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UK Pensions Speedbrief: The Twelve Days of Christmas (with a pensions twist)

  • United Kingdom
  • Pensions - Defined benefit
  • Pensions - Defined contribution


We recently hosted our 11th Annual Pensions Conference, with a record attendance and first class speaker line-up. Highlights included hearing from Richard Harrington MP about the Government’s planned Green Paper on the sustainability of DB pensions, insights from John Cridland CBE on the key issues being considered as part of the state pension age review and tips from Professor Wändi Bruine de Bruin on communicating with an ageing audience. These, together with the other highlights from the day, are summarised in this festive speedbrief.

The Twelve (Pension) Days of Christmas

On the twelfth day of Christmas my true love sent to me…

Twelve months of madness – Looking back on the past year, Francois Barker, head of pension at Eversheds, reflected on how it had been a year of the unexpected with the vote for Brexit and for Donald Trump. It had also been a tumultuous year for pensions with high profile sponsor failures, rising DB deficits and concerns about the regulation of master trusts. These will be some of the key issues that will need to be addressed in 2017.

Eleven Supreme Court judges – In his legal update, Steven Hull, pensions partner at Eversheds, considered the significance of the Brexit hearing before the Supreme Court. If the Supreme Court finds in favour of the Government it will be able to trigger Article 50 by the end of March 2017 as intended. If not, the Government will be forced to pass legislation to authorise this. While the Government is likely to be able to get a Bill through the Commons, the House of Lords could potentially frustrate the Government’s plans. This could potentially lead to a constitutional impasse and an early General Election.

Ten cybersecurity warningsLeslie Titcomb, Chief Executive of the Pensions Regulator, repeated her calls for trustees to get on top of the issue of cybersecurity, to understand what their third party service providers are doing to address this and to put an information security policy in place for their plan.

Nine people playingAnthony Hodges, founder and Chairman of AHC Consulting, highlighted the potential value in the gamification of pensions. “People learn through playing”, he said, and called on the industry to create pensions and wealth simulators (to emulate flight simulators) to help people learn about pensions, savings and investing.

An 8% contribution (well, 6.9% really) – A number of speakers highlighted the need for the Government to consider the suitability of the 8% minimum auto-enrolment contribution rate. Minister for Pensions, Richard Harrington, indicated that this should be considered as part of the statutory review of automatic enrolment in 2017 as well as examining the case for extending automatic enrolment to cover some, or all, of the groups currently excluded.

Seven salami slices – Former Pensions Minister, Steve Webb, said he is concerned that the Government will continue “salami slicing” pensions tax allowances instead of implementing a radical overhaul of pensions tax relief for fear of alienating core voters.

Six State Pension AgesJohn Cridland CBE highlighted the key issues that he is considering in his review of the State Pension Age. He is keenly aware of the variations in life expectancy across the UK and among different groups within society. He indicated that maintaining a one-size-fits-all State Pension Age is not easy but said that there is a trade-off between simplicity and greater sensitivity. His guiding principles are that the state pension age needs to be “fair, affordable and realistic” and he said there is a choice between having a larger state pension later or a smaller state pension earlier.

Five themes for 2017Francois Barker started the day by setting out his five key themes for 2017. These were:

  • Brexit
  • Adequacy
  • Decumulation
  • Cybersecurity
  • The future of DB

Of these, delegates identified the debate about the future of DB plans as the biggest issue for 2017. Bigger even than Brexit.

Four tips for communicatingProfessor Wändi Bruine de Bruin of Leeds University Business School said that the “sweetspot” for financial decision-making is in your 50s. At this point your decision-making ability - made up of your cognitive capacity, experience, motivation and emotional well-being - is at its peak. Cognitive decline can then begin to have an effect. However, the extent of this varies significantly between individuals. Her tips on communicating with an ageing audience included framing the message positively, not offering too many options, understanding your audience and continually assessing the effectiveness of your communications.

Three big ideas David Pitt-Watson called for secondary legislation to be implemented to permit the establishment of collective DC plans. This would enable collective decumulation vehicles to be established which could offer better outcomes for members and enable individuals to pool longevity risk. Michael Johnson proposed the establishment of a Workplace ISA within the Lifetime ISA and said that his vision for the Lifetime ISA was that it would be a savings vehicle that could take someone from cradle to grave. And the Pensions Ombudsman, Anthony Arter, suggested that all schemes should move to a one-stage IDRP process to speed up dispute resolution.

Two ways of decision-makingProfessor Wändi described two different ways that people make decisions – maximising (where an individual seeks to select the very best option) and satisficing (where an individual looks to select an option that is good enough). As individuals get older they tend to move from maximising to satisficing. It has been shown that satisficing can lead to better outcomes not least because those who adopt a satisficing approach tend to live with less regret. Professor Wändi queried how this might impact the way the pensions industry frames retirement decision-making and communications.

And a Green paper on sust-ain-abil-ityRichard Harrington MP confirmed that the Government is planning to issue a Green Paper on the sustainability of defined benefit pension plans in the first few weeks of 2017. Amongst other things, the paper will cover the valuation process and methodology for DB plans, inflation protection, consolidation and DB regulation.

Date for your diary

Next year our pensions conference is taking place on 7 December 2017 in Central London. We do hope you can join us.

For more information contact

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