Analysis: UK targets radical aid for ‘just about managing’ schemes

first_imgThe UK’s “just about managing” pension funds need a radical rethink of how to tackle widening pension deficits, mounting costs, and volatile markets, according to leading industry experts.Ahead of last year’s Autumn Statement, the government’s first post-EU-referendum budgetary update, the focus was on prime minister Theresa May’s new term: “just about managing” families – abbreviated to JAMs for the sake of a soundbite. However, there was hardly any mention of the “just about managing” in the pensions world.As Mark Wilkinson, a principal at consulting firm Mercer, describes them: “These are some of the smaller defined benefit [DB] schemes in deficit, essentially managing on a valuation to valuation basis – a hand to mouth existence, you could say.“They cannot magic up more money as their sponsor employers are also struggling. So there is a real challenge about the options available to these kinds of schemes.” According to the Pension Protection Fund (PPF), the aggregate deficit of the 5,794 DB schemes increased to £224 billion at the end of December 2016, from a deficit of £195 billion a month earlier. The number of schemes in deficit also increased marginally to 4,339, representing three quarters of all schemes.Richard Murphy, a partner at consulting firm Lane Clark & Peacock, says the key challenge for the industry is to avoid adding to the number of JAMs.“Over the next few years, some schemes will fail and end up in the PPF, and others will struggle – it will be more realistic for industry to work with trustees and employers to ensure that a wider group of schemes avoid ending up as JAMs,” he said.Schemes in deficit have to submit a recovery plan to the Pensions Regulator. This can be tailored to meet the specific needs of the scheme and sponsor, including the employer’s plans to invest in sustainable growth.“We are committed to working closely with employers and trustees that are facing significantly challenging circumstances,” a spokesman at the Pensions Regulator confirms.One way forward, Murphy says, is rethinking investment strategy to target higher-returning assets, as well as improved diversification.“It is clear that if pension funds invest defensively, they will never achieve the return they require,” he says. “It is also clear that old style mix of equities and bonds are being replaced by hedging of interest rate and inflation to a much higher level.”Murphy adds: “We are seeing strong interest in a much more diversified range of assets such as private equity and absolute bonds.”Collaboration and consolidation Another radical plan is to consolidate the smaller schemes along the lines of the industry-wide pension schemes in the Netherlands and Australia. The UK already has seen some consolidation with the pooling of local government pension schemes and multi-employer funds such as the Railways Pension Scheme and the Universities Superannuation Scheme. The pensions market has also seen the launch of new DB master trusts, such as TPT Retirement Solutions (formerly The Pensions Trust), which provide services such as management, administration, and governance as well as investment.The Pension and Lifetime Savings Association (PLSA) – the UK’s retirement funds trade body – published an interim report from its DB Taskforce in October 2016. In it, the association called for an investigation into the potential for scheme consolidation to achieve greater economies of scale.Joe Dabrowski, head of governance and investment at the PLSA, said: “We have found that, with the smaller schemes, they have fewer resources and much more limited access to the right advisers or investment strategies. In some cases, we found that schemes at the bottom end of the size spectrum are paying proportionately more for their services, in comparison to larger schemes, due to their limited bargaining power and typically lower expertise.”This was backed up by recent research by consultancy Spence Johnson, which found that schemes with less than 100 members typically struggled to secure fund prices below the UK’s 75-basis-point price cap.The PLSA will publish its final report at its investment conference in March, outlining what it says will be the best way forward and the risk to members’ benefits of maintaining the status quo.Richard Butcher, managing director of independent trustee firm Pitman Trustees (PTL), agrees that there is a sound argument to be made for consolidation, but argues there are constraints to this happening.“In principal it is the right thing to do, but in practice it’s not workable without compulsion,” he says. “The idea of consolidation is that you can definitely drive economies of scale. So while the argument is sound, there are a number of barriers not least from employers and trustees who fear their influence will be reduced.”Inflation (un)protectedThe other proposal the PLSA is examining is conditional indexation, whereby struggling schemes could temporarily stop paying pension increases, or pay low increases, to help bring them back on track. The body will make its recommendations on conditional indexation in March.Dutch pension schemes have conditional indexation rules. A number of funds have fallen below the funding threshold required to increase benefits, and this year 10 pension schemes will cut payouts to pensioners in order to address funding difficulties.Mercer’s Wilkinson adds that, while DB benefits are in theory ‘guaranteed’, there should be some flexibility about payment of those benefits.“There is a case for changing the law so that you can go back to members to ask them to accept a lower level of benefit – for example, conditional indexation – in exchange for greater security and a lower risk of ending up in the PPF.  As long as properly communicated and explained, members could well be in favour,” he says.However, Steve Delo, chief executive of independent trustee firm PAN Governance, warns that any “tinkering” with members’ benefits would be impossible to do without strong governmental intervention and such flexibility would introduce a new “moral hazard”.“There is a need for some creative thinking around this whole issue surrounding the JAMs,” Delo says. “But all parties involved need to know that there is no magic bullet solution – and it is very much a case of the stable door having been left open a long time ago.”UK pensions minister is expected to publish a green paper with proposals for DB reform in the coming weeks.last_img read more


Dutch drinks sector scheme to merge with €20bn retail fund

first_imgLast year, Dranken reported asset management costs of 0.25% and administration costs of €207 per participant, which compared to 0.17% and €76, respectively, at Detailhandel.Pension contributions amounted to 27% of salary at Dranken, and 21.6% at the larger scheme.Dranken indicated that, given the difference in funding, there was a reasonable chance of a one-off pensions increase for its participants as a result of the merger.At July-end, its funding stood at 115.4%, whereas Detailhandel’s coverage was 111.4%. The €738m Dutch pension fund for the drinks sector – Dranken – plans to merge with the €20bn fund for the retail industry next year.On its website, the scheme explained that pensions accrual could be more effective and cheaper as part of Detailhandel.Dranken has more than 21,000 members affiliated with 300 employers, whereas Detailhandel has 1.1m participants in total.Last year, the industry-wide schemes for furnishing (Wonen), shoemakers (Schoenmakerij) and the textile wholesale sector (Textielgroothandel) all joined Detailhandel. The €329m sector scheme for the leather industry also plans to join next year.last_img read more


Watford’s Deeney claims every team has ‘one gay player’

first_img Loading… Deeney suspects gay footballers are worried about the scrutiny that would follow if they reveal their sexuality while still playing.But the 31-year-old claims one top player coming out would lead to others following their lead.Talking on the BBC’s Grounded with Louis Theroux podcast, Deeney said: “I would go on record saying that there is probably one gay or bi-person in every football team. They’re there, they are 100 percent there.“I think people that are gay or from that community definitely are very worried about having to shoulder the responsibility of being the first. I think once the first comes out, there would be loads.“If he come out and said it, I genuinely believe you would get in the first week at least 100 people that went ‘me too’. Just because they don’t want to be the face of it.”Former Norwich and Nottingham Forest striker Justin Fashanu, who declared he was gay in 1990 and died in 1998, remains the only openly gay male footballer in British history.Despite acknowledging some players would fear criticism, Deeney, who is preparing for the Premier League’s return on June 17, believes the current era is a good time for sportsmen to declare if they are gay.Watford striker Troy DeeneyRead Also: Hazard taken off, ice strapped to right ankle“I think there is now a bigger platform than ever to be a gay athlete of any nature,” he said.“I also wonder, why people finish football, rugby, whatever the sport it might be, and then go ‘I am gay’… I feel like it must be a real heavy load to carry throughout all your whole sporting career.” Watford striker Troy Deeney believes there is probably “one gay player in every football team”.Advertisement FacebookTwitterWhatsAppEmail分享 Promoted Content5 Of The World’s Most Unique Theme ParksBirds Enjoy Living In A Gallery Space Created For Them7 Black Hole Facts That Will Change Your View Of The Universe6 Incredibly Strange Facts About HurricanesYou’ve Only Seen Such Colorful Hairdos In A Handful Of AnimeBoys Deserve More Than Action-Hero Role ModelsThe Very Last Bitcoin Will Be Mined Around 2140. Read MoreBest & Worst Celebrity Endorsed Games Ever Made6 Interesting Ways To Make Money With A DroneA Runner Uses Strava App To Create Amazing Pieces Of Running ArtThe 10 Best Secondary Education Systems In The World9 Facts You Should Know Before Getting A Tattoolast_img read more