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 DWP confirms its determination to bring about DC consolidation of smaller schemes, the Regulator ends more of its Covid-19 easements and the Court of Appeal rejects the claim that increases in the state pension age of women born in the 1950s was discriminatory.
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.
Covid-19 has created many challenges for DB schemes but, for those ready to transact in 2020, it may have created even more favourable market conditions for a buyout. The problem is that most schemes are not there yet. In this Briefing we look at what being “deal ready” actually means and what work it will involve.
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