“Given the tone of TPR’s response, it seems unlikely the key principles underlying the new code are set to change fundamentally. However, there is some welcome reassurance that TPR will address the concerns raised by respondents... "
“We welcome the DWP's conclusions and support maintaining the charge cap at 0.75%. Over time, it’s likely that we will see more investment innovation in the DC marketplace and schemes should have the ability to add more sophisticated strategies to their default arrangements where they believe these will genuinely improve net of fee outcomes for their members."
Commenting on her expectations for DB schemes in 2021, Susan McIlvogue, Head of DB Pensions, Hymans Robertson says:
“2020 has been a year like no other, and the implications of Covid-19 on health, wealth and jobs will undoubtedly further impact in 2021. With Government support for businesses ending in the Spring, it will be sadly inevitable that some DB scheme sponsors won’t survive. Whilst many of these schemes will fall into the PPF, we predict that some will go down the new route of commercial consolidation. For schemes with ongoing but weakened covenants, there may be little choice but to lengthen funding plans and implement additional protections.
Nearly a quarter (22%) of FTSE 350 DB schemes with rated sponsors expect corporate insolvency before they reach buy-out according to analysis from Hymans Robertson in its annual FTSE 350 DB Report. This is a timely warning given the increasing numbers of high-profile High Street insolvencies leading to pensions cuts, claims the leading pensions and financial services consultancy. It cautions that these schemes can expect sponsor insolvency to trigger early wind-up, forcing annuitisation and potentially a haircut to members’ benefits and should be putting measures in place to mitigate this risk.
The Aviva Staff Pension Scheme (the “Scheme”) has completed a £875 million buy-in with Aviva Life & Pensions UK Ltd (“Aviva”) covering the Scheme’s liabilities in respect of c.2,800 members. This is the second buy-in with Aviva following a £1.7bn buy-in in 2019 and a £5bn longevity swap in 2014. Hymans Robertson acted as lead adviser to the Scheme.
“If RPI is aligned with CPIH from 2030 this will be a major blow both for pension schemes and their members. Many pension scheme members will be expected to get lower pension increases due to this change. It is common for pension schemes to pay pension increases linked to RPI so lowering the future rate of growth in RPI lowers the pension increases pensioners will receive."
This ruling addresses the thorny issue of pension schemes picking up the tab for GMP equalisation for past transfer values. This should be good news for some of those who took a transfer value as they may now be in line for a top up payment. However, the effort involved in revisiting transfers paid out by pension schemes across the industry over the last 30 years will be a very significant challenge for schemes, and in many cases historical data will not be available.
Today’s guidance is particularly timely given the current backdrop. It’s a reminder to trustees of the value of early contingency planning and being ready to act before it’s too late and we are supportive of the Regulator putting more emphasis on managing these issues. Trustees might not think that they’ll ever face this situation, but the risk of sponsor insolvency is very real.
We accept that Government has the power to amend LGPS benefits, and had flagged up in last year’s General Election that a £95k exit payment cap would be brought in. However, there are a number of clear and widespread concerns which remain forefront in our mind. Firstly, the manner of communication of the various reform proposals have demonstrated a lack of joined-up thinking in Government.
The 2020 Master Trust Default Report shows retirement outcomes for members in Master Trusts are likely to be back on track, relative to their position at the start of 2020.
Nearly three quarters of DB schemes (70%) would not meet TPR’s fast track requirements according to analysis undertaken by Hymans Robertson. Using the funding plans of a representative sample of clients, the leading pensions and benefits consultancy found that less than a third of schemes (30%) would pass all four of the proposed Fast Track tests on the Long Term Objective, technical provisions, recovery plan and investment risk
Hymans Robertson has been working with Marks & Spencer on the de-risking strategy for the pension scheme, working collaboratively with the Trustee and its advisers.