The new flexible drawdown rules could have an impact on qualified overseas recognised pension schemes (QROPS), following one financial planner’s investigations into the Isle of Man (IOM).

Andrew Johnston, partner at Holden and Partners, told PM one client benefited from using the flex drawdown rules, rather than going into a QROPS or other structure, because of the size of the pension fund and a cap on the level of tax payable, due to double tax treaties.

Pension-busting practices through qualifying recognised overseas pension schemes (QROPS) has a strong correlation with countries going through economic turmoil, according to Mike Lightfoot, pensions director at Close Trustees Guernsey.

Small to medium-sized defined benefit schemes are being offered the opportunity to cut liabilities at lower than cost price through enhanced annuities.

The opportunity lies in health assessments of senior staff with large pension rights who have unhealthy lifestyles or serious ailments.

Companies giving executive directors excessive cash sums via in-lieu-of-pension payments will be condemned by the High Pay Commission report due later in June.

An increasing number of directors in high profile companies now receive in-lieu-of-pension payments worth half their annual salary, the report has found.

Pressure from scheme members to see excessive pay tackled publicly is forcing Hermes Equity Ownership Services to change how it engages with companies.

Members of the BT pension fund and around one-third of the other pension fund clients of Hermes Equity Ownership Services are calling for the change.

A handful of charities are due to become the first employers to enter the National Employment Savings Trust (Nest) in July.

The pilots were supposed to be participating in the scheme from April. Nest is remaining tightlipped on the reason for the delay, but it is believed to be a mixture of compliance and IT difficulties.

The Department for Work and Pensions (DWP) has created a team to deal with transsexual people who are entitled to additional state pension having had gender reassignment before 2005 legislation was implemented.

This sensitive issue could affect any scheme – many of which follow the state model – causing possible disputes with members over gender equality and implications for spousal benefits.

ITV and car maker Bentley are the latest companies to enter into the growing longevity swap market.

The pair are gearing up to complete deals worth £1.8bn and £400m respectively in the next few months.

Large schemes, including British Airways, are taking on illiquid bank debt for short periods in exchange for their investment grade bonds.

The deals, sometimes called collateralised upgrade transactions (Cuts), involve investment banks swapping packaged mortgage and business loans (typically acquired from high street banks before the financial crisis) with schemes that then hand over an equivalent-yielding bundle of gilts, other developed government and blue-chip corporate bonds.

Big hikes in contributions just announced for local government employers are leading to many exploring the use of special purpose vehicles (SPVs) to help ends meet.

A quarter of local government pension scheme (LGPS) funding levels fell by 12%-15% between 2007 and 2010, triennial reviews show.

However, 3%-9% falls were most common (44%), according to Hymans Robertson figures.

The High Court has rejected member claims Prudential breached a duty of good faith by capping discretionary pension increases at 2.5%.

Lord Hutton has voiced concerns over the participation of small businesses in the National Employment Savings Trust (Nest), stressing “compliance is going to be a major issue”.

The Treasury’s clampdown on the use of qualifying registered overseas pension schemes (QROPS) as a way of mitigating taxation will lead to a drop in the products’ sales, according to AJ Bell.

A group of advisers from around the world are preparing a code of conduct for advisers delivering qualifying recognised overseas pension schemes (QROPS).

Platform providers on the Isle of Man (IoM) are moving into scheme administration, paving the way for the first contract-based qualifying recognised occupational pension schemes (QROPS).

Defined contribution (DC) scheme trustees and managers should place less emphasis on funds’ fees when choosing investment strategies, according to a panel of experts.

The ‘scheme pays’ policy means it’s up to trustees to approach sponsors with details of changes to the annual allowance as this will affect benefits

KFC is suing Mercer for breach of fiduciary duty and negligence, and is hoping for an imminent sum of more than £15m.

BT is developing a corporate ISA solely for staff to use in investing in the telecoms giant itself.

Law firm Pinsent Masons is launching a lobby group to promote collective defined contribution (CDC) schemes in the UK, having received considerable interest from employers.

Unite is engaged in a legal arms race with Ford Britain – on behalf of ex-Visteon UK workers – after bringing in a more senior and expensive lawyer.

Shared services are set to revolutionise local government pension savings, as the first merged project announces it has already achieved 60% of targeted savings since its October launch.

Half a million construction workers are to avoid an annual management charge on their pension pots in 2012.

Half of M&S defined contribution (DC) pension scheme members are remaining in employment past their selected retirement date, according to the retailer’s technical manager.

Employers seeking to take advantage of increased national insurance (NI) rates to boost salary sacrifice, must do so with care, warn advisers.

The University and College Union (UCU) has denied its decision to strike was futile and called for further negotiations.

Dan Ashley, press officer for the UCU, said: “We are not striking for striking’s sake, or the general secretary election – which would be next year, anyway. We are striking because the Employer Pension Forum (EPF) won’t talk to us.”

A strike by the University and College Union (UCU) was dismissed as “industrial action for the sake of it” by a leading figure representing universities.

The strike was in response to the University Super-annuation Scheme’s (USS) proposed increased member contributions, cap on pension increases and a career average scheme for new employees from April 2011.

Members of defined contribution (DC) schemes should not be treated as a homogeneous group, but individual consumers, said Nigel Aston, director of PensionDCisions.

Saul Trustees rejected partnering the National Association of Pension Funds (NAPF) in its pioneering Wheels case against HM Revenue & Customs (HMRC), NAPF investment conference delegates heard in March.

During a session on the subject of class actions, Dennis Buckley, chairman of Saul Trustees, admitted Saul “bottled out” of joining the NAPF as lead plaintiffs in its ongoing VAT battle with HMRC, but was happy to “sit on the coattails” of the NAPF to receive compensation should they be successful.

Trustees should not venture into class actions as a lead plaintiff unless they are seeking more than £50m in compensation, lawyers warn.

The Irish Association of Pension Funds (IAPF) is seeking to drive up standards of occupational pensions, with the launch of a quality mark for defined contribution (DC) schemes.

More than a third of the UK’s largest employers will use the forthcoming high earner tax changes to close their remaining defined benefit (DB) schemes.

Pension schemes have been denied the option to delay paying members’ high annual allowance (AA) charges, following an announcement from Mark Hoban.

Platforms

Merger conflict concerns

 Pensions Rocks!, a charity battle of the bands co-organised by Pensions Management, has raised more than £15,000 in its second year.

Risk management

Trustees at the £35bn BT Pension Scheme are pioneering a tool to measure the impact of asset allocation decisions on their fund and their employer’s covenant.

Royal Mail final salary

A Labour MP’s attempt to create untouchable future defined benefit (DB) pensions for Royal Mail workers has been defeated by one vote at a legislative committee.

Law & regulation

Unite has served a High Court writ against Ford on behalf of former Visteon UK workers to coincide with the motor company’s recent record profits announcement.

Unclean data led to BP making an error in the payment of its pension schemes, it was revealed at a National Association of Pension Funds (NAPF) conference.

Addressing the delegates on data cleansing, Gail Chorley, pensions administration manager for BP UK Pensions & Benefits, said cleaning up the heritage spouses data had uncovered an error in payment spanning eight years.

Stephen Metcalfe MP will meet work and pensions secretary Iain Duncan Smith to press for a select committee investigation into the Visteon pension dispute.

Stephen Metcalfe MP is planning to meet KPMG representatives over the administrator’s role in the Visteon UK pensions dispute.

BT has backed away from a full shift to the consumer prices index (CPI) for pension increases to its defined benefit (DB) plans.

Trustees and unions have been told the telecoms giant will not seek the shift for a section of its DB scheme, which has the retail prices index (RPI) written into its rules.

Many schemes recognise the lack of help offered to members at retirement, but few have actively taken steps to improve communications, according to a PM survey.

The research, produced in partnership with Retirement Angels, showed that while only 27% of schemes felt their members could make the right decisions at retirement, 70% do not make advice available at all.

A part-time subeditor working for the Telegraph Media Group has won the right to join his workplace pension scheme, following a pension ombudsman ruling.

National Union of Journalists (NUJ) member Glyn Roberts, who worked part-time without a formal written contract, attempted to join the scheme 10 years ago after gaining a statement of terms and conditions of his employment in 2006.

The Reader’s Digest UK Pension Scheme has now formally entered the Pension Protection Fund (PPF) assessment period.

A Heathrow landing slot has been offered as a contingent asset to trustees of a UK pension scheme.

A northern European airline, which has UK employees enrolled in a defined benefit (DB) plan, has offered the landing slot – worth millions of pounds – to trustees to improve its scheme funding position, schemeXpert.com understands.

Legal & General is bringing an occupational scheme design to market, aimed at competing with the National Employment Savings Trust (Nest) for firms with high staff turnover.

The WorkSave Pension Trust will go live with around 15 clients on the insurer’s corporate wrap from April and will refund employee contributions to staff with less than two years’ service.

The move is aimed at sponsors with high staff turnover, whose schemes will be swelled by auto-enrolment reforms, and those that want to liquidate leavers’ pots efficiently, which they will be unable to do with Nest.

The BBC has appointed Friends Provident to run a defined contribution (DC) scheme for both new employees and fixed-term workers.

Britain chairman Joe Greenwell will face a cross-party MP committee this month to discuss the ill-fated Visteon UK pension plan.

Hymans Robertson is piloting a low cost DIY data-cleansing system for public sector clients facing funding cuts.

The Irish Association of Pension Funds (IAPF) has described the decision to supplement the country’s bailout using the National Pension Reserve Fund (NPRF) as “disappointing, but not surprising”.

Senior industry figures have called on John Hutton, head of the government’s pensions commission, to recommend career average schemes for the public sector, during the fifth annual UK Leadership of Pensions Summit.

Independent consultant John Ralfe’s claim that public sector pensions cost £30bn a year – compared with the official figure of £15bn – laid the foundation for a debate on the policy necessary to reform the public sector.

Niki Cleal, director of the Pensions Policy Institute, said: “It is important for the government to think about what it is trying to achieve through public sector pensions.

The image of a golden age of defined benefit (DB) pensions was a fallacy, according to independent consultant John Ralfe.

Joanne Segars has broadly supported the proposals from the auto-enrolment review panel, first reported in the Financial Times.

Speaking at the National Association of Pension Funds (NAPF) annual conference in Liverpool, the organisation's chief executive said she agreed smaller firms should not be made exempt from auto-enrolment.

She also noted the decision to allow a three-month grace period before employers were obliged to enrol new employees was a common-sense move.

The lack of communication and continued uncertainty around the National Employment Savings Trust (Nest) and auto-enrolment has damaged confidence in the scheme, Ignis Asset Management has claimed.

The National Employment Savings Trust (Nest) has published a tender for a risk management systems provider.

Defined contribution (DC) schemes may be failing their members by ignoring the default propositions recommended by their providers, according to new research.

Fewer than 20% of the UK’s largest DC plans have adopted one of the new-style defaults that have been introduced to the market over the past few years.

These funds tend to have more dynamic asset allocation than the relatively static allocation of traditional DC defaults. They are also more diversified, with exposure to property and even commodities. In fact, two-thirds of the asset managers favour target date or target return strategies.

Club Vita has more than doubled the number of members in its longevity analytics organisation, thanks to the inclusion of the Pension Protection Fund (PPF).

The PPF will share the longevity data of its 168 schemes with Club Vita, which monitors and reports on longevity risks.

As part of its recent funding strategy, the PPF announced its intention to fund a margin to cover longevity risks. Club Vita harnesses the collective data from all member schemes to enable more accurate predictions on life expectancy.

Two-fifths of employees want their employer to provide full financial advice alongside their pension, according to a report from Scottish Widows.

The Greater Manchester Pension Fund (GMPF) has become the best performing local authority scheme over 10 years, with average returns of 6.1%.

Sponsors that hold strategic stakes in other companies are looking to pass these holdings on to their pension funds rather than liquidate them.

Lincoln International Pensions Advisory identified this as one of the most exciting new uses of contingent assets by cash-short sponsors who were struggling to meet growing pension deficits.

Alex Hutton-Mills, a director at Lincoln who has already helped a sponsor achieve such a move, said these deals employed the alignment of interests between sponsors and schemes.

Cabinet member and former shadow pensions minister David Willetts has urged the prime minister to consider a hybrid scheme for MPs.

Age UK is using a significant proportion of its charitable income to fund its scheme deficit, according to sources close to the charity.

The national aid organisation, created through the combination of Age Concern and Help the Aged, admitted it is using charitable cash in this way, but refused to put a figure on the exact proportion.

“Age UK is unusual in its sector in that it has significant commercial income from its enterprises and retail arms, with only about one third of income coming from donations and legacies,” said Charles Scott, finance director.

The government is to further ease section 75 debt rules for employers to relieve pressure on charities and other small organisations.

The first longevity risk model to look at future medical advances to predict mortality rates has been broadly welcomed by the insurance industry.

Aviva has admitted its active member discount (AMD) of workplace pension products could land deferred members with a 1.5% annual management charge on leaving their employer.

The government’s decision to extend CPI indexation to private sector pension schemes has divided the industry – and the arguments continue to rumble on.

Param Basi, technical pensions director at AWD Chase de Vere, can see no justification for the move and claims it will only harm pensions’ already tarnished name further.

“It is grossly unfair to those who have contributed in good faith toward their retirement to now change the measure by which their income in retirement will increase,” said Basi.

“The argument that CPI is a more appropriate measure does not stand up when you consider that pensioner inflation is recognised as being higher than RPI anyway.

law & regulation

Firms are rushing to urge deferred final salary scheme members into defined contribution (DC) arrangements, on the back of proposed changes to the law.

Cuts to government departmental spending could affect billions of pounds worth of pension funds administered by firms like Capita Financial.

It’s that time again. The awards season is almost upon us.

And for Pensions Management, that means the Technology, Administration and Service Awards has opened to entries for 2010.

The awards recognise those providers who have delivered excellent service to their financial adviser clients.

The ongoing row over the fairness of active member discounts (AMDs) escalated last month after Scottish Life claimed some structures fell foul of treating customers fairly (TCF) principles.

Following the news that Aviva charges some deferreds as much as 1.5% for their pension following their departure from an employer (see p4), Scottish Life has questioned whether the high, and often poorly explained, charge increases could fall foul of regulations designed to protect consumers.

The insurer believes some AMDs offered by rival life offices run “an unacceptably high risk of not meeting the requirements of the TCF principles”, given the opaque nature of the structure.

The first longevity risk model to look at future medical advances to predict mortality rates has been launched by Risk Management Solutions (RMS).

Deputy prime minister Nick Clegg has called for a major overhaul of public sector pensions as the cost of their provision is expected to double over the next four years.
Figures from the Office for Budget Responsibility indicate annual costs will rise from £4bn in 2010/2011 to £9bn in 2014/2015, or £143 for every one of the 62.7 million inhabitants of the UK.

Recent climate change legislation could have a serious impact on the profitability of the UK firms pension schemes invest in, trustees have been warned.

Small self-administered schemes (SSASs) are legacy products with no relevance to the vast majority of clients, an industry panel has heard.
Speaking at a Pensions Management roundtable, the group of industry spokesmen agreed the only advantage a SSAS had over a self-invested personal pension (Sipp) was the loanback facility.
“Is SSAS not a hangover term?” asked Paul Garwood, director at Smith & Williamson. “The SSAS as we used to know it is no more.

PM’s annual Sipp survey reveals industry concerns for the immediate future, but hope remains in the long term as the market regroups

The Pension Protection Fund (PPF) could be liable for millions of extra pounds in schemes where equalisation has been miscalculated.

Continued interest in special purpose vehicles (SPVs) among blue chip employers is expected to follow moves by Marks & Spencer (M&S) and Sainsbury’s.

A review of the way pension assets and liabilities are calculated is to be launched this year by the International Account-ing Standards Board (IASB).

Public sector pensions have seen payments increase by 38% in the last decade, according to a National Audit Office report (NAO).

The local government pension scheme may face a deficit of £60bn, if figures from the Liberal Democrats are to be believed.

IBM has been accused of forcing through changes to its £6.6bn defined benefit scheme for UK employees, without trustee approval.

Hargreaves Lansdown announces the launch of an integrated corporate wrap in April 2010, incorporating workplace savings, ISAs and group Sipps

Further details of ITV pension scheme’s groundbreaking contingent assets deal have been revealed by the chair of trustees, Graham Parrott.

A local authority pension scheme is poised to become the first of its type to hedge itself against the risk that its pensioners will live longer than expected.

At least two FTSE 100 employers are currently tendering for enhanced transfer value (ETV) exercises after a shift in corporate bond values made pricing more effective.

Cost pressures on defined benefit schemes are forcing through innovative changes such as contribution holidays and pensionable salary caps.

Some of the country’s biggest final salary pension schemes have chosen the summer months to publicly announce plans for drastic changes to plug growing deficits.

Scheme trustees are still prepared to pay for quality administration services despite the recession, according to PM research.

The Oval Group has revealed it is to develop a third-party administration function from the former Unigate pension scheme.

The market for consulting services servicing pension schemes has seen much consolidation in recent years, but one company bucking the trend is the Oval Group.

"We have long warned the government that it must radically reform regulation and create a flexible regime that allows employers to meet the needs of a modern workforce. While the government has made some changes, ministers have not taken this issue seriously enough.”

The closure of several large defined benefit (DB) schemes in the past few weeks could have a ‘snowball effect’ on the rest of the DB sector, according to industry commentators.

Workers with an income of between £100,000 and £113,000 could be better off by increasing their pension contributions in the next tax year.

Low-wage earners are far less likely to belong to a company pension scheme than higher-paid employees, according to the Office for National Statistics.

BT has cut its dividend share price in an effort to plug a £4bn funding gap in its pension scheme.

Administration costs increased by around 20% during 2008, according to Watson Wyatt’s annual Pension Scheme Cost Survey.

A survey of 200 businesses found that no open final salary schemes are planning to close.

Goodyear Dunlop, the UK branch of the tyres and car supplies manufacturer, is looking to introduce a new defined contribution (DC) scheme for its members.

A defined benefit pension scheme’s rules have been rewritten to reflect the intention of its sponsor and trustees after a High Court decision.

Despite a number of recent studies indicating that UK workers are disenchanted with occupational pension arrangements, Kellogg’s, the household name cereal manufacturer, can demonstrate it has successfully bucked that trend.

Insurance broker and pensions consultant Aon has denied its recent merger with Benfield directly influenced the decision to cut its pension benefits.

Two local authority pension schemes are looking to sue Royal Bank of Scotland (RBS), claiming that it falsely reassured investors of its financial security.

Defined contribution (DC) needs to be better targeted if it is to deliver what both the employer wants and the member requires, said Gary Smith, a senior member of Watson Wyatt’s DC team.

A new type of defined benefit (DB) scheme could be a long-term solution for many employers struggling to meet current DB guarantees, according to a leading pensions expert.

Premier Foods, the maker of Hovis bread, has established new arrangements with trustees of its four pension schemes to reduce their burden.

Business and pensions groups are calling for action to abolish the indexation of defined benefit (DB) pensions, to help companies avoid insolvency during the recession.

Standard Life is to develop a corporate self-invested personal pension (Sipp) plan for BT staff.

OPT advises pension funds in danger of entering the PPF: keep running and generating returns so members can receive full benefits

More than 90% of small firms’ defined benefit (DB) schemes are closed to new members, and half of those are closed to new accruals, according the Association of Consulting Actuaries (ACA).

The acceleration in UK defined benefit (DB) scheme closure will continue in 2009, Watson Wyatt has predicted.

Companies operating defined benefit (DB) schemes need to be more aware of the costs involved in these schemes if they are to successfully overcome the economic downturn, according to research by Pension Capital Strategies (PCS).

Standard Life is to remediate certain customers of its Sterling Pension Fund following its announcement that the value of the fund had dropped by 5%.