A) UK PENSIONS: REGULATORS WITH NEW MANDATES & INITIATIVES
In the past there were too often reports of incorrect actions in the Pensions Industry. As beneficiaries in general will have to rely on regulators(!), it's good to see that regulators have several new mandates and new initiatives.
The UK’s Pensions Regulator (TPR) has begun to use a number of enforcement powers for the first time in efforts to deal with pension scams, scheme valuations and automatic enrolment.
The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have yesterday launched a joint regulatory strategy aimed at strengthening their relationship and taking joint action to deliver better outcomes for pension savers and those entering retirement.
B) UK QROPS: SOUTH AFRICA LOSES QROPS STATUS
South Africa has dropped off the list of financial jurisdictions offering QROPS expat offshore pensions.
The latest HM Revenue & Customs QROPS List published on October 15, 2018, confirms the removal of the last QROPS based in South Africa. The ABSA Group Pension Fund was the final South African QROPS. Neither ABSA or HMRC have commented about the removal.
Generally, QROPS are delisted for three main reasons:
1) HMRC is probing the administrative or tax status of the scheme;
2) The last member has drawn down on their fund or transferred out of the fund;
3) The QROPS provider closes.
South Africa has been ever-present on the HMRC list since QROPS were introduced in April 2006. Between March 2010 and June 2015, the number of QROPS peaked at between 28 and 31 pensions.
After HMRC introduced tax and rules changes in June 2015, the number slumped to seven QROPS, rising to a recent peak of 12 pensions at the start of 2016.
C) UK PENSIONS: INTEGRITY AND NEW VIOLATIONS………..
Four directors of companies that formed part of a group involved in the transfer of millions of pounds of pensions have been banned for a total of 34 years.
Karl Dunlop, Stuart Grehan and Ian Dunsford previously accepted disqualification undertakings for their management roles within the group of companies involved in the transfer of pension funds.
Stuart Grehan, Director of Sycamore Crown Ltd and also known as Stuart Chapman-Clark, agreed to a 9-year voluntary ban as a result of false and misleading statements made to encourage investors to transfer their pension pots.
Karl Dunlop (9 years), Director of Imperial Trustee Services Ltd, and Ian Dunsford (7 years), Director of Omni Trustees Ltd, agreed to voluntarily bans for failing to act in the best interests of pension members and subsequently failing to ensure investments were adequately diverse.
Stephen Talbot recently accepted a 9-year disqualification undertaking for failing to explain what happened to millions pounds worth of assets.
The lesson? Be critical and aware of your own advisor! The right one will understand and respect you for it!
D) UK PENSIONS: SMALL FIRM PENSION RISK EXPOSURE
The funding positions of company pension pots improved last year but smaller firms are not managing their risk exposures well, according to a recent survey.
An annual survey of FTSE 350 pension schemes found many were “in the best position they have been in for a long time” after funding levels improved.
However, it cautioned smaller schemes demonstrated more volatile funding outcomes due to “a less robust” approach to risk management.
The survey found the very smallest schemes were nearly 15pc less well-funded.
E) UK PENSIONS: PENSIONS DASHBOARD APPROVED BY GOVERNMENT
You may be pleased to hear that Government has committed to the ‘Pensions Dashboard.’ This is a technological initiative to allow pension savers to see all of their savings pots in one place.
State pension entitlement data was set to form the cornerstone of the pensions dashboard. From similar applications in other countries we have learned that it is quite difficult to provide simple and complete information that also accurately portrays the future situation.
F) IRELAND PENSIONS: DB Pension Plans deficits rise to €1.6bn
Deficits in traditional company pension plans of quoted companies rose last year, in a move that could put pressure on the schemes. The black holes in the Defined Benefit pension schemes of Irish listed companies rose by 20% last year. The projected deficit rose from €1.3bn in 2017 to €1.6bn at the end of 2018, largely due to poor equity market performance at the end of last year.
With many of Ireland’s largest pension schemes not included in the ISEQ constituents, the deficit across all Irish Defined Benefit plans is likely to be higher.
Members of Defined Contribution (DC) schemes are also likely to have seen the value of their pension pots reduce.
Defined Benefit plans promise a set level of pension based on years of service and final salary, but the promises have become increasingly hard to keep due to poor investment returns, people living longer, and higher levels of regulation.
With a DC scheme, the holder takes the risk, which means a poor investment performance can adversely affect the size of the pension pot. Last year was a poor one for pension schemes in Ireland. The first 10 months of the year saw strong equity market returns, but the final two months saw a sharp correction in all major equity.
G) UK EXPAT PENSIONS: GUERNSEY ON BLACK LIST
As of January 1st Guernsey and The Isle of Man have been placed on the Dutch Black List re tax evation.
In practice some advisers mentioned in QROPS perspective that Guernsey might be interesting. If you focus on the sole interest of the client, Guernsey was often already not that interesting.
Best Advice re UK Pensions and QROPS: Make it simple, gather all facts, focus only on client interest and then decide!
H) UK PENSIONS: 250,000 NHS workers opt out of pension plan
A quarter of a million NHS workers have opted out of the NHS pension scheme in the past three years, according to Freedom of Information data gathered by the Health Service Journal and Royal London.
Royal London says the opt out rate is far higher than other public sector schemes and could have dire consequences for the workers. The long term squeeze on public sector pay and higher contribution rates could be to blame, it believes.
Royal London says that a typical nurse earning £25,000 a year would save £1,420 by opting out but would lose pension rights worth around £13,000 when they do due to giving up the employer contribution into their pension.
Royal London says the NHS needs to take action to tackle the “epidemic” of opting out, otherwise large numbers of NHS staff risk poverty in retirement.
I) FTSE 350 DB Deficit Rises To £ 57 BILLION
The accounting deficit for guaranteed Defined Benefit (DB) pension plans at the UK’s top 350 organisations increased by £5 billion between April 2019 and May 2019, rising to £57 billion.
The Pension risk survey, which analyses the pension deficit calculated using the approach FTSE 350 organisations have to adopt for their corporate accounts, also found that liability values increased by £11 billion in May 2019, totaling £856 billion.
Amazing. The increasing DB deficit is waiting for…………?
J) UK Pensions: Expected 400% Increase Of Transfers Of Value
The UK’s bulk annuity market is forecast to increase with 400% during the next 10 years due to especially lower pricing as more plans mature and new reinsurers enter the UK market according to recent research.
By the end of 2019 it is expected that the bulk annuity market in Great Britain to exceed £40 billion with the total UK risk transfer market forecast to reach £50 billion.
There is a strong demand for member option exercises, with more than £20 billion of individual Defined Benefit to Defined Contribution transfers via bulk exercises and individual requests expected by the end of the year.
“The next few years are looking bright for those schemes wishing to insure their members’ retirement income,” As the UK’s Defined Benefit schemes mature, the length of insurance contracts reduce, making them more predictable and cheaper to buy."