Pension news
Pension news
USS proposals – chaos on campuses ANALYSIS BY independent experts First Actuarial shows that under proposals to reform the Universities Superannuation Scheme (USS), which would see the defined benefit scheme replaced by a defined contribution scheme: ● staff in some of the UK’s most elite universities will see the value of their retirement income drop by as much as £200,000 ● a lecturer starting work today could be £208,000 worse off over the course of their retirement, and £385,000 worse off than if they worked in their nearest new ‘post-92’ university where academics’ pensions are paid by the rival Teachers’ Pension Scheme rather than USS. The total loss in retirement for current USS members reduces with the more past service they have; someone with twenty years’ past service could lose £35,000 in total. Alistair Jarvis, chief executive of Universities UK, says: “Change is needed to address the scheme’s deficit and the rising cost of future pensions. Our proposals for reform will tackle the scheme’s funding challenges so that universities can continue to offer attractive pensions benefits to staff…The option of no reform would be a dangerous gamble that employers are unwilling to take.” However, Sally Hunt, general secretary of the University and College Union (UCU), said: “…these proposals would devastate USS members’ pensions and could create a recruitment and retention crisis as staff jump ship to secure their futures.” Members of the UCU have received ballot papers asking them to back a sustained campaign of strikes and other forms of industrial action; the result of the ballot was expected shortly after 19 January. Margaret Snowdon, chair at PASA, commented: “Critical to the success of robotics is that the volume of poor data is addressed, as data must be good enough to allow the technology to follow an automated pathway and to help members make more appropriate decisions. This will no doubt pose a hurdle for many, but should already be high priority for schemes in preparation for the new GDPR [General Data Protection Regulation]. If we commit to getting this done and the incorporation of robotics is managed in the right way, then we have the potential to restore confidence in the industry and in saving for retirement overall. It could help avoid the spectre of pensioner poverty and greatly enhance members’ retirement outcome potential.” Pension robotics THE PENSIONS Administration Standards Association (PASA), an independent body dedicated to driving up standards in pensions administration, says that far from fearing the implications of the growing emergence of robotics, it should be embraced by the pensions industry.
Physical and financial security ACCORDING TO a recent nationwide study of working over-forties, conducted by Prudential, more than two- fifths (44%) have recently started focusing on improving their physical health but improving their future financial security is receiving less attention with only 34% saying that turning forty has spurred them on to sort out their retirement (http://bit.ly/2lDM0hc). The study finds that 58% admit they rarely or never check the value of their retirement savings. Even those aged 55 to 64 do not pay much attention to their pensions with 60% admitting they seldom look at their savings. Minimal compliance with AE duties A POLICY paper, Automatic enrolment and the law – how far do employers’ duties extend (http://bit.ly/1Vr3eHK), published jointly by Eversheds Sutherland and Royal London, warn Britain’s employers to beware ‘minimal compliance’ with automatic enrolment (AE) legislation. Highlighting areas where employers should not regard AE as a ‘once and done’ activity, the paper proposes employers should: ● regularly review an AE scheme – this is especially important given that the whole process of AE relies on ‘inertia’ with employees having little or no active involvement in choosing the provider, choosing the default investment strategy etc; an employer persisting with a pension provider that was not providing good value to members could face some searching questions in years to come ● ensure that the scheme chosen provides tax relief to all employees – employers choosing a scheme which delivers tax relief through the net-pay-arrangement could face challenge as this excludes non-taxpayers from the benefit of tax relief ● help to protect individuals against making poor decisions – whilst employers are not under a legal duty to provide financial advice to their employees, courts have implied a duty on employers to provide information to employees about their pension rights where not doing so could lead to an individual suffering financial loss. Steve Webb, director of policy at Royal London, said: “Many larger employers do already take pensions seriously and go well beyond their statutory minimum duties. But all employers should be reviewing their [AE] arrangements on a regular basis to ensure that it remains fit for purpose.” Francois Barker, partner and head of pensions at Eversheds Sutherland, said: “…the law tends to evolve over time and the courts may decide in the future that employers – particularly large ones – should have done more than the bare minimum required under the [AE] rules. If firms want to insulate themselves as far as possible against future regulatory action, there are a number of key areas they should address on an ongoing basis.”
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| Professional in Payroll, Pensions and Reward |
Issue 37 | February 2018
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