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www.pensionsage.com January 2021 The leading pensions magazine What good is data without insight?
When it comes to workplace pensions, there’s a lot of boxes to tick.
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a better financial future.
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Green gilts Auto-enrolment Complex retirement saving requirements
The government’s plan for green sovereign The lack of consensus over the next How complex family structures can affect
bonds and what it means for pensions steps for raising AE contributions pension saving
www.pensionsage.com January 2021
The leading pensions magazine
Case study: The work of NHS Employers and the NHS Business Work practices: The Covid-19 work structures here
Services Authority to support NHS Pension Scheme members to stay and what changes are still to come
Rolling
with the
trends
Editorial credit: SIHASAKPRACHUM / Shutterstock.com
The industry trends continuing to evolve despite Covid-19’s challenges
Trustee Guide 2021: A brighter future
Sustainable Investment Summit
ESG, SRI, Impact, Sustainability and Governance
17 March 2021 Online
REGISTER NOW
Sponsored by
Organised by Media Partners
sisummit.net #SI_Summit
comment news & comment
Special Guest Comment Sixth floor, 3 London Wall Buildings,
London, EC2M 5PD
P
The path ahead for pensions in 2021
ensions play a vital role in shaping the of the wider global context; climate change is a real financial
financial security of the nation and our risk to savers, and it is beholden on us all that the issue is
commitment to net zero by 2050. addressed.
That’s why my focus in 2021 will be to Climate change is expected to have a significant impact
deliver on the essential measures included on pension schemes’ assets and returns for savers, both
in the Pension Schemes Bill to create a through the risks of a warmer planet, and the transition to a
safer, better and greener pensions system lower-carbon economy.
in the United Kingdom. I am putting trustees’ duty to manage climate
Putting the consumer first is at the heart of this, and risk on a statutory footing by introducing minimum
at the heart of automatic enrolment. With more than 10 governance requirements and mandating the publication
million employees automatically enrolled in workplace of climate-related risks and opportunities in line with the
saving since 2012, everyone accepts that it has been a great recommendations of the Taskforce on Climate-related
success. But that doesn’t mean we can’t make improvements. Financial Disclosures (TCFD).
The growth of deferred small pension pots in the We will be consulting on draft regulations in the new
automatic enrolment market is one such problem I am year, and will be the world’s first major economy to do so.
determined to address. A first step on the journey to In addition, we are working with the Taskforce on Pension
achieving this was the creation of the Small Pots Working Scheme Voting Implementation, including the Association
Group, harnessing opinions from across the financial of Member Nominated Trustees, to change the relationship
services and other sectors. with pension schemes’ asset managers, and improve
The group’s valuable analysis and recommendations, stewardship.
published on 17 December 2020, will be considered in The UK leads the world in its action on pensions policy
detail, alongside the review of the default fund charge cap and climate change, and as the country seeks to build back
and standardised cost disclosure. It is vital that costs, charges better following the extreme difficulties of the pandemic,
and transparency measures work effectively to protect the United Kingdom has a real opportunity to showcase this
member outcomes. progressive agenda at COP26 in November.
The creation of pension dashboards will help reduce Collectively, we have accomplished a great deal in
the proliferation of small pots, increase transparency, 2020, the most challenging of years. I am looking forward
and transform the way we all think about and plan for to building on these accomplishments over the next 12
retirement. I’m encouraged by the progress made last year, months.
and the continued collaboration driving the project forward.
I am ambitious for the future of dashboards, as a
place where people can easily see what they can expect at
retirement, and the value their current providers are giving
them.
The bill also places greater responsibility on the
government to ensure savers are protected from
unscrupulous scammers, creating greater safeguards for
pension savers when transferring between schemes.
Safeguarding the individual consumer, increasing Minister for Pensions,
engagement and offering choice are essential, but at the Guy Opperman
same time, individuals and pensions do not operate outside
www.pensionsage.com January 2021 03
PENSIONSAge
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2021
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65
COVER FEATURE Theme: Taking stock
Rolling with
the trends
Duncan Ferris explores pension industry trends that have remained relevant throughout
the unpredictability of 2020 and beyond, including the rise of ESG, the challenge of
increasing member engagement and the drive for pension scheme consolidation
Kickstarting a green recovery 38 • The importance of tailored and relevant
Sophie Smith examines the government’s communications
plan for green sovereign bonds, the • How to help members avoid pension pitfalls in 2021
Highlighted features
challenges and benefits they could bring, • The sustainability spectrum
and what they could mean for pension schemes and the • Incorporating ESG factors into fixed income
wider economy
AE: Lost momentum 68
Supporting those who support the nation 40 The industry agrees that the
At a time when NHS staff have worked tirelessly to current minimum automatic
support the country through the Covid-19 crisis, Sophie enrolment contribution of 8
Smith explores the work that NHS Employers and the per cent is not enough, but there is less of a consensus on
NHS Business Services Authority have done to support what the next steps should be. Natalie Tuck reports
NHS Pension Scheme members
New year, new normal 70
Trustee Guide 2021: 2020 saw unprecedented change in the pensions industry,
A brighter future 43 but as businesses begin to consider life post-Covid-19,
Featuring: Sophie Smith considers what changes are here to stay and
• The post-Covid new what work is still needed
normal for trustees
• Why diversity and Complex families, flexible retirement savings 72
inclusion should be on the agenda Laura Blows explores how complex family structures can
• The bulk annuity landscape for 2021 affect pension saving and the ways in which the industry
• The benefits of a CDI approach can help these savers with their retirement provision
By agreement, Pensions Age is distributed free to all PLSA By agreement, Pensions Age is distributed free to The Pensions Management
members as part of its package of member benefits Institute (PMI) members as part of its package of member benefits
Pensions Age is distributed to The Association of Member By agreement, Pensions Age is distributed free to all SPP members as part
Nominated Trustees members of its package of member benefits
Audit Bureau of
Circulations Member
Pensions Age magazine, and its content in all and any media are part of Perspective Publishing Limited. All Perspective Publishing Limited’s content is designed for professionals and to be used
as a professional information source. We accept no liability for decisions of any nature, including financial, that are made as a result of information we supply.
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Supporting those who support the nation 40
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Tel: 020 7562 2437
PLS 08:23:
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08:24:58
At a time when NHS staff have worked tirelessly to Reporter
Looking to the future 19 support the country through the Covid-19 crisis, Sophie Sophie Smith
Tel: 020 7562 2425
Kevin Martin considers the opportunities for the pensions Smith explores the work that NHS Employers and the
Reporter
industry to find the good in these difficult times NHS Business Services Authority have done to support
Duncan Ferris
NHS Pension Scheme members Tel: 020 7562 4380
A perfect match 21 Design & Production
Martin Mercer offers a quick guide to finding your Trustee Guide 2021: A brighter future 43 Jason Tucker
Tel: 0207 562 2404
perfect adviser Featuring:
Accounts
• The post-Covid new normal for trustees Marilou Tait
Podcast: Responsible investing 23 • Why diversity and inclusion should be on the agenda Tel: 020 7562 2432
Laura Blows speaks to Standard Life head of investment • The bulk annuity landscape for 2021 Commercial
solutions, Gareth Trainor, about the latest responsible • The benefits of a CDI approach John Woods
Tel: 020 7562 2421
investment trends and developments for providers, • The importance of tailored and relevant communications
Camilla Capece
pension schemes and their members • How to help members avoid pension pitfalls in 2021 Tel: 020 7562 2438
• The sustainability spectrum
Pension funds risk landscape in 2020 24 • Incorporating ESG factors into fixed income Lucie Fisher
Tel: 020 7562 4382
Judith Hetherington reflects on how attitudes to risk have
Subscriptions
changed during 2020, and what UK schemes are doing Rolling with the trends 65 Tel: 01635 588 861
about governance Duncan Ferris explores pension industry trends that £149 pa within the UK
£197 pa overseas by air
have remained relevant throughout the unpredictability
Pensions Age Northern Conference review 26 of 2020 and beyond, including the rise of ESG, the
Covid-19, Brexit, ESG, CDI, dashboards, scams and more challenge of increasing member engagement and the NEW circulation figures
Pensions Age now has its new
drive for pension scheme consolidation circulation figure from the Audit
Pensions in 2021 29 Bureau of Circulations (ABC).
14,481 (July 2019–June 2020)
Following the tumultuous year that was 2020, the AE: Lost momentum 68 print distribution. This is 100%
pensions industry may be hoping for a quieter 2021. The industry agrees that the current minimum automatic requested and/or copies sent as a
member benefit (PLSA, PMI, SPP,
However, with the impact of Covid-19 still being felt, the enrolment contribution of 8 per cent is not enough, but AMNT). Pensions Age is also sent
introduction of the Pension Schemes Bill and a swath there is less of a consensus on what the next steps should as a Tablet Edition to our 30,000+
online subscribers (source:
of new regulations, this seems unlikely. Jack Gray looks be. Natalie Tuck reports Publishers Statement Sept 20).
ahead at the trends likely to shape the coming year Our print circulation is around
300% higher than the next nearest
New year, new normal 70 title, and 500% higher than the
Market predictions 32 2020 saw unprecedented change in the pensions industry, third title.
Expert views on the 2021 trends for equities, property, but as businesses begin to consider life post-Covid-19, Managing Director
fixed income and infrastructure Sophie Smith considers what changes are here to stay and John Woods
what work is still needed Publishing Director
Don’t leave data ‘til later 35 Mark Evans
Duncan Ferris chats with Pensions Dashboards Project Complex families, flexible retirement savings 72 ISSN 1366-8366
(PDP) principal, Chris Curry, about how newly-released Laura Blows explores how complex family structures can www.pensionsage.com
data standards set out what providers and schemes need affect pension saving and the ways in which the industry Sixth floor, 3 London Wall
to prepare in order to digitise retirement savings can help these savers with their retirement provision Buildings, London, EC2M 5PD
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news & comment round up
Dateline - December 2020
Rounding up the major pensions-related news from the past month
1 December Pensions Minister, Guy 8 December The proportion of pension transfers
Opperman, announces the launch of showing at least one sign of being a potential scam
the Taskforce on Pension Scheme Voting reached a record high of 64 per cent in November,
Implementation, which will examine issues according to XPS Pensions Group. The company’s
faced by trustees implementing their own voting Red Flag Index shows that incidents of red flags that
policies, particularly in relation to pooled funds. might indicate scams had more than doubled since the
The taskforce will be supported by the Department emergence of the coronavirus pandemic, having sat
for Work and Pensions (DWP), but will remain at below 30 per cent in October 2019. Transfer values
independent, and has been given a focused remit to declined slightly during the month, from £257,000 to
consider potential solutions to voting system issues. £256,000, while transfer activity rose from 0.62 per cent
of members to 0.63 per cent.
2 December Defined benefit (DB) scheme funding
levels fall to an average of 94.9 per cent, as of March 9 December TPR executive director of regulatory
2020, from an average of 99.2 per cent 12 months policy, analysis and advice, David Fairs, urges the
prior, the Pension Protection Fund’s (PPF’s) latest industry not to make “rash predictions” about the
Purple Book reveals. The decline in the aggregate impact of the regulator’s upcoming DB funding code.
funding ratio is attributed to market movements, In a blog, Fairs seeks to allay fears about the parameters
primarily due to lower gilt yields driving up liability of its funding route options by stating that there were
values and decreases in equity values. The aggregate still multiple stages of planning to go before parameters
deficit increased from £12.7bn to £90.7bn during the are set. He says that TPR is “surprised” by some of the
same period. debate and predictions that had been surfacing since it
published its first consultation. LCP had warned that
2 December The Court of Appeal overturns a the funding regime proposals could result in the UK’s
High Court ruling to block the transfer of a £12bn biggest DB schemes paying an additional £40bn over
portfolio of annuities from Prudential Assurance the next decade, while Hymans Robertson had said 70
Company to Rothesay Life, stating that the original per cent of schemes would fail fast-track requirements.
judge was “wrong” on a number of issues. The ruling “While some schemes and advisers seem confident that
upholds all of the central issues highlighted by the they already know the impact the new funding code
appellants, confirming that these “errors” mean that will have on DB schemes, we have yet to firm up the
the judge’s original decision cannot stand. proposals for our second consultation,” Fairs says.
“These will be informed by responses to our first
3 December Arcadia owner, Tina Green, agrees to bring forward consultation, an impact assessment and the final
a payment of £50m for the collapsed firm’s pension scheme from legislative package.”
September 2021 to 12 December 2020 or earlier. Arcadia, whose
shops include Topshop, Burton and Dorothy Perkins, fell into
administration in late November with an estimated pension deficit 10 December The UK
of £350m. Green, who is married to Philip Green, had agreed to pay pension risk transfer market
a total of £100m into the pension scheme as part of a £385m package could reach up to £60bn in
agreed with The Pensions Regulator (TPR) in 2019. She has already 2021 through bulk annuities,
paid the first two instalments of £25m each and will now pay the longevity swaps and new risk
remaining £50m. The company’s scheme is likely to enter the PPF, transfer solutions, according
with more than 9,000 members affected. On 1 December, Business to forecasts from Mercer. The firm predicts continued
Secretary, Alok Sharma, wrote to the Insolvency Service, asking it, growth in risk transfers during 2021, stating that
in its investigation into the business’ collapse, to look at whether any increased activity will likely be driven by an increase
action by Arcadia directors had caused detriment to creditors or the in demand and innovative and streamlined processes,
firm’s pension scheme. and could lead to the “busiest year on record”.
08 January 2021 www.pensionsage.comround up news & comment
For more information on these stories, and daily breaking news from the pensions industry, visit pensionsage.com
11 December Representatives for the University of three potential options, including increasing the rates
Cambridge write to the Universities Superannuation but introducing separate levy rates for DB, defined
Scheme (USS) to express “serious concerns” over the contribution (DC), master trusts and personal pension
approach taken to the March 2020 valuation. The letter, schemes.
addressed to USS Group CEO, Bill Galvin, argues
that the scheme had missed an opportunity to rebuild 17 December The Small Pension Pots Working
trust between the USS, University and College Union Group publishes a report that outlines a series of
(UCU) and Universities UK (UUK), as well as between recommendations for the government and pensions
members and employers. Furthermore, it warns that industry to work together on in tackling the increasing
based on the proposals so far, there is a “real danger of a number of small, deferred pension pots in the auto-
serious and damaging breakdown in trust”. enrolment pensions market. The cross-sector working
group, chaired and facilitated by the DWP, urges the
government, industry and regulators to explore and enable
15 December The PPF outlines a number of opportunities for member-initiated consolidation, with
supportive measures for levy payers in 2021/22 following proportionate member safeguards. It concedes, however,
its consultation. Schemes with less than £20m in that member-led consolidation alone is unlikely to halt the
liabilities will have their levies halved, with the levy growth in small, deferred DC pots.
adjustment tapering for schemes with between £20m
and £50m in liabilities. The risk-based levy cap will be
reduced from 0.5 per cent of liabilities to 0.25 per cent. 21 December The government sets out a list of
The PPF confirms it will continue to measure insolvency circumstances where the cap on the payments that
risk using credit ratings and the PPF-specific insolvency specified public sector bodies make in relation to
risk model operated by Dun & Bradstreet. The levy employees’ exits from the Local Government Pension
estimate of £520m for 2021/22 and the levy scaling Scheme (LGPS) can be relaxed. The Restriction of
factor of 0.48 per cent will be retained. The PPF states it Public Sector Exit Payments Regulations 2020 imposed
received “overwhelming backing” for the proposals. a £95,000 cap on the payments LGPS employers could
make into the pension scheme to fund early exit terms.
15 December The The government has now published guidance on the
Pensions Dashboards circumstances where these regulations must or can be
Programme (PDP) relaxed.
publishes its key data
standards and tells 22 December
Editorial credit: Air Elegant / Shutterstock.com
schemes and providers Arcadia’s DB
it is “essential” that pension schemes
they begin to prepare their data. The standards set out are expected
definitions of data that pension information holders to enter PPF
will be required to provide for the PDP, both to allow assessment
for the finding of individuals’ pensions in order to “shortly”, according
populate the dashboard and to allow individuals to to a letter from TPR. It notes, however, that the schemes’
view their information. entry into the assessment period was still subject to
validation by the PPF. The regulator is responding to
16 December The government launches a questions from Work and Pensions Committee chair,
consultation on the options to increase the general Stephen Timms, who wrote to TPR to ask how the
levy on occupational and personal pension schemes, Topshop owner’s collapse would impact members and
including plans to restructure the levy. The change previously agreed measures for contributions to
consultation, which closes on 27 January 2021, outlines the retailer’s two DB pension schemes.
www.pensionsage.com January 2021 09news & comment round up
News focus
Editorial credit: Damian Pankowiec / Shutterstock.com
Govt launches consultation on subsequent realignments, whilst also
preserving the collective approach that
restructuring general levy
underpins the levy system.
It also acknowledged that pension
schemes have been operating in
an environment of “considerable
The government has published a consultation on the uncertainty and unpredictability”
options to increase the general levy on pension schemes amid the pandemic, and has therefore
proposed only “moderate increases” in
and its plans to restructure the levy. It has proposed the levy for 2021/22 under this option.
introducing separate levy structures for DB, DC, master In particular, it proposed an increase
trusts and personal pension schemes. Meanwhile, the of 10 per cent for DB and DC schemes
other than master trusts, and 5 per cent
PPF has announced several supportive measures for levy for master trusts and personal pension
payers in 2021/22, following a consultation schemes.
T
The consultation stated that these
he government has launched contribution (DC), master trusts and increases would begin balancing the
a consultation on the options personal pension schemes. levy without imposing an “unreasonable
to increase the general levy It argued that this would allow for a burden” on schemes, predicting that if
on occupational and personal more extensive realignment to recognise levy rates were to remain unchanged,
pension schemes, including plans to that the supervisory regime directs more there would be a deficit of around £230m
restructure the levy. operational effort towards some scheme at the end of 2023/24.
The consultation, which closes on types than others. Furthermore, whilst the government
27 January 2021, has outlined three The government said it was attracted is proposing higher increase for 2022/23
potential options, including increasing to this option, noting that it would better and 2023/24, it stated that bringing
the rates but introducing separate levy reflect the differing levels of supervisory forward new levy rates for a three-year
rates for defined benefit (DB), defined attention and would provide scope for period should provide schemes with a
10 January 2021 www.pensionsage.comround up news & comment
firm basis on which to plan for payment. comms, Darren Philp, added: “While executive director and general counsel,
Considering this, the government has it is disappointing that levy rates are David Taylor.
said it will aim to set the levy rates for increasing during the current economic “We are therefore confirming key
forward periods of three years in future, climate, it is welcome that the DWP has decisions now, which we hope will help
which would allow for more robust listened to feedback and is proposing schemes plan for next year.”
payment planning for schemes, and a fairer distribution of levy financing, The PPF stated that it received
would align with the corporate planning recognising the different regulatory “overwhelming backing” for the
cycles operated by the levy-funded efforts involved. proposals it outlined in its consultation,
bodies. “This realignment is important which was published in September.
The consultation’s second option given that, under the current system, Its newly-announced measures
suggested increasing rates and auto-enrolment master trusts would be aim to support levy payers that plan to
introducing a separate, lower set of levy financing an increasing proportion of the implement risk reduction measures,
rates for master trusts, although it stated levy, cross subsidising the regulation of which could reduce the amount of levy
that the government is not attracted to other types of schemes.” they pay before the 31 March.
this option because it does not reflect the Meanwhile, The Pension Protection Taylor continued: “We hope
relative complexity of DB schemes. Fund (PPF) has outlined a number of that these measures will help with
The government estimated that supportive measures for levy payers in affordability while preserving a levy
option one would raise £60.7m in 2021/22 following its consultation. that is risk-reflective and incentivises
additional levy revenue and option two Schemes with less than £20m in measures to reduce risk.
would raise £58.4m. liabilities will have their levies halved, “In this difficult year [2020] the
Its third option proposed with the levy adjustment tapering for protection we provide has never been
maintaining the existing levy structure schemes with between £20m and £50m more important. The levy schemes pay
and increase rates. in liabilities. is a vital source of funding which allows
However, it emphasised that this The risk-based levy cap will be us to protect members of defined benefit
would mean failing to act on the reduced from 0.5 per cent of liabilities to pension schemes in challenging times as
representations received following the 0.25 per cent. well as good.”
2019 consultation, namely that the The PPF confirmed it will continue The pensions lifeboat will maintain its
structure should be made more equitable to measure insolvency risk using current rules for levying superfunds, but
and cross-subsidies addressed, and that credit ratings and the PPF-specific will monitor market developments and is
the government is therefore not attracted insolvency risk model operated by Dun & considering using a ‘hybrid’ methodology
to this option. Bradstreet. in future levy years for arrangements that
Commenting on the proposals, It also confirmed the levy estimate have similar characteristics.
Pensions Minister, Guy Opperman, of £520m for 2021/22 and that the levy The 2020/21 levy was invoiced in
stated: “Changes within the pensions scaling factor of 0.48 per cent will be autumn 2020 and over 97 per cent has
industry and regulatory landscape have retained. been received, although a “small number”
resulted in growing responsibilities for The levy estimate represents a of schemes have taken up the flexibilities
the DWP’s pensions bodies, putting reduction of £100m compared to this the PPF has offered through the Covid-19
additional pressure on their expenditure. year’s levy. However, the PPF warned easement and payment plans.
“Whilst the government has protected that it expects to see a worsening in The review of the PPF’s funding
the industry from increases in the levy insolvency scores, which could impact strategy is planned to take place in
over a number of years, we can no longer the levy estimate for 2022/23. 2021/22 and will inform the setting of the
avoid the fact that action is needed to “I’m delighted that our levy 2023/24 levy.
bring levy rates back into balance with payers and industry stakeholders
expenditure.” overwhelmingly supported the proposals Written by Jack Gray and Sophie Smith
Smart director of policy and in our recent consultation,” said PPF
www.pensionsage.com January 2021 11news & comment round up
VIEW FROM THE PLSA
PDP publishes data standards and
Starting the New Year with a
resolution to try new things, improve
calls for dashboard preparation
things or to tackle some long put-
off project, is a long-established
tradition.
It’s the perfect time for pension The PDP has published the key data standards it expects in
schemes to think about taking stock
schemes’ preparations for the pensions dashboards and told schemes
of their own costs. Thankfully, the
Cost Transparency Initiative’s (CTI) that it is vital they begin to prepare their data. Meanwhile, the small
series of templates make that task pots working group has announced a series of recommendations for
easy, and are free to use. the government, regulators and pensions industry to help tackle
Here are a couple of quick tips for the increasing number of small, deferred pension pots, which the
making the most of them. Firstly,
dashboards are also expected to help address
T
investment charges will probably be a
significant element of your scheme’s he Pensions Dashboards income data that will provide an estimated
operating costs, so if you are not
Programme (PDP) has published retirement income derived from current
already, start using them with your
its key data standards and told pension pot value for defined contribution
investment managers. After that, it’s
schemes and providers it is (DC) pensions and the date payable for
important to set aside sufficient time
“essential” that they begin to prepare their each pension.
to collect and analyse the information
data. Pensions Minister, Guy Opperman,
you receive. Also make sure the
The standards set out clearly- said: “Bringing information to savers at the
information provides the degree of
detail you expect. If that’s not the
worded definitions of data that pension touch of a screen will revolutionise how
case, or if there is some doubt about information holders will be required to we engage with our pensions and plan for
how a template has been completed, provide for the PDP, both to allow for the retirement. Getting data standards right is
speak to your manager. finding of individuals’ pensions in order vital, to realise the full potential of pension
Secondly, review and prioritise to populate the dashboards and to allow dashboards. The publication of key data
anything in detail that’s a surprise individuals to view their information. standards is therefore an important and
to you or your advisers. When you Stressing the importance of the welcome step.
are interpreting the results also publication, PDP principal, Chris Curry, “I’m encouraged by the progress to
consider factors such as quality of said: “With schemes and providers date and the continued collaboration
service, investment performance and onboarding to dashboards from 2023, it’s driving it forward. I am ambitious for the
a comparison of products or services essential that everyone starts to prepare future of dashboards, as a place where
by objective, asset class or cost. their data now, using the information in people can easily see what they can expect
The templates have been used the data standards usage guide.” at retirement, and the value their current
by many schemes and investment The report details which individual providers are giving them.”
managers for nearly two years now, elements of data will be mandatory, The dashboards are expected to help
and feedback remains incredibly conditional or optional, with a given name address the increasing number of small,
positive. We’d encourage all schemes and surname being mandatory, types of deferred pension pots.
to start as they mean to go on, alternate surnames being conditional and The small pension pots working group
by committing to make sure they all alternate surnames being optional. published a report that outlines a series
understand their costs. The data required to locate individuals’ of recommendations for the government
pensions that data holders will need to and pensions industry to work together
PLSA deputy director of policy, Joe match against includes information such on in tackling the increasing number of
Dabrowski as a person’s first name and surname, date small, deferred pension pots in the auto-
of birth, address and national insurance enrolment (AE) pensions market.
number. The cross-sector working group,
Meanwhile, the data required for chaired and facilitated by the Department
savers to view on the dashboards includes for Work and Pensions (DWP), urged
their pension arrangements and the the government, industry and regulators
name of the pension provider, as well as to explore and enable opportunities for
12 January 2021 www.pensionsage.comround up news & comment
VIEW FROM TPR
Since the rollout of programme in
2012, auto-enrolment (AE) has seen
10 million staff automatically en-
rolled by 1.6 million employers.
It’s typical to hold more than one
job for life. For some, brief periods
with different employers may be the
norm. And it’s these short stints of
employment that are the primary
driver behind a growth in deferred
pension pots.
These small pots pose a risk to
saver outcomes as they are vulnerable
to becoming lost or left deferred and
slowly eroded due to scheme charges.
member-initiated consolidation, with for a low-cost bulk transfer process.
This means savers may not experience
proportionate member safeguards. An initial publicised update on the
the best possible outcome.
It conceded, however, that member-led administrative challenges outlined should
The Department for Work and
consolidation alone was unlikely to halt be made available in the summer of 2021,
Pensions’ research estimates AE could
the growth in DC small, deferred pots, the working group added.
create about 50 million dormant
and recommended cooperation between Additionally, the working group called pension pots by 2050 – it’s clear a
the industry and government to enable on the industry to prioritise member- solution is needed.
automatic and automated large-scale low- exchange proof of concept trials involving Savers, whatever their employment
cost transfers and consolidation. low value small pots within DC master pattern, should see their pension
Pension providers holding multiple trusts to test the concept, starting with a savings working for them throughout
pots within charge-capped default funds feasibility report in summer 2021. their working life.
for the same deferred members were urged It noted that the trials would offer an That’s why I’m pleased to see
to work towards implementing a single opportunity for learning through testing industry working together with
consumer facing view, which the working administrative processes for mass transfers government and regulators on this
group said could be achieved through and consolidation. and welcome the publication of the
adoption of industry best practice and This investigation and examination small pots working group’s report on
regulatory guidance following scoping of administration processes should then 17 December 2020.
work in 2021/22. inform the development of the two TPR’s strategic goal for members of
To investigate and address consolidation system models – the default defined contribution (DC) schemes is
administrative challenges that will need to small pot consolidation scheme and the to see savers get good value for their
be overcome to underpin mass transfer and automatic pot follows member model. money. This means costs and charges
consolidation systems that can be delivered The working group recommended must be kept at a reasonable level.
at scale, the pensions industry was called that the DWP and pensions industry work We look forward to continuing
upon to establish operational focused collaboratively to develop an initial cost/ to work with industry and the
groups. benefit analysis in the second half of 2021 government to ensure any solutions
The working group noted that effective to further assess the models, including developed will be in the best interest
transparency and reporting arrangements how they will complement pensions of all DC members and will deliver
will be required within the governance dashboards. improvements in savers’ outcomes.
structure. They were also urged to work together
TPR executive director of
It stated that activity on scoping the in developing customer journey mapping
regulatory policy, analysis and
core minimum viable administrative in relation to the models to understand the
advice, David Fairs
processes should be prioritised, including end-to-end process and provide deeper
developing and testing data that would appreciation of the impacts.
provide sufficient matching capability,
developing and adopting common
Written by Duncan Ferris and Jack Gray
standards, and identifying requirements
www.pensionsage.com January 2021 13news & comment round-up
VIEW FROM THE PMI
When Sir Philip
Green’s Arcadia
PPF Purple Book reveals drop in
Group went into
administration at
scheme funding levels
the end of November
The Pension Protection Fund’s (PPF’s) latest Purple Book found that
2020, there was an
immediate media average funding levels for defined benefit (DB) pension schemes fell
focus on the deficit by 4.3 percentage points in 2019/20, with the aggregate deficit rising
within the group’s pension scheme. more than seven-fold and the number of schemes in deficit increasing,
What had originally been established
as the DB pension universe continued to shrink
as the Burton Group scheme in 1972
had become a mature scheme with specific challenges, particularly as we
benefits for some 10,000 members, have seen in recent days in sectors such as
and a reported deficit of £350 million retail.”
(though it remains unclear on which The Purple Book showed that the DB
basis this has been calculated) suggests universe continued to shrink, with the
strongly that benefits will ultimately number of eligible schemes decreasing
be provided by the Pension Protection to 5,327 in 2020 from 5,436 in 2019 and
Fund (PPF). The national media 7,751 in 2006.
wasted little time in concluding that
Membership of DB schemes also fell,
this would be a ‘bad thing’.
D
to 9.9 million from 10.1 million members
The reality, of course, is the exact
in 2019 and 14 million members in 2006.
opposite. Since its establishment
B scheme funding levels Of the 9.9 million DB scheme
by the 2004 Pensions Act, the PPF
has provided benefits for 380,000
fell to an average of 94.9 members in March 2020, 43 per cent were
members who would otherwise have per cent, as of March 2020, pensioner members, 46 per cent were
received little or nothing following the from an average of 99.2 per deferred members and 11 per cent were
insolvency of their scheme’s sponsor. cent 12 months prior, the active.
Whilst the media might rail against PPF’s latest Purple Book has revealed. The proportion of schemes closed to
the reduction of benefits – with some The decline in the aggregate funding all benefit accrual increased from 44 per
members receiving ‘only’ 90 per cent ratio was attributed to market movements, cent to 46 per cent over the year, while
of their accrued pension rights – there primarily due to lower gilt yields driving the proportion of schemes open to new
has been little discussion of benefits for up liability values and decreases in equity members remained at 11 per cent.
pensions in payment being safeguarded values. Schemes with more than 5,000
in full. The aggregate deficit increased from members made up almost 75 per cent
These include benefits for former £12.7bn to £90.7bn during the same of each of total assets, liabilities and
CEO Sir Ralph Halpern, which period. members, while only forming 7 per cent
reportedly amount to £1 million a year. Nearly two-thirds (63 per cent) of of the total number of schemes in the
The PPF has never really received schemes were in deficit with an aggregate dataset.
the credit it deserves for being so deficit of £229bn, up from £160bn in Schemes with fewer than 1,000
successful. Before it was even launched, March 2019. members made up 80 per cent of the
its detractors were confidently The aggregate surplus of schemes in total number of schemes but only around
predicting its inevitable bankruptcy. surplus fell from £147bn to £138bn. 10 per cent of total assets, liabilities and
The truth is that over the past
Dalriada Trustees professional trustee, members.
15 years the PPF has performed an
Adrian Kennett, stated: “In terms of Investments in equities declined over
essential (if unfortunate) role and
funding, the fact that the effective date the year, from 24 per cent to 20.4 per cent,
has proved to be very successful. We
is 31 March 2020 is key. Funding levels as the value of equities fell, while bond
should all show it our gratitude.
were down at that point – if the data investments increased from 62.8 per cent
PMI director of policy and external was cut today it would show a different to 69.2 per cent.
affairs, Tim Middleton story. But that different story of funding
Written by Jack Gray
improvement would mask scheme-
14 January 2021 www.pensionsage.comYou can also read
