Pension News
Pension news
Automatic enrolment review recommendations WORKPLACE PENSION provider NOW: Pensions, is calling for The Department for Work and Pensions to consider the following recommendations in its 2017 review of automatic enrolment to safeguard long-term success: ● Remove qualifying earnings and instead base contributions on every pound of earnings, which would significantly improve outcomes for savers. ● Review the automatic enrolment trigger, to ensure low-paid and part-time workers are given the opportunity to save for their retirement. ● Address the income tax net pay anomaly. All savers should be treated equally, regardless of the type of scheme (net pay or relief source) they are in. ● Rebalance contributions to minimise opt outs and address the fact that nearly a quarter (24%) of automatically enrolled savers say they ‘definitely will’ or ‘might’ opt out when minimum contributions hit 8% of qualifying earnings in 2019. ● Set the roadmap for increasing contributions beyond 8%, and ensure people will be able to enjoy the same sort of standard of living in retirement as they did in their working years. Morten Nilsson, chief executive officer of NOW: Pensions, says: “In order to safeguard the future of auto-enrolment, and with it, the future of millions of people in UK, we believe the government needs to address these five key areas when it undertakes the review of auto-enrolment in 2017. We strongly urge the government to consider these changes…”
PPF update THE PENSION Protection Fund’s (PPF’s) August 2016 update (http://bit. ly/2cVswyc), known as ‘PPF 7800 Index’, provides the latest estimated funding position for defined benefit schemes potentially eligible for entry to the pension protection fund (PPF). Highlights of the update comprise: ● Aggregate deficit of the 5,945 schemes in the PPF 7800 Index is estimated to have increased over the month to £459.4 billion at the end of August 2016, from a deficit of £376.8 billion at the end of July 2016 (previously shown as £408.0bn). The position has worsened from the previous year, when a deficit of £233.3 billion was recorded at the end of August 2015. ● The funding ratio worsened from 79.2 per cent (previously shown as 77.4 per cent) to 76.1 per cent. The funding ratio is lower than the 84.3 per cent recorded in August 2015. ● Total assets were £1,459.7 billion and total liabilities were £1,919.1 billion. ● There were 5,042 schemes in deficit and 903 schemes in surplus. There were 1,267 schemes in surplus at the end of August 2015 (21.3 per cent).
Historical aggregate balance and funding ratio of schemes in PPF universe
Pensions paralysis AN EXTENSIVE research project conducted by Willis Towers Watson in collaboration with Nottingham University Business School has found that following the recent pension reforms, nearly half of United Kingdom (UK) employees are suffering from a crisis of confidence when it comes to financial decisions making – resulting in a ‘pensions paralysis’. Initial findings of the comprehensive survey of 2,000 UK workers revealed the following: ● The number of available saving options is one of the main factors contributing to this crisis of confidence – over a third of consumers (34%) think there is too much choice when it comes to saving for retirement. ● Long-term economic factors such as low or poor interest rates (48%), a lack of certainty over rate of return (22%) and being unclear on the extent of investment risk (16%) are further compounding the issue. ● Other factors contributing to the crisis of confidence for savers include a lack of knowledge/information (35%), complexity of investment choices available (25%) and a general distrust of financial institutions (25%). Minh Tran, director in Willis Towers Watson’s Wealth and Retirement Practice, said: “The results of our study highlight a savings problem, that has become more pertinent with the introduction of auto-enrolment. “Employers and the pensions industry have to work together to help employees navigate these tough financial decisions. New innovative and personalised approaches to financial education, engagement and saving opportunities are required if we are to improve the situation and help UK employees to save more.” James Devlin, professor of financial decision making at the Centre for Risk, Banking and Financial Services at Nottingham University Business School said: “Although savers like the idea of having options and want to shop around, when faced with too much choice and complexity the decision becomes overwhelming and this can cause inertia.”
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Issue 25 | November 2016
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