Synopsis: A brief roundup of the pension market in the last week or so.

PPF comments on Monarch pension scheme

The PPF has issued a press release commenting on the restructuring on Monarch Group. The travel business Monarch Group has announced that it is to be sold to a London-based investment company in a deal that will see the new owner save the company with a £125m cash injection. Greybull Capital has acquired a 90% stake in Monarch Holdings Limited and the group’s pensions shortfall will be closed, with a 10% stake in the company passing to its ‘defined pension scheme and ultimately The Pension Protection Fund (PPF)’. Commenting on the deal, PPF Chief Executive Officer Alan Rubenstein said: ‘We welcome that we, along with The Pensions Regulator, have been able to agree a deal with Monarch which meets our principles of restructuring and allows the company to continue trading…. Over the coming weeks we expect the pension scheme to enter the PPF assessment period and we will work with the scheme to take this forward and provide reassurance to members.’

Prudential – For richer, for poorer: Nearly half of couples risk leaving their partners without any income in retirement

Research by Prudential has found that just 42% of couples over the age of 40 have put arrangements in place to make sure that one partner will continue to receive a retirement income after the other one’s death. The main details include:

• Women are most at risk, with 18% planning to depend entirely on their other halves for their retirement incomes, compared with just 2% of men.

• 47% of couples have never discussed the impact that one partner’s death could have on their current pension arrangements.

• regionally:

o 65% of couples in the North East of England are the least likely to have made joint retirement arrangements.

o 72% of those in the Eastern region (the most savvy it appears) claim to have some arrangements in place.

• 20% have shared pension saving arrangements, while 65% have their own individual arrangements.

• 11% have made a will but won’t have any other financial arrangements in place should they find themselves in this unfortunate situation.

ACA: Small employers calling for auto enrolment delay

The ACA 2014 Smaller firms’ pension survey, which surveyed 414 organisations with 249 or fewer employees, found that six out of ten of respondents are supportive of the new pensions flexibility, while one in ten are opposed.

Some of the main points include:

• Nine out of 10 small employers that have not reached their pensions auto-enrolment staging date yet want the process to be delayed until the new raft of pension reforms are complete

• The research also found that 56% of respondents support further changes to pensions, whereby current levels of pension tax relief are more targeted to those with lower incomes.

• More than a third also said tax relief should be further restricted for those on higher incomes.

• Among the 57% of respondents that have yet to auto-enrol, awareness of staging dates and budgeting appears low, with only 46% of respondents saying they are aware of these.

• The median opt-out level of employees from the 43% of respondents that have auto-enrolled employees is between 11% and 15%.

• 57% of respondents with 10 to 49 employees plan to use the National Employment Savings Trust (Nest) to auto-enrol employees.

• 62% of respondents with 10 or more employees are clear about when they must auto-enrol eligible employees.

David Fairs, chairman of ACA, said: ‘To date, auto-enrolment has been a success, boosting the numbers covered by workplace pensions in 34,000 mid-sized and large employers by over 4.7 million people.

‘But in a three-year period from the middle of this year, over one million small employers will have to meet the auto-enrolment challenge, three-quarters with four or fewer employees.

‘It is right that pension provision should be available to employees in even the smallest firms, but with so many pension reforms being squeezed into a short time-frame, it cannot be surprising that smaller employers are calling for a delay in auto-enrolment. We believe that there could be some sense in pausing the dates when employers with fewer than 50 employees are due to auto-enrol, namely those due to auto-enrol from 1 June 2015 onwards.’

ONS: Pension scheme membership statistics 2014

New official statistics released by the Office for National Statistics (ONS) about pension scheme membership reveal increases in members of workplace schemes, alongside a host of other interesting trends. Barnett Waddingham hasissued a press release commenting on the ONS data.

The report highlights:

• Membership of occupational pension schemes increased from 6.2 million in 1953 to 12.2 million in 1967, followed by an almost continuous decline between 1967 and 2012 to 7.8 million. Membership rose to 8.3 million in 2013.

• For men and women aged 16 to 64, from 1996/97 to 2012/13, private pension scheme membership was higher for men in all years. The gap is decreasing, from nearly 20 percentage points in 1996/97 to 3 percentage points in 2012/13.

• In 1997, 46% of employees had a defined benefit pension. By 2013, this had declined to 29%. Over the same period, membership of Group Personal Pensions and Stakeholder pensions increased from 1% to 12%.

• Employee membership of a workplace pension is lowest at the beginning of working life. For employees aged 16 to 21, around 10% of both men and women belonged to their employer’s pension scheme.

• In 2013, for both men and women, those working in public administration, defence and social security were most likely (over 90% for both) to be members of a workplace pension. Accommodation and food services was the industry where both men (16%) and women (14%) were least likely to be members.

• The percentage of self-employed men belonging to a personal pension fell from 37% in 2005/06 to 25% in 2009/10, falling further to 22% in 2012/13.

APFA: Simplicity must define products of the future

The Association of Professional Financial Advisers (APFA) has published a report, sponsored by Fidelity, which considers what the next few years hold for product development in financial services, including pensions and long-term care. Alan Higham, Retirement Director at Fidelity Worldwide Investment, commented: ‘The recent changes to defined contribution pensions are the biggest since the regime was introduced in 1921. But what could this mean for products? Looking ahead, the crucial issue here is whether auto-enrolment works, and people embrace the need to save more. If they do, then from a product perspective we may see no more than tinkering. Alternately if opt-out rates rise then we could see soft compulsion graduate to compulsion with knock-on effects for products, taxation and allowances for retirement savers.’

Towers Watson publishes Global Pension Finance Watch – Third Quarter 2014

Towers Watson has published its Global Pension Finance Watch for the third quarter of 2014, which reviews how capital market performance affects defined benefit pension plan financing in major retirement markets worldwide. The report found that for all regions other than Brazil and Japan, net results for the third quarter were slight decreases in pension index results.

Ninth version of the Purple Book published

The Pension Protection Fund (PPF) and The Pensions Regulator (TPR) have published the ninth edition of the Purple Book, which monitors the risks faced by 6,057 pension schemes throughout the UK. According to the Purple Book, the percentage of schemes closed to new members fell slightly from 54% in 2013 to 53%, while the percentage of schemes closed to future accruals rose from 30% to 32%.

PPI issues Briefing Notes 71 and 72

The Pensions Policy Institute (PPI) has issued:

• Briefing Note 71 – Risk Sharing Pension Plans: The Dutch Experience, and

• Briefing Note 72 – DC savers’ needs under the new pension flexibilities.

Partnership: one in ten plan to repay mortgage borrowing with tax free pension lump sum

Research published by Partnership reveals that one in ten (389,483) 40 to 70 year olds in England intend to use their tax free pension lump sum to repay the outstanding balance on their mortgage. In answering the question ‘How will you repay your mortgage?’ the answers given were:

Keep making monthly repayments until it is paid 58% 2,259,004
Make some lump sum repayments in addition to my monthly repayments 22% 865,519
Use my tax free pension lump sum to repay outstanding balance 10% 389,483
Have savings/investments set aside to repay outstanding balance 7% 268,311
Use an inheritance 6% 225,035
Use my pension to repay outstanding balance 5% 199,069
Will take in a lodger to help repay my mortgage 3% 112,517

IEA report warns of ‘debt timebomb’ created by Britain’s ageing population

The Institute of Economic Affairs (IEA) has published a report which warns that the Government needs to cut public spending by 25% in order to deal with the ‘debt timebomb’ created by Britain’s ageing population. Recommendations in the report include increasing the state pension age further and linking rises in the state pension only to increases in prices and encouraging work participation for those over the age of 55 by removing employment protection legislation in areas that currently provide an incentive to retire early.

FCA warns of incentives to buy shares in Emmit plc with pension savings

The Financial Conduct Authority (FCA) has expressed ‘serious concerns’ in a press release that individuals are being encouraged to transfer their savings from their work pension arrangements to self-invested personal pensions and use that money to purchase shares in AIM-listed company Emmit plc. As an incentive, the FCA claims that some investors are being offered ‘cash back’ on their investments in the company, paid for by a third party. In a statement on its website, the FCA said: ‘Some investors appear to have invested 100% of their pension assets into Emmit plc shares and may suffer significant financial loss if they have done this without fully understanding what they are doing. Further, the cash incentive might amount to a withdrawal of assets from a pension scheme which could incur a significant tax liability on the investor.’


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