its career average revalued earnings (CARE) scheme. The scheme was 87% funded at its March 2018 annual funding update, with a deficit of £342 million. Employees who joined the AA after 1 October 2016 are already in one of its DC arrangements.
In the news this week, the long-awaited tax guidance on some GMP equalisation issues is published, BAE Systems agrees to contribute £1 billion to its main DB scheme and PACE completes a second buy-in.
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.
As DB liabilities have become legacy issues to be managed, governance has become the umbrella term for a broad range of risk management tools. In this publication, we look at the DB governance solutions we have helped our clients to implement.
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