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Viewpoint
COUNTDOWN TO
The official journal of the Pensions
and Lifetime Savings Association
CONFERENCE:
Issue 3 2020
OUR FLAGSHIP EVENT
GOES VIRTUAL
THE CHILDREN’S
SOCIETY PENSIONS
EXCELLENCE
SUPERFUNDS IN
FOCUS
RETHINKING
RETIREMENT
DECISION-MAKING
PENSIONS TAX RELIEF:
GOLDEN GOOSE OR
SITTING DUCK?
PROVIDING
LONG TERM SECURITY
The purpose of Pension Insurance Corporation plc (“PIC”) is to
pay the pensions of its current and future policyholders.
PIC provides secure and stable pensions through providing
pension risk transfer solutions backed by leading customer
service, comprehensive risk management and excellence in NEW LIABILITIES INSURED
(HY 2020)
asset and liability management.
As of 30 June 2020, PIC has insured 237,600 £3.5 BILLION
pension scheme members, backed by £47.7 billion
of investments.
Clients of PIC include FTSE 100 companies, ASSETS UNDER MANAGEMENT
(HY 2020)
multinationals and the public sector.
For more information, £47.7 BILLION
please visit www.pensioncorporation.com
or call 0207 105 2000.
Pension Insurance Corporation plc is registered in England and Wales under registration number 05706720.
It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority (FRN 454345). Its registered office is at Cornhill, London EC3V 3ND.
Contents C
CONTENTS
04 06 09 08
10
CEO’S VIEWPOINT ANNUAL CONFERENCE POLICY IN PRACTICE SUPPORTING
PENSIONS STEWARDSHIP
TAX RELIEF
NEW WAYS TO THRIVE 2020: PENSIONS, ECONOMY, PLSA RESPONSES NEW
NOVOTING
GOLDENGUIDELINES
GOOSE
SOCIETY
13 16
TERRY RITCHIE RETIREMENT SAVINGS
TRUSTEE TRAINING TIME FOR A RETHINK
PRIORITIES
18 22
FINANCIAL WELLBEING SURVEYING THE
20 10 PLSA Team:
Maggie Williams, Editor
A LIFELONG GOAL SUPERFUNDS Tel: 07876 823 716
Email: maggie.j.williams@googlemail.com
Twitter: @mrsmaggiew
Edward Bogira
Tel: +44 (0)20 7601 1733
Email: edward.bogira@plsa.co.uk
27 31 34
Design
arc-cs ltd
www.arc-cs.com
Advertising
MEET THE MEMBER THE PENSIONS REGULATOR CEO NETWORK Adrian Messina
Tel: +44 (0)20 7601 1722
HEIDI CATHERALL EMPLOYERS, SAVERS AND A NEW PLSA GROUP Email: adrian.messina@plsa.co.uk
COVID-19 Claire Simmons
Tel: +44 (0)20 7601 1735
Email: Claire Simmons
ISSN 2398-7626
36 38 45
40 © Pensions and Lifetime Savings
Association 2020. All rights reserved.
Published by the Pensions and Lifetime
Savings Association, a company registered
THE CHILDREN’S SOCIETY A DIGITAL TOMORROW GENTLE GUIDANCE:
TIME FOR A MORE in England and Wales. Company number
PENSIONS EXCELLENCE PENSIONS AND MENTORING
INCLUSIVEIN PENSIONS
INDUSTRY 1130269.
TECHNOLOGY 24 Chiswell Street London EC1Y 4TY
The views expressed in this publication are
not necessarily the views of the Pensions
and Lifetime Savings Association.
Viewpoint Issue 3 2020 3
C CEO’s Viewpoint
CEO’S Viewpoint
It’s a time of great change but the PLSA is working hard to meet the challenges, says Julian Mund
AUTUMN IS ALWAYS A TIME OF CHANGE The theme of this year’s conference is how the
pensions sector can prepare, invest and provide
– AND NEVER MORE SO THAN THIS for the future, as the economy and our society
YEAR. BACK TO SCHOOL FOR MANY, go through the most dramatic transformation in
BACK TO THE OFFICE (OR NOT) FOR living memory. I’m looking forward to sharing
with you some fascinating new research on the
SOME, ANOTHER STEP FURTHER INTO evolution of workplace pensions in my
WHAT CONTINUES TO BE THE UNKNOWN keynote address.
FROM THE PERSPECTIVE OF COVID-19. I The world-class programme will cover
HOPE YOU, YOUR FRIENDS AND FAMILY everything from investing for good, which
continues to be an important theme, to Pension
HAVE ALL STAYED SAFE AND WELL THIS Freedoms five years on. The global pandemic
SUMMER. has shone a light on the challenge of providing
2020 has been an exceptionally difficult year financial wellbeing for savers and this will be
for society, business and the pensions industry another key focus at conference. We’ll also
alike. We have all faced new challenges and reveal new data and insight from the award-
been forced to find new ways of working. winning Retirement Living Standards.
Communications with savers worried about You can read a taster on these and other
their future retirement, investment strategies conference sessions in this edition of Viewpoint.
dealing with market shock, governance and
administration carried out remotely and with PARADIGM SHIFT IN THE WAY
a reduced workforce: these are just a few of the ORGANISATIONS WORK
issues reported by PLSA members. Covid-19 has brought a digital revolution front
and centre. We’re really excited to be embracing
The PLSA has been extremely busy speaking to
digital – a direction we believe the pensions
our members, over video conference this year
sector was taking anyway as shown by the
rather than in person. While concerns remain
launch of our brand new Tech Conference
regarding interest rates and the employer
later this year.
covenant, it’s reassuring to hear that schemes
have generally coped very well with the impact Technology has enabled us to continue doing
of Covid-19. what we do best – bring people together. The
remainder of our conferences this year will
One aspect that has stood out is members’
be online, as will the first part of our trustee
resilience and determination to continue
training, which you can read more about in
delivering the best possible outcomes for
this issue.
their schemes and pension savers.
Here at the PLSA we’re continuing to work from
JOIN US ONLINE FOR THE BIGGEST home, but we’re considering ways to capitalise
EVENT IN PENSIONS on the benefits experienced during the world’s
In July we announced that our events for the biggest and most successful home working
rest of 2020 will be online, digital experiences, experiment.
and that we aren’t planning to return to live
events as we knew them until at least 2022. Across many sectors, like ours, there has been
a huge emphasis placed on the wellbeing and
This October the PLSA Annual Conference takes support of staff. The ability for employees to
place online – the biggest pensions event in the work from home and personalise their daily
UK. It will run over five shorter days instead routine can only be good from the perspective
of the usual three, and will include all the of diversity and inclusion.
networking opportunities you’ve come to expect,
only this year with a digital twist. Learn about For the rest of this year there continues to be
our networking tools and how the exhibition much uncertainty, many unknowns. I hope
will work on the digital platform in our Digital you enjoy this issue of Viewpoint and Annual
Conference Centre. Conference. But most importantly, stay safe.
4 Viewpoint Issue 3 2020
COST
TRANSPARENCY
INITIATIVE
Open source and free to use, the Cost Transparency
Initiative (CTI) templates are designed to help
pension schemes understand and compare the cost
of investment management.These templates and
tools are free to download from www.plsa.co.uk.
MARY
USER SUM
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USER SUMM MAIN AC
INFORMA
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1. ACCOUNT LATE
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Client/Inv T LEVEL TE
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value LIO
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Purchase T AC
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Management Template, look out for
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4.3. Govern Tran
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show
Transactio sactio e n as po
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F Feature
ANNUAL
CONFERENCE 2020
Rachel Pine looks forward to a flagship
event with a big difference…
WHEN OUR INDUSTRY LAST GATHERED, There were plenty of top-of-mind issues to future from a wide variety of perspectives.
AT INVESTMENT CONFERENCE 2020 IN discuss at Annual Conference 2020 before With speakers including legendary political
Covid ever reached our shores – the Pension broadcaster and publisher Andrew Neil on
EDINBURGH IN MID-MARCH, NO ONE HAD
Schemes Bill, the proposed DB funding code, our ‘New, new normal’ – the government,
ANY IDEA THAT IT WAS TO BE THE LAST the pensions dashboards and an increasing Brexit and the American election; Money
TIME A LARGE EVENT COULD BE CONVENED focus on climate, the environment and asset Saving Expert Martin Lewis, who’ll talk
FOR THE FORESEEABLE FUTURE. OVER stewardship for schemes. If anything, the to us about his views on how the British
THE COURSE OF THE CONFERENCE AND unfolding news over these past months public view their pension savings; and
THE DAYS IMMEDIATELY FOLLOWING, THE has solidified the inextricable relationship David Olusoga, the noted historian and
CORONAVIRUS MOVED FROM DISTANT between the economy, society and pensions broadcaster, discussing what history can tell
– every single industry and employer has us about our potential future and the deeper
THREAT TO IN-PERSON REALITY, WITH THE
been impacted, and therefore every pension meaning behind the recent focus on societal
UK’S LOCKDOWN FOLLOWING JUST scheme and fund. With many policy issues inclusion; our programme looks to engage,
DAYS LATER. to cover, investment strategies to examine enlighten and inform the bigger picture.
and ideas to share, at the heart of the AC20
And while there is no single industry that Guy Opperman, the Minister for Pensions,
programme is the irrefutable fact that
has been unchanged by the pandemic, the addresses the conference live on Wednesday
the UK’s pensions industry has much to
pensions sector – encompassing every single morning, giving us the latest on his priorities
contribute to provide a safe and just future
employer in the nation and nearly every and the Pension Schemes Bill, and we’ll
for our society.
working-age adult – is certainly central discuss the results of our ‘Facing the Future’
to the economic issues of the day, and will What you’ll see over the five days of the survey – research work in which many of you
remain so in the coming months and years conference is our continued commitment to participated – with him. Charles Counsell,
as we move toward recovery. questioning, examining and picturing that chief executive of The Pensions Regulator, is
6 Viewpoint Issue 3 2020
Feature F
on hand to talk about what TPR has in store
for schemes, for superfunds and for overall
supervision.
Over the days of the conference we will be
presenting information on a raft of topics,
including new ways to increase saver
engagement, our latest thinking on DC
decumulation, an update on the Retirement
Living Standards, battling pension scams
(featuring Stephen Timms MP, chair of the
Work & Pensions Committee), new solutions
to the not-small issue of small pots, and
a presentation on our own Investing For RETIREMENT LIVING STANDARDS: ONE YEAR ON,
Good work, which gets under the bonnet of
schemes’ thinking about climate change, and TWO AWARDS
climate-positive investing. We have a debate We’re delighted that the PLSA’s Retirement Living Standards campaign,
on pensions tax relief where you’ll be able to launched at our Annual Conference 2019, has won two industry awards
share your views, too, and let us know which this year:
side of this contentious issue you’re on.
Headlinemoney
Our leap into digital started off slowly,
Headlinemoney Awards 2020: Thought Leadership Initiative of the Year
gathering momentum as we fully redesigned
Annual Conference into a five-day online
PIPA
event brimming with ways for attendees to
engage with content, speakers and sponsors. Pensions and Investment Provider Awards (PIPA) 2020: Innovation of
We remain committed to providing up-to- the Year
the-minute content on our industry to all of
our fund and business members, at a time “Entries to the category demonstrated that the pensions industry is
when disaggregation rules the day. catching up with the rest of financial services in its commitment to
customer services and embrace of technology,” said PIPA. It described
Retirement Living Standards as “A cross-industry effort…the standards
translate desires and expectations about quality of life in retirement into
a financial cost, helping savers to set achievable targets.”
Throughout the conference we invite you “WHEN WE SET ABOUT LAUNCHING OUR RETIREMENT
to get involved – take polls, play the digital
game that’s part of the exhibition, chat with LIVING STANDARDS WE WANTED IT TO RESONATE WITH
our session ‘whips’ in the chatbox that runs BOTH THE INDUSTRY AND SAVERS, AND THROUGH
alongside every session, visit the sponsors in
the networking channels and keep letting us A WELL-MANAGED AND PRECISE PR CAMPAIGN WE
know your thoughts about the issues of the MANAGED TO GET THE TONE OF THE MESSAGE JUST
day, and how this new way of meeting feels
to you. RIGHT. I’D LIKE TO CONGRATULATE EACH AND EVERY ONE
While we hope to be able to meet again in OF THE TEAM WHO MADE THIS LAUNCH A HUGE SUCCESS
person in the very near future, the positives
of the digital conference are difficult
AND THANK THEM ALL FOR THEIR TIRELESS EFFORTS
to ignore. We’ve broken our record of AND SLEEPLESS NIGHTS.”
participating schemes this year, with 283
schemes registering, up from our previous Julian Mund, CEO, PLSA
record of 226, a 25% increase in the number
of schemes attending. We have 472 people
attending who’ve not attended for at least
the past three years and we are excited to
welcome them back. The carbon footprint
of the conference, without the travel,
accommodation and shipping of stands,
is much lower and this is an important MORE INFORMATION:
consideration. It is likely that we will
https://headlinemoneyawards.co.uk/headlinemoney-thoughtleadership-oty
continue to include a digital element to many
of our conferences in the future. content.yudu.com/web/43wcl/0A43wm7/PE-Pipa-App-Aug2020/html/
index.html?page=76&origin=reader
See you on the other side!
Viewpoint Issue 3 2020 7
F Feature
Supporting you and your clients
Our workplace solutions are designed to give control
and flexibility, helping members feel confident to
make the right choices for their financial future.
With high-quality service and guidance at every step
of the way, we support you and your clients in the
moments that matter.
Find out more at standardlifeworkplace.co.uk/employer/covid-19.page
Standard Life Assurance Limited is owned by the Phoenix Group and uses the Standard Life brand under licence from the Standard Life Aberdeen Group.
You can find more information about Standard Life Aberdeen plc’s strategic partnership with Phoenix at www.standardlife.com/partnership
Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.
Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
www.standardlife.co.uk
8 Viewpoint Issue 3 2020
GEN3174_A4 1020 © 2020 Standard Life Aberdeen, reproduced under licence. All rights reserved.
STA1020305688-001
Article A
POLICY IN Luisa Ciavucco runs down some of
PRACTICE
the recent releases from the PLSA
CURRENT CIRCUMSTANCES AREN’T DATA STANDARDS: CALL FOR INPUT – out in their Statement of Investment
STOPPING US FROM DELIVERING A BUSY PLSA RESPONSE Principles.
POLICY AGENDA AND ACHIEVING THE BEST The Pensions Dashboard Programme has
DC DECUMULATION CALL FOR EVIDENCE
OUTCOMES WE CAN FOR OUR MEMBERS. TO made significant progress and its work
KEEP YOU UP-TO-DATE WITH WHAT WE’VE on data standards illustrates this. It is This set out a new framework to support
essential that appropriate data standards savers and schemes in the member
BEEN WORKING ON, HERE ARE SOME OF OUR
are released as soon as possible to journey towards retirement. Key
KEY RECENT POLICY DOCUMENTS: allow pension schemes sufficient areas of focus included the statutory
time to prepare the data they hold for obligation, scheme impact, product
PLSA RESPONSE TO THE TREASURY onboarding. mix, the default, signposting, the role
SELECT COMMITTEE CALL FOR EVIDENCE: of IGCs and member communications
TAX AFTER CORONAVIRUS PLSA RESPONSE TO THE DWP CALL FOR and engagement. Look out for our
Questions were asked about the level EVIDENCE: REVIEW OF THE DEFAULT recommendations soon.
of taxation the economy can bear and FUND CHARGE CAP AND STANDARDISED
long-term pressures for the tax base, as COST DISCLOSURE ENGAGING THE ENGAGERS: A PRACTICAL
well as the role of tax reliefs in rebuilding
The PLSA supports the current charge TOOLKIT FOR SCHEMES TO ACHIEVE
the economy. We believe it’s essential
cap but does not believe it should be EFFECTIVE STEWARDSHIP THROUGH
that government continues to provide
reduced. Including transaction costs as THEIR MANAGERS
support and incentives to help people Our joint guidance with the Investor
a component of the charge cap would
save enough for retirement. Forum supports schemes in holding
act as a barrier to enabling schemes
to act in members’ best interests and their asset managers to account on
PROTECTING PENSION SAVERS CALL FOR would limit investment options. We also engagement and stewardship issues. In
EVIDENCE: PLSA RESPONSE discuss in this submission the proposed this toolkit, we’ve included suggestions
The PLSA shares the Work and Pensions limitations on the flat fee structure and for schemes to ask their managers,
Select Committee’s desire to stamp out cost transparency. and provided a broader framework for
pension scams. In this response, we assessing stewardship and engagement
discuss measures taken by regulators, JOINT TREASURY/UKSA CONSULTATION: approaches.
industry and government to tackle REFORM TO RETAIL PRICES INDEX (RPI)
pension scams. We define types of METHODOLOGY: PLSA RESPONSE GMP EQUALISATION MADE SIMPLE
pension scam and mis-selling, and set This guide, sponsored by Equiniti,
The joint consultation from the
out recommendations for combatting covers the history, the methods and the
government and UKSA sought views on
scams and protecting savers. roadmap for the future to help trustees
the alignment of RPI to CPIH, including
among other things, the issue of timing. prepare for and begin their GMP
DB FUNDING CODE – PLSA RESPONSE We understand that RPI is a flawed equalisation project, a complex and
Our response to TPR’s first consultation measure of inflation and support plans to long-term undertaking with significant
on its DB funding code of practice develop a more robust measure. implications for many DB schemes.
supports the principles and believes
its aims and objectives to be practical, PLSA IMPLEMENTATION STATEMENT
with the two compliance routes – ‘Fast- GUIDANCE FOR TRUSTEES To find out more about any of the
track’ and ‘Bespoke’ – able to help
Our guidance and vote reporting topics above, visit our website at
smaller schemes achieve compliance
templates provide practical support https://www.plsa.co.uk/Policy-
as efficiently as possible. How the code
for trustees of both DB and DC/hybrid and-Research-Document-
can be adequately applied in Fast-
schemes around the production of their library#/by-title and keep up to
track is complex and requires further
new Implementation Statements, where date with PolicyWatch.
consideration.
trustees must disclose how they have
followed the objectives and policies set
Viewpoint Issue 3 2020 9
A Article
PENSIONS TAX RELIEF:
NO GOLDEN GOOSE
With a hole in the nation’s finances, Nigel Peaple, director of policy and research,
PLSA, warns against cutting imaginary ‘costs’ and finding illusory ‘savings’
THE CORONAVIRUS PANDEMIC HAS OPENED more likely than not that the employers In 2016, the PLSA undertook a research
UP A SUBSTANTIAL HOLE IN THE BUDGET involved might make up some or all of the project that examined the likelihood that
AS THE GOVERNMENT HAS PROVIDED VITAL resulting fall in take-home pay for the senior current workers would have a pension
SUPPORT FOR BUSINESSES, PUBLIC SERVICES nurses, doctors and headteachers affected, equivalent to the pension targets identified
AND INDIVIDUALS. THERE HAS BEEN MUCH especially if we’re still battling COVID-19. by the 2006 Pensions Commission.
SPECULATION IN RECENT WEEKS ABOUT HOW Obviously, any additional funding would
Using the Commission’s targets, the PLSA’s
have to come from the public purse.
THIS WILL BE PAID FOR, AND PENSIONS TAX research found that just over 50% of the
RELIEF IS REPORTEDLY UNDER REVIEW BY Around 20% of the sum is tax not levied on working population, or 13.6 million people,
CHANCELLOR RISHI SUNAK. employers who are making up the pension were at high risk of failing to meet their
deficits in traditional final salary schemes. target replacement rate. Moreover, it is
Speaking from a pensions perspective, we’d
These contributions are generally used to the middle-aged savers of Generation X,
prefer that government find some other way
make sure pension promises, to former and today aged around 40 to 55, and the young
to find the funds. But if the government does
current employees for work done in the past, millennials, aged around 25 to 39, who are
choose to raise them from pensions, we’d like
are honoured. Amending this part of the most likely not to be saving enough.
to emphasise that the amounts available are
regime would simply add a tax on business
less than often quoted and the consequences So the government should think very
and make the pensions of millions of people
less appealing. carefully before reducing the amount of
less secure.
support it provides for pension saving.
Under the current rules, which are designed
The remainder goes to the minority of people
to incentivise people to lock money away for However, if the government is determined
in the private sector that are contributing to
their retirement, most savers pay no income to alter pensions tax relief, then we’d urge
a final salary pension and the many millions
tax on any earnings they contribute towards them to ensure that any change is primarily
of others, nearly all in the private sector,
a pension. However, apart from a 25% tax- designed to help people save enough for
who have a money purchase or defined
free lump sum, they do pay income tax when retirement. Ideally, any change would also be
contribution pension. We estimate the
they come to draw it. So the figures quoted simple to adopt and administer, and should
total savings to government available from
are not all that they seem. be sustainable over the long term. Everyone
this part of pension saving is under half of
knows that the current system is not perfect,
It’s often said that pensions tax relief “costs” the £40 billion so often quoted – and, of
so the pensions sector is open to considering
the government about £40 billion a year. The course, the government would not want to
how it can be improved. But let’s keep
implication is that if the government changed remove all support from people saving for
our eyes on the prize: everyone having an
the rules on pensions tax relief, they could retirement. So the total “savings” for the
adequate income in retirement.
save a significant proportion of this sum of public purse will be far, far lower.
money. The reality is far from this.
Reducing fiscal support might be a
About 40% of the amount is allocated to reasonable approach if people in the UK
public sector pension schemes so, if the were already saving enough for retirement.
government did reduce fiscal support, it’s However, this is not the case.
This piece originally appeared in
Understanding Pensions, a special
report produced by Raconteur in
association with the Sunday Times,
THE GOVERNMENT SHOULD THINK on 27 September 2020.
VERY CAREFULLY BEFORE REDUCING THE https://www.raconteur.
net/report/understanding-
AMOUNT OF SUPPORT IT PROVIDES FOR pensions-2020/
PENSION SAVING
10 Viewpoint Issue 3 2020Feature F
THANK YOU TO ALL OUR
EDUCATION PARTNERS
FOR THEIR SUPPORT IN
2020
VIA WEBINARS AND THOUGHT LEADERSHIP ARTICLES,
OUR PARTNERS FOCUS ON THE HOT TOPICS OF THE DAY
TO BRING YOU UP-TO-DATE INFORMATION AND SHINE A
SPOTLIGHT ON ISSUES AND OPPORTUNITIES TO SUPPORT
YOU IN YOUR ROLE.
www.plsa.co.uk/Events-and-training/Education-partners
Bloomberg focuses on technology Phoenix runs through investment
& data solutions for portfolio oversight only platforms
Caceis drills down into data and Russell Investments investigates
custody governance fiduciary management
Equiniti explores GMP equalisation UBP navigates impact investing
R
GRIDSERVE focuses on sustainable World Gold Council discusses the role
energy infrastructure of gold in a pension fund portfolio
For our full webinar schedule please visit www.plsa.co.uk
Viewpoint Issue 3 2020 11THE MEMBER
BACKING
PENSIONS AND
LIFETIME SAVINGS
ASSOCIATION
TRUSTEE TRAINING
PROGRAMME ONLINE
TRAINING
PART 1 - THE THEORY
4 & 5 November 2020
100% OF
DELEGATES WOULD
Our trustee training programme helps new RECOMMEND THE
trustees and people interested in becoming a trustee COURSES TO A
to understand their role and responsibilities and the COLLEAGUE
challenges they’ll face.
OVER TWO MORNINGS, YOU’LL LEARN ABOUT
• Pension trustee duties, responsibilities and powers
• How trustees protect themselves against legal challenge
• Types of advisers and advice
• How workplace pension schemes are financed
and how they value their assets and liabilities
• Investment strategies
• Accountability and communication
• Good pension scheme governance
Find out more: www.plsa.co.ukInterview I
TRUSTEE
TRAINING
Terry Ritchie introduces a new virtual approach to training
at the PLSA and beyond as he explains to Maggie Williams
Q Q Q
HOW HAS THE COVID-19 CRISIS AFFECTED WHAT ARE THE KEY TOPICS THAT WE’VE SEEN ACCREDITATION
TRUSTEE TRAINING? TRUSTEES NEED TO LEARN ABOUT? INTRODUCED THIS YEAR FOR
PROFESSIONAL TRUSTEES – SHOULD
A A MEMBER-NOMINATED TRUSTEES ALSO BE
We’ve all had to change our mindset over Most core subjects – such as the role of the REQUIRED TO HAVE A QUALIFICATION?
the last few months as a result of the
pandemic. Face-to-face training still isn’t
trustee, legal considerations, actuarial,
governance, and understanding the annual A
practical or desirable at the moment, and report and accounts – remain the same as The Trustee Knowledge and Understanding
the PLSA has been developing its trustee ever. programme from the Regulator is very
training so that it can be delivered virtually. user-friendly, and provides a lot of sensible
However, there will be new and updated
guidance. That is augmented with CPD
In the longer term, when work and travel directives from The Pensions Regulator
requirements which trustees should be
practices have stabilised, learners could (TPR) linked to many of these areas. For
addressing as part of their role.
have a choice between face-to-face and example, the need to publish DB schemes’
virtual methods, as both have different Statement of Investment Principles online Beyond that, a qualification might be a
advantages. Face-to-face training brings is new this year, as well as the requirement step too far for many member-nominated
benefits such as enabling presenters to to produce an Implementation Statement trustees, especially as the demands of
observe delegates’ body language and gauge for both DB and DC schemes. The content the role are becoming ever-greater and
their level of understanding. Tasks that of the SIP is also changing, to include TPR more vigilant. Pensions are always
require collaborative working in a group, information on how schemes are addressing complicated, but with the overlay of the
such as case studies, can also be delivered ESG issues and stewardship. Investment pandemic and other factors, there is already
more easily in person. And, of course, you strategies are also coming under the so much for trustees to consider and learn
won’t have a problem with your wi-fi signal microscope, with changes to the Defined as part of their role.
dropping out! Benefit Funding Code on the horizon.
However, virtual training can offer greater Another key issue for DB trustees is the
flexibility – there’s minimal travelling employer covenant. Even seemingly strong
time, and training can be delivered more covenants could be severely tested by the
cost-effectively. It also means that we can effects of Covid-19 and ongoing uncertainty
deliver information in bite-sized chunks. over Brexit. I have focused a lot on the
Rather than packing everything into a covenant recently in my own trustee work, Trusteeship – part 1:
single day course, we can divide up the and we’re likely to see more emphasis from
the theory is available as an
materials and have, for example, a session TPR on making sure trustees review the
on legal requirements and actuarial work, strength of the covenant regularly. online course in 2020.
then cover governance, investment matters, 7-8 October 2020
One key message that is applicable for all
and annual reports and accounts on
trustees is to make sure that they remain up 4-5 November 2020
another day.
to date with the latest requirements from
Delegates also have more control over TPR. Both new and experienced trustees Our follow-on courses, part 2: the
accessing training at a time that suits need to make sure they stay on top of these, practice and part 3: the expert will
them. As technology develops and we get and we’ll always include a session in our return in 2021
more comfortable with it, we’ll be able to training to recap on recent changes. All
replicate even more parts of the face-to-face trustees should also make sure they keep https://www.plsa.co.uk/
experience online. their continuous professional development Events-and-training/Trustee-
(CPD) up to date, reflect on whether their Training/
knowledge is sufficiently current, and ask
themselves if there’s any additional training
they need from their advisers.
Viewpoint Issue 3 2020 13A Article
THREE WAYS TO IMPROVE
COST TRANSPARENCY
Samuel Condry, Policy Lead: Standards, has a trio of tips for trustees
BE PREPARED TO CHALLENGE made with the wider context of value for the PLSA runs on behalf of the pensions
money (VFM) firmly in mind. And when it industry, alongside its partner organisations
PRIORITIES comes to VFM, things are heating up. the Investment Association (IA) and the
As we’ve moved through the intervening Local Government Pension Scheme Advisory
The FCA has an open consultation on Board (SAB).
months since the start of lockdown, many
proposals to strengthen IGCs’ obligations
people’s priorities have naturally focused on
to assess the ongoing VFM of workplace The CTI framework is an industry standard
funding and investment risks – as well as
pensions (CP20/9 ‘Driving value for money for institutional investment cost data –
juggling the myriad tasks needed to provide
in pensions’). The proposals include a three- developed by industry, for industry. The
an uninterrupted service to pensions savers. pronged approach to VFM assessments, framework consists of several templates and
In such a turbulent environment, it has been incorporating charges and costs, investment tools which enable asset owners to view all
all too easy to lose sight of some of the more performance, and services provided their costs and charges in a consistent and
‘hidden’ priorities. Investment costs can (including member communications). comparable way. These are all free to use and,
often be overlooked at the best of times – While the FCA is unlikely to become overly if you’re a trustee or IGC member, you can
yet Covid has provided a real opportunity prescriptive in this space, it’s apparent use this information to get a full and detailed
for schemes to reassess their priorities that IGCs will need to examine the moving understanding of your investment costs.
and to find unturned stones to peer under. parts of investment performance and costs
Gaining such a detailed view of investment
Investment costs are certainly worth a closer together, and to some level of detail.
costs will allow you to make meaningful
look, as poor investment performance means Similarly, pensions trustees are likely to have comparisons across investment mandates
their basis points-impact can be magnified equivalent new obligations imposed on them, and across your different managers
just now. with The Pensions Regulator (TPR) and the (including where in-house and external
As dividend payments and other investment Department for Work and Pensions (DWP) managers are employed); facilitating
returns are expected to be squeezed further making it clear that they will be bringing changes or other recommendations where
over the coming months, some of the most forward proposals. At time of writing, the appropriate.
progressive pension funds have already been DWP has just published a consultation
The CTI framework has the benefit of
finding significant monetary savings through paper which details new requirements for
compatibility, as it has been designed to be
renewed scrutiny of investment costs, as well small scheme trustees (schemes with less
easily harmonised with other regulatory
as helping to exert downward pressure on than £100 million in total assets) to assess
or reporting requirements, such as ILPA
fees, renegotiating where appropriate. key elements of value, including investment
or MiFID II. The framework has also been
performance and charges. This is no
If you’re a trustee, or a member of an incorporated into the services provided by
bloodless process – trustees must proactively
independent governance committee (IGC), the leading information providers (utilities)
identify and recommend whether it might
this autumn will be a key time to ensure in the marketplace, as well as the LGPS
be in scheme members’ interests to move
you keep investment costs on the meeting Transparency Code.
to a larger scheme (or an authorised master
agenda. You should challenge your advisers trust), which provides better value. Whichever approach you take to scrutinise
and investment managers to justify any investment costs, it’s vital to have open
priorities, and be prepared to push back if DIG OUT THOSE DETAILS conversations with your investment
you feel costs and charges might have been managers and advisers about your
A thorough assessment of investment costs
unduly relegated or dropped off the agenda. requirements – help them to help you and
and charges can be onerous, especially
While the focus for pensions remains long- when time and resources are stretched make sure cost transparency is kept high on
term, the link between how individuals by competing priorities. Collecting the the agenda.
manage their money today, and how they necessary data can be time-consuming at
build up savings for the future, is becoming best, even before you begin to wrestle with
ever stronger – and ever more important to data quality and comparisons. Yet it’s just
members. those areas of detail – such as incidental
costs, administration costs, or governance- Further information about the CTI
ALWAYS CONSIDER THE related costs – which can really add up to framework is available on the website:
WIDER CONTEXT impact on the net return on investment www.plsa.co.uk/Policy-and-
performance. Research-Investment-Cost-
However, too great a focus on simply cutting
Transparency-Initiative
back costs comes with its own risks. Any This is where I want to plug the Cost
assessment of investment costs should be Transparency Initiative (CTI), which
14 Viewpoint Issue 3 2020Integrated thinking.
Better outcomes.
Our multi-disciplinary team advises on all
types of covenant and funding solutions.
Join Travers Smith Head of Pensions Daniel Gerring
and Lincoln Pensions Managing Director Matthew
Harrison at a joint Trustee Learning Zone session on
Assessing Employer Covenant in Uncertain Times.
Location: The PLSA Digital Annual Conference
Date: Tuesday 13 October
Time: 11.15am
Visit www.plsa.co.uk for
further details and registration.
traverssmith.comF Feature
RETHINKING RETIREMENT DECI
Lizzy Holliday, Head of DC, Master Trusts and Lifetime Saving
at the PLSA, assesses current issues and attitudes
THE PENSION FREEDOMS GAVE SAVERS fluctuations, and potential diminished savers from poor outcomes. But the current
GREATER CHOICE ABOUT HOW TO ACCESS decision-making capabilities needed to system also presents a variety of operational,
THEIR RETIREMENT SAVINGS. manage their retirement income. litigation, and other risks for schemes, which
results in many choosing to provide minimal
Prior to the reforms, 90% of pension pots In the five years since the introduction of
support (signposting savers to Pension Wise
moved into annuities in the decumulation the pension freedoms, several attempts to
and providing pre-retirement ‘wake up’
phase. By June 2018 FCA reported that twice improve savers’ knowledge, understanding
packs). Among these risks is how schemes
as many pots were moving into drawdown and level of engagement have had limited
navigate the line between guidance and
than annuities, with 2019 figures suggesting success, and there’s clearly room for
advice.
the downward trend in annuity sales improvement in the ‘at-retirement’ processes
has continued. The total value of flexible to better serve savers. THE PLSA’S DECUMULATION PROPOSAL
withdrawals has risen steadily, and now The PLSA has, over the last few weeks, been
According to research by the PLSA, nearly
exceeds £35 billion. getting input from the industry, consumer
three-quarters (71%) of savers in defined
But a significant body of evidence shows contribution (DC) funds want support groups and other stakeholders on its
the confusing range of options and risks is when deciding how to access their pension, new proposal to help improve retirement
potentially leading to poor decision-making including some wanting to be guided by their outcomes.
that’s affecting the adequacy of people’s pension scheme to a ready-made retirement
income option. At the heart of the proposal is a call to
retirement living standards.
establish a new regulatory regime that will
What’s more, the new array of choices shift Pension schemes want to support savers require pension schemes to support their
a number of risks onto the individual in more effectively by improving the help they members when making decisions about
retirement: the possibility of running out of get when they’re thinking about drawing how to access their pensions – including by
money, ongoing exposure to stock market their pension and setting a path that protects offering or ‘signposting’ to products. The
16 Viewpoint Issue 3 2020Feature F
provides a crucial function in their decision-
making.
Advisers know their clients and can make
the bewildering range of choices they face
comprehensible. Our solution doesn’t rely
on members taking advice, but it encourages
members to seek out further guidance and
advice, not just at the start of their retirement
journey, but also in the planning phase and,
increasingly, during a management phase in
retirement.
Many of our pension scheme members tell
us that finding ways to introduce or provide
access to professional financial advice on
behalf of their members demonstrates that
they are best in class, particularly so that they
can take a holistic view across the multiple
IN THE FIVE YEARS SINCE pots they may hold across different schemes,
THE INTRODUCTION OF THE or different kinds of benefits (e.g. DB).
PENSION FREEDOMS, SEVERAL
Retirement processes should work for all
– those who arrive at their decumulation
ATTEMPTS TO IMPROVE SAVERS’ options with little knowledge, or who do not
engage, as well as those who are confident
KNOWLEDGE, UNDERSTANDING and have detailed plans. Together, pension
AND LEVEL OF ENGAGEMENT schemes and advice have central roles to
play to help people achieve better incomes in
HAVE HAD LIMITED SUCCESS retirement.
ISION-MAKING
PLSA DC DECUMULATION CALL
FOR EVIDENCE CLOSES
The PLSA DC Decumulation Call for
Evidence closed on 4 September. It
set out a new framework to support
savers and schemes in the member
journey towards retirement.
During the Call for Evidence period
we had some great discussions
with highly engaged participants –
including seven roundtables (one
proposed framework would entail minimum obligations to provide guidance and
of which was a consumer-focused
standards for member engagement and ‘signposting’ to retirement income products
session), covering more than 50
communications, products and scheme might impact their operations. It also
individuals representing more than
governance in relation to decumulation. examines how greater choice has exacerbated
40 organisations. We have also
These standards would help protect savers by some risks to savers – of making poor
received over 20 considered written
maintaining the quality of a scheme’s offer decisions, of outliving their savings, of
responses.
and providing a safety net to protect savers investments not meeting expectations.
against the worst consequences of inaction. Key areas of focus have included the
THE ROLE OF ADVICE
statutory obligation, scheme impact,
The proposed framework is designed to One recurring theme we’ve been hearing product mix, the default, signposting,
support all savers, and protect people who during our consultation has been about the role of IGCs, and member
don’t engage with or fully understand the the important role of professional financial communications and engagement.
choices they face when they move towards advice in securing adequate retirement
semi- or full retirement. incomes. We’re very grateful for all the
The PLSA’s call for evidence paper places views you’ve shared with us and
Our proposal to enable, encourage and contributions made during this time.
this proposal in the context of the ongoing
support pension schemes to signpost certain
evolution of the broader pensions landscape: We intend to refine our proposals
pathways or develop retirement products is
the growth of DC saving and master trusts, over the course of the next few
not intended to diminish the vital part an
the future consolidation of funds and the weeks and publish our final
adviser can play in helping savers with at-
impending delivery of pensions dashboards. recommendations at the PLSA’s
retirement decisions.
It considers schemes’ responses to the virtual Annual Conference.
pension freedoms, the development of Schemes can only provide so much support
solutions, and how proposed future to their members. For many savers, advice
Viewpoint Issue 3 2020 17F Feature
PLAN FOR THE
FUTURE, LIVE
FOR TODAY £
How can the pensions industry help people with their
broader financial wellbeing? Maggie Williams reports
FINANCIAL WELLBEING HAS BEEN A QUIET their financial health daily, and only 19% term savings, so that different approaches
REVOLUTION IN WORKPLACE SAVINGS AND of respondents said they never worry about to financial wellbeing don’t play off against
money. The research also showed that one of each other.”
EMPLOYEE BENEFITS. ON THE SURFACE
the greatest causes of concern is how to fund
IT MIGHT LOOK LIKE A MARKETING BUZZ- retirement. According to Close Brothers, “The first thing we can do to help with
PHRASE TO ENCOURAGE EMPLOYEES TO 31% of respondents cited this as their biggest financial wellbeing is to be an exceptional
SAVE MORE INTO THEIR PENSION, BUT money worry. pensions industry, continuing to innovate
UNDERNEATH IT REPRESENTS A MUCH and providing good quality pensions at the
Pensions have an obvious role to play in lowest cost,” says Will Sandbrook, Executive
DEEPER RECOGNITION ABOUT HOW WE
making sure savers are on track for a healthy Director, Nest Insight.
VIEW OUR RELATIONSHIP WITH MONEY, financial future. But should the pensions
INCLUDING RETIREMENT SAVINGS. industry have a wider remit when it comes to However, Sandbrook believes schemes can
financial wellbeing? help to create an integrated way of saving
According to the Money and Pensions
that takes account of both short-term
Service, financial wellbeing is “feeling secure
“I think it depends who you’re talking accessible savings and long-term retirement
and in control. It is knowing that you can pay
to,” says Brian Henderson, Director of pots: Nest has been carrying out a ‘sidecar
the bills today, can deal with the unexpected,
Consulting at Mercer. “For example, the savings’ trial to explore this principle.
and are on track for a healthy financial
trustees of an in-house pension scheme
future.” “As fiduciaries of people’s longer-term
have a fiduciary duty to provide pensions
financial wellbeing, [pension schemes]
However, studies have shown that for many and to focus on their scheme. But if you’re
should make sure individuals are in a good
there is a lot of work to do to achieve that looking at bundled pension provision, then
position in the short term. In the US, where
goal. Recent research from Close Brothers, I think there’s more of an obligation to look
there has been more of a focus on short-
Changing Trends in Financial Wellbeing, at the wider picture. You have to think about
term emergency savings, the pensions
showed that 21% of employees worry about an integrated approach to short- and long-
industry has been front and centre. Pension
THE FIRST THING WE CAN DO TO HELP
WITH FINANCIAL WELLBEING IS TO BE AN
EXCEPTIONAL PENSIONS INDUSTRY
18 Viewpoint Issue 3 2020Feature F
THE BEST WAY
TO BE FINANCIALLY
£ WELL FOR THE
LONG TERM IS TO
BE WELL IN THE
SHORT TERM
schemes have good payroll integration and a ‘jam jar’ for their future,” says Rimmer. contributions where affordability is a real
communications, and that can be helpful “We can apply that same idea to short-term issue, until they can get back on their feet.”
when working with employers to set up savings as well, so that there’s a jar for
He adds: “People’s finances tend to be so
initiatives like sidecar savings.” emergencies, for example.”
fragmented. A further opportunity is to
21%
Rimmer also says that using techniques help employees to see all their financial
such as sidecar savings can help to create a information, simply presented, in one place
balance between immediate financial needs, – and to provide them with accessible help
and building up retirement adequacy. “The and support.”
theory is that savers might have zero money
in their sidecar pot at retirement. That’s Henderson says that this ‘helicopter view’
positive if it means they haven’t built up debt of an individual’s finances can be hugely
that they still need to pay off after beneficial. “Sometimes it’s not about
they retire.” big steps such as an increase in pension
OF EMPLOYEES WORRY ABOUT contributions. It’s also the small details, such
However, the ongoing effect of the Covid-19 as helping people to save money day to day,
THEIR FINANCIAL HEALTH DAILY, pandemic could mean some tough financial which all add up.”
AND ONLY 19% OF RESPONDENTS decisions for individuals as redundancies,
SAID THEY NEVER WORRY cuts in working hours and pay reductions Rimmer adds that building good financial
ABOUT MONEY. bite. “Before Covid-19, managing day-to- habits, such as budgeting, is another key
day bills and unexpected costs was already aspect of financial wellbeing. “When you’re
a challenge for many,” says Ruston Smith, used to creating a budget and knowing what
non-executive chair of the Tesco Pension you can afford and what to cut back on, it
Scheme and former chair of the PLSA. “With gives you a better idea of what you’ll need to
Could pensions lose out if people become
increased unemployment, reduced pay spend when you give up work to retire.”
more focused on building up short-term
savings? In principle, Craig Rimmer, Policy and difficulties through lockdown I expect “The best way to be financially well for the
Lead, Master Trusts at the PLSA doesn’t family households will struggle even more – long term is to be well in the short term,”
think so. “Auto-enrolment has been such perhaps forcing a choice between managing concludes Sandbrook.
a success because it has enabled people to today and saving for tomorrow.”
While the focus for pensions remains long-
save more easily for retirement. And, while Smith suggests that there are ways that
term, the link between how individuals
inertia might have played a part early on, schemes, providers and government could
manage their money today, and how they
most people know where their money is help: “We could consider giving people
build up savings for the future, is becoming
going and choose not to stop it going into alternatives to simply opting out by allowing
ever stronger – and ever more important to
their pension. It’s helped them to create them to save less or suspend – not stop –
members.A Article
How ESG can help build
resilience in Buy and Maintain
credit strategies
Responsible investment has always been about the long term.
Equity investors want to know a company isn’t vulnerable to global shifts
around environmental or social issues and fixed income investors, looking
to more distant horizons and might need to ensure a business can be part
of a resilient strategy for the next 20 years.
raw data covering more and resilience – and the
puts environmental, than 7,200 companies in results are tangible,
social and governance 100 countries to deliver not aspirational.
(ESG) factors at its a simple score from Exclusions based on
heart. It’s not for show 0-10. This is the first ESG quality have allowed
– the integration of hurdle. We will not buy us to avoid exposure
ESG decisively shapes a bond from a company to ratings downgrades
allocations. We believe that scores below a 2, and bankruptcy and we
this can help deliver or which falls foul of expect the effects of such
long-term performance baseline exclusions. examples will be seen in
enhancement for An ESG score, performance over time.
institutional investors. however, only reveals We believe the impact
The reason is simple. its true value when of ESG can be magnified
Companies that can’t combined with a full as downgrades and
adapt to new realities qualitative assessment. defaults emerge over the
have never made for It is, for example, hugely years. We want to lend to
great investments, and important to track scores companies that will be
Lionel Pernias, as the world responds through time. Where we thriving, and delivering
to climate and social see a company heading cashflows, 15 years from
AXA IM Head of Buy and change, this is becoming up or down the scale, the now.
Maintain, London more important. So how real investment driver is
F
do we make sure our knowing what lies behind
or asset managers strategies are prepared?
seeking to build
the trajectory.
Companies with an ESG
The goal is
such fixed Scores and more score above 2 still face sustainability
income strategies, it’s ESG scores are a very
all about culture. At useful part of our
detailed scrutiny from and resilience –
AXA IM, we believe process, but they are
our credit analysts who
take care to factor in ESG
and the results
our Buy & Maintain the starting point, not risks, working closely are tangible, not
business benefits from the destination. Our
credit analysis that proprietary system1 uses
with our equity analysts. aspirational
The goal is sustainability
20 Viewpoint Issue 3 2020Changing markets company, there is more imperative. One highlights our thirst for
This isn’t only about value to be gained from global name gained an practical innovation. Our
strategic allocations, active engagement with allocation, not simply own guidelines5 allowed
it’s also about staying management. In 2019, because it issued a Green for a €100m issue of
relevant in changing alongside intense activity Bond, but because it this new type of debt,
fixed income markets. in equity markets, we specifically earmarked which allows carbon-
Our view is that asset engaged with close to funds for sales leasing intensive companies to
managers who take ESG 40 debt-only issuers2. A on hybrids. This kind finance decarbonisation
seriously have better nuanced understanding of verifiable data projects. We are now
prospects for allocations of a company’s ESG encourages us to invest. leading industry efforts
when debt comes to progress allows us to to ramp up this asset
market. build a strategy that Growing markets class6. We also have more
At AXA IM we have is sustainable from New markets have than £2bn of exposure
seen more and more all angles. amplified the role of to social housing where
evidence that allocations Our pension fund responsible investment. we selectively lend to
are affected by and insurance clients We have sought a leading Housing Associations
responsible investment need to see how we are role in the growth with clear social
characteristics. Our addressing ESG concerns of Green and Social3 development strategies.
experience is that banks with companies and bonds – debt designed When you take ESG
will allocate more to so we have enhanced to directly address ESG seriously in fixed income,
what they see as real, reporting of milestones issues, and which is opportunities can
active, long-term money and results. Clients can often anchored in the UN emerge. As the market
– to asset managers who receive a line-by-line Sustainable Development adapts to the realities
are “seen as green”. A report, with a timeline Goals (SDGs). of climate change and
reputation as a major of engagement steps and The SDGs give issuers a other ESG challenges,
player in this space themes where we are useful way to pitch debt we believe it pays for
can therefore offer a seeking improvement. to responsible investors. asset managers to
hard-earned edge and Our team is always on But they do not remove embed true responsible
influence the nature of hand to give deeper the need for scrutiny – in investment techniques
issuance. The market insights, and our twice- fact, engagement can be in their allocation
is also moving towards yearly Stewardship more intense to meet process. Just as we seek
standardisation of how report gives details technical and disclosure out companies that stay
ESG is reflected (most of every engagement requirements. It is crucial ahead of the curve, so
obviously in Green and we make. to avoid ‘greenwashing’, asset managers have a
Social bonds) and those One example has been where companies pay lip duty to be at the leading
with strong systems have to push oil companies service to targets, and as a edge as the investment
a potential advantage. to make ‘net-zero’ proud active investor our industry evolves.
commitments on focus is on tracking how Footnotes
emissions as we seek to money is actually used. 1 AXA IM: Our Scoring Methodology
Our protect the long-term Again, reputation 2 AXA IM 2019 Stewardship report
3 Rise in Covid-19 bond issuance fans
experience interests of clients by
influencing the future of
matters. AXA IM’s
leadership in Green
fears over ‘social washing’ Financial
Times, 30 June, 2020
is that banks the energy industry. bonds helps shape the
4
4 AXA IM: Our Green Bond framework
5 IPE, 12 June 2019: AXA IM calls for
will allocate AXA IM lends to one sector. This includes ‘transition bonds’ to help companies
more… to asset
go green
oil major on the basis membership of the 6 ICMA Working Group on Climate
of a 2050 net-zero Green Bonds Principles
managers
Transition Finance
commitment. Deviation Executive Committee
who are ‘seen from that path could where we have helped
as green’ prompt a refusal to
participate in new
provide industry
guidelines to improve
issuance. Among transparency.
Transparent carmakers, we favour Our role in the
Once we secure an those trying to transition development of
allocation from a ahead of the regulatory Transition bonds
For Professional Clients only. Not to be relied upon by retail clients.
This communication is for informational purposes only and does not constitute an offer to buy or sell any investments, products or services and should not
be considered as a solicitation or as investment advice.
This communication is issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority.
Registered in England and Wales No: 01431068. Registered Office: 155 Bishopsgate, London EC2M 3YD (to 31/12/20); 22 Bishopsgate, London EC2N 4BQ
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