Pension news
Costs increase for DB schemes THE PENSIONS and Lifetime Savings Association (PLSA) has recently published its 2016 Annual Survey (http://bit.ly/2k7DyI7), providing a wealth of statistics and information on workplace pensions. The survey highlights that costs for operating defined benefit (DB) schemes – excluding the Local Government Pensions Scheme (LGPS) – have increased by 37% in one year, with the mean running cost per member increasing by £146 to £546. This is largely driven by increases in fund management and custody costs, up 32%. Smaller schemes, those with 5,000 or fewer members, have seen the greatest rise in running costs with an average increase of 63%, to £787 per member. The overall cost per LGPS member declined in 2016 to £193 (£201 in 2015), much lower than the average for private sector schemes. In 2016, only 10% of DB schemes were open to new members compared to 21% in 2015. The figure in the private sector is only 4%. DB schemes continue to mature, with 44% of scheme members in 2016 being pensioner members, compared to 39% in 2010. Only 10% of respondents in 2016 said that their main DB scheme was accepting new entrants. Overall contribution rates into DB schemes have remained similar to previous years at around 30%. The mean value of reported contributions stands at 24.2% for employer contribution and 5.6% for employee contributions. Within defined contribution schemes the average employee contribution rates remain at 4.2% and employer contribution rates sit at 7.9% (8.0% in 2015). Savers continue to benefit from low charges, with the average annual management charge of 0.4% as it has been for a number of years. The average (median) payable pension for LGPS schemes in 2016 was £4,988 (up from £4,850 in 2015). This is notably below the £8,727 average paid by their private sector counterparts. Joanne Segars, chief executive, PLSA, said: “Higher operating costs, especially for smaller schemes, combined with widening deficit levels mean DB schemes are under pressure as never before. We can’t ignore the resulting risk to members’ benefits for all but the most strongly funded schemes and for these members the risk is they will lose 15–20% of their benefits.”
One in five lose track of pensions savings RESEARCH BY Aegon reveals that 62% of people have multiple pensions but more than one in five (21%) of this group has lost track of one or all of their pensions. As a result, more than 6,600,000 people may have misplaced some of their retirement savings. One option to prevent losing track of different pension pots is to combine them with one pension provider: the research found 67% of people would be interested in consolidation. However, while 30% thought there were benefits to doing so, 43% said they would need further information on the benefits. The findings highlight the challenge of a broader trend towards a career involving an average of eleven jobs and the difficulty of keeping tabs on workplace savings. With a majority of people holding multiple pensions, as many as two fifths (39%) did not know the value of their pensions. Kate Smith, head of pensions at Aegon said: “It’s very hard to plan your retirement without a full view of your savings and it’s important everyone has a clear idea of how much their pension is worth and what their state pension entitlement is likely to be. “With so many people losing track of a pension it’s perhaps not surprising that 67% of people are interested in consolidation even if they have to track down a pension first. There can be benefits to consolidation as many older-style pensions often have complex or more expensive charges. “Looking to the future, the launch of a pension dashboard in 2019 should simplify the process of finding lost pensions, and has the additional bonus of seeing all your pensions, including the State pension, in one place. [In addition, the] Department of Work and Pensions pension tracing service can already help people find lost or forgotten pensions they built up many years ago.” Businesses missing their AE start date NEW FIGURES from Aviva have revealed that a growing number of companies are risking a fine by failing to set up their workplace pension in time. Using its own client data, AVIVA has revealed that during quarter four of 2016: ● 1 in 7 (14%) of businesses applying to Aviva for a workplace pension made their application after their automatic enrolment (AE) staging date had passed ● more than a third of businesses (38%) left their application to the last minute ● just under half of companies (48%) prepared for AE well in advance. The proportion of firms applying with Aviva that missed their staging date has increased rapidly during the course of 2016, from just 1% in quarter one to 14% in quarter four. However, during this time the volume of companies setting up workplace pensions has also increased offering some explanation for the rapid growth of ‘late stagers’.
| Professional in Payroll, Pensions and Reward | March 2017 | Issue 28 36
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