Pension news
Use of DC master trusts ACCORDING TO the Pension Plan Strategy survey from LifeSight, Willis Tower Watson’s defined contribution (DC) master trust, 71% of organisations have reviewed or are planning to review their DC pension delivery vehicle in the next two years, with the number expecting to have a master trust as their main DC pension scheme set to more than double over the next three years from 12% to 26%. The survey revealed that single employer trusts and group personal pension contract-based pension schemes are set to decrease from 34% to 23% and 50% to 47% respectively. David Bird, head of proposition development, commented: “This is good news for prospective employers and members, as those master trusts left standing will be able to achieve the scale necessary to improve their offering to members. “The desire for better member communication and outcomes is something that our research encouragingly reveals is a key motivating factor behind organisations’ decision to review their DC pension delivery vehicle. For those organisations looking to switch to a master trust, focus should be on the strength and quality of governance and management of those trusts under consideration.” Collective DC schemes consultation THE DEPARTMENT for Work and Pensions has launched a consultation setting out proposals as to how a particular form of collective DC pension scheme might work in the UK, and the legislative and regulatory regime that would be needed to support any such scheme (https://bit.ly/2JXAg41). The paper notes that the collective nature of such a scheme, and the way it adjusts the level of pensions and prospective pensions, should mean that the overall membership will enjoy an element of cushioning from volatility as investment risk is adjusted for over time and longevity risk is pooled across the membership. IORP II regulations TWO SETS of regulations, which are designed to implement the second European Pensions Directive (also known as ‘IORP II’), come into force on 13 January 2019. Ferdinand Lovett, associate director at Sackers & Partners LLP, commented: “In creating a statutory duty for occupational schemes to have an ‘effective system of governance’ including internal controls, this lays down the bedrock on which [The Pensions Regulator’s] codes of practice will be built or updated. We do not expect that schemes [that] already have good governance systems in place will need to make quantum leaps in terms of compliance. But arrangements will need to be reviewed against the codes of practice, when available.”
Salary sacrifice advice A SERVICE for employers to facilitate a tax-efficient salary sacrifice scheme that allows employees to claim up to £500 towards the cost of pension advice has been developed by Equiniti. Tim Brook, head of HR Solutions Platform and Engagement, at Equiniti, commented, “We hope our service will start to entice more employers to offer access to advice through salary sacrifice which will in turn drive employee engagement and that employees see the value of receiving pensions advice.” Women falling behind men A PENSION Review Service (PRS) study of its private pension planning clients found that men not only hugely outnumber women planning for their retirement but are also saving considerably more into their plans. In a sample of 1,000 clients in the eighteen months to October 2018, the PRS found that: ● of those seeking pensions advice, 75% were men, 25% women, and the typical age was 55 ● the average pension pot was £250,488 ● men had squirreled £274,901 into their pots, but women lagged with savings of just £181,181 Mark Abley, managing director, PRS, observed that “Working women at age 55 now are facing a double whammy of having to hang on until they are 66 to qualify for the state pension – and lagging way behind men when it comes to their own personal pension. If our data is anything to go by, many working women will struggle to finish work before their 66th birthday.” Withdrawing pension savings RESEARCH FROM Prudential’s unique annual research into the financial plans and aspirations of people planning to retire in the year ahead, reveals that: ● 10% expect to withdraw their entire pension savings as one lump sum ● 20% intend to take out more than the tax-free 25% limit, risking a potential tax bill shock. The study found the main reason given by those withdrawing their entire fund was to invest in other areas such as property, a saving accounts or an investment fund (71%). Further analysis shows that since the launch of pension freedom reforms in April 2015, more than 1,100,000 people aged 55+ have withdrawn around £15.744 billion in flexible payments. Government estimates indicate around £2.6 billion was paid in tax by those taking advantage of pension freedoms in 2015–16–17 with another £1.1 billion raised in the 2017–18 tax year. The cash withdrawal is most for used for holidays (34%), 25% on home improvements, 20% for gifts to children or grandchildren, 20% on a new or second-hand car, 18% paying off mortgage.
| Professional in Payroll, Pensions and Reward | December 2018 / January 2019 | Issue 46 44
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