(24/11/08) Mercer Survey finds that the number of schemes with at least one independent trustee has risen to 44%
(16/10/08) OPA condemns proposals to alter "return of surplus rules". More..
(1/10/08) The Pensions Regulator has now published the Guidance for Trustees on Conflicts of Interest
(11/09/08) Professional Pensions reported that, following pressure from the NAPF, the DWP conducted a survey of stakeholders (which excluded the OPA!) and is now considering making it easier to return scheme "surpluses" to employers. The OPA opposes such a move. More..
"OPA has weighed in the call for the government to honour its commitment to introducing 50% member-nominated trustees. It believes there would be no shortage of candidates for extra trustees from the recently retired." Pensions Week 4/8/08
The plain English guide to the Act produced by CMS Cameron McKenna has been updated and is available here.
Government launches a consultation on Conditional Indexation (06/06/08)
Big Change in State Pensions - Paul Lewis explains what the changes mean for your State Pension. (Saga, May '08)
Co-op workers face 70% contribution hike. OPA executive officer Roger Turner said: "For the company not to increase its contribution levels but ask for employees to pay these well above average levels is completely immoral. (06/06/08)
EMI Pension Fund trustees have asked TPR to use its "failure to agree" powers under the 2004 Pensions Act to impose a solution on both the trustees and the private equity investor, Terra Firma. This will be the first occasion in which these powers have been used. (01/05/08)
OPA slams TPR's Corporate Plan for failing to police its Codes of Practice. (01/05/08)
ONS report Pension Trends reveals that around two thirds of pensioner households receive private pension income in 2005/06, but 40 per cent of pensioner couples,
55 per cent of single men and 61 per cent of single women pensioners have annual private pension income of less than £1,000. And yet most current employees expect to retire on half their salary. (15/04/08)
Pension funds are at risk from takeovers by unregulated insurers such as the Pension Corporation which are not covered either by the Financial Service Compensation Scheme or the PPF. Unite, the UK's largest labour union, is pressing the government to enact laws to stop investors making short- term gains by taking assets from the pension schemes of companies they acquire. More.. (3/04/08)
New help for people who lost savings when their employer-sponsored pension schemes collapsed. Young Review published. (17/12/07) Total cost for the compensation package now £2.9bn. Contrast this with Tony Blair's claim almost 2 years ago that it would cost £15bn. See summary at "A pension scandal worse than Maxwells".
Betrayal of Deferred Pensioners: There is to be a reduction in the cap on the revaluation of future accruals of deferred pensions from 5% to 2.5%. (5/12/07)
Trust and confidence in pensions and pension providers - a DWP survey of those who are not retired to gauge the levels of trust the public has in pensions and pension providers. 51% of respondents do not trust the Government; less than half this number do not trust their employer. We're not surprised! (18/10/07)
DB Pensions hurting profits: John Cridland, CBI Director General, complains that DB schemes top-ups amounting to £3bn last year are hurting profits. Has he forgotten already how profits were boosted in the late 90s when companies took out £18bn (according to Inland Revenue figures) from the pension funds by taking "pension holidays"? (8/10/07)
Roger Turner has been appointed in his capacity as the Executive Officer of the OPA to the Financial Reporting Council’s Stakeholder Interests Working Group
Review of Pensions Regulation OPA concerns over 2007 Pensions Act particularly on the dregulatory review.
MNT Confusion over opt out regulations.
Financial Assistance Scheme : A last minute government amendment to the Pensions Bill puts the annuity purchases of FAS schemes on hold for nine months and trustees are only allowed to buy annuities if they first get permission. This will allow the Young Review to assess the assets available. (26/07/07)
Alliance Trust research shows record rate of inflation for the elderly (April 2007)
Treasury documents released under the Freedom of Information Act (following the application by the Times) on the impact on UK pension funds of the decision to withdraw the payment of tax credits on UK dividends (31/3/07)
Budget 2007: The Chancellor, Gordon Brown, announced increases for the Financial Assistance Scheme from £2.3bn to £8bn but is it enough? (21/3/07)
Saga magazine has launched a campaign with a petition in support of those who have lost their pensions (18/8/06)
Lane Clark & Peacock have issued their 13th annual survey of pensions.
Despite record contributions and rising stock markets, the total deficit of FTSE 100 UK defined benefit pension schemes, calculated under the international accounting standard IAS19, is estimated at £36bn, broadly the same as at this time last year. (2/8/06)
The House of Commons Select Committee on Public Adminstration has issued a highly critical report which accuses the government of causing a constitutional crisis over pensions. (1/8/06)
(9/06/06) The National Association of Pensions Funds has called on the government to allow employers to alter their pension promises retrospectively. More..
Ombudsman's Report
The government has issued its response to the Parliamentary Ombudsman's report (6/6/06). An annotated copy from Ros Altmann refuting the government's arguments is available here. The net present value, i e real cost, of compensation is shown to be about £3bn, far less than the £15bn figure quoted by Tony Blair. The case is now subject to a judicial review - see press release. (14/6/06)
Indexation of pensions (15 May '06)
 John Hutton, Secretary of State for Work and Pensions announced on 25th May '06 that the Financial Assistance scheme will be extended to cover eligible people who were within 15 years of their scheme’s normal retirement age on 14th May 2004. Under this extension, the Government will top-up to 80 per cent of expected core pension for those within seven years of scheme pension age, 65 per cent for those within eight to eleven years of scheme pension age and 50 per cent for the remainder.
 Ros Altmann writes: FINANCIAL ASSISTANCE SCHEME CHANGES TOO LITTLE, TOO LATE – WILL UNDERMINE WHITE PAPER REFORMS
Despite the positive spin and while any extra help for those who have been stripped of their pensions is welcome, the Government’s changes to the Financial Assistance Scheme are a further example of pension injustice. By refusing to comply with the recommendations of the Parliamentary Ombudsman and by refusing to behave honourably on this issue, the Government is undermining confidence and trust in both pensions and the word of Government. No-one could trust a National Pension Savings Scheme in future, on the basis of this precedent.
The White Paper reforms are designed to encourage people to take personal responsibility for their retirement in future and to engender a new retirement savings culture. What Government doesn’t seem to appreciate is that here is a group of tens of thousands of people who did exactly what Government is saying we need. They saved for their retirement, took personal responsibility for their pensions and have ended up with next to nothing. In fact, many of them are now far worse off than if they had never contributed to a pension scheme at all. They have lost their entire occupational pension, all their contributions and also some of the state pension they would have had if they had never joined their company scheme. Just ten years ago, the Government announced that people should join company pension schemes and that it had put legislation in place to make them safe and to protect them by law. These people believed that at the time and contributed their money each week. But when the Government’s assurances turned out not to be true, a new Government just says that they should never have believed that their pensions were safe in the first place!
What message does this send to the nation? It tells people that, if you listen to the Government and lock your money into a pension, you may end up worse off. Once you trust what the Government says on pensions, if it all goes wrong a new Government may tell you that you were a fool to believe anything the previous Government said. How can we restore trust and confidence in pensions if this situation is allowed to stand?
As long as the Government refuses to compensate those who have lost out when their pension scheme wound up, people will not trust pensions. We need ‘compensation’ not ‘assistance’, in line with the recommendations of the Parliamentary Ombudsman.
The extension of the already very low level of benefits from the Financial Assistance Scheme is wholly inadequate and seems to be designed to try to get positive headlines, rather than help those affected. It will still leave most of those affected without most of their pensions. The changes announced today extend the current 80% benefit level to those within 7 years of scheme pension age. But, for those from 7-11 years away from scheme pension age only 65% of their ‘core pension’ will be paid and those 11-15 years away will be reduced to just 50%. But the reality is far worse. These are just the headline figures. Those who have lost out so badly will have to keep fighting for their pensions. After years of begging and battling, the Government has still only offered meagre recompense for their losses. The Financial Assistance Scheme has cost over £5m so far, but is only helping a few tens of those 125,000 people affected.
So why is this FAS so inadequate?
1. Many are still excluded. Those excluded are as follows:
a. People over 15 years from pension age (Example, Richard Nicholl contributed 27 years and is 3 months beyond the cut-off so gets nothing)
b. All members of solvent employer schemes
c. All members of insolvent foreign companies, unless the company registered as insolvency in the UK (Example, TWA is bankrupt but its UK employees have been told they are excluded from the FAS)
2. No payments will be made until age 65:
Even if scheme pension age was below this. Even women whose scheme pension age was 60 and who get their state pension at 60 will get no FAS payments until age 65. While the Government says these people cannot get a penny until they are age 65, public sector workers, MPs and other ‘favoured’ groups are being allowed to use taxpayers’ money to maintain their generous pensions in future from age 60.
3. No inflation-linking
If inflation is 2.5-3% a year, then within 20 years or so the value of this pension will halve in real terms. After 20 years the 80% will be worth only 40% and losing the inflation linking means that, by the end of retirement, those who initially get 50% of the pension will end up with only 25%!
4. £12,000 cap
Payments are capped at £12,000 a year, so those who were expecting pensions over this will lose much more. By comparison, the PPF cap is £25,000.
The cost:
The headline of £2billion cost of FAS is misleading because it is not money that is needed now. These are pensions and will be paid over many years, so the annual cost is quite modest in comparison to this headline figure. Also, the payments are subject to tax, so the Government will recoup some money here and there will also be further expenditure savings in reduced means tested benefits.
In the interests of restoring confidence and a desire to establish a new retirement savings culture, it is essential that those who have lost out as a result of doing exactly what Government is trying to persuade people to do in future, must be compensated. This is likely to cost £100-£150m a year for about 50 years. The money need not all come from the taxpayer either, it could be paid from unclaimed assets. But it is urgent that compensation be agreed and for the Government to admit its mistakes, sort out the issue properly and move on with pension reform.
Ros Altmann
Community is continuing its legal action, for failure to implement the Insolvency Directive adequately, against the UK Government. The initial hearing took place in the European Court of Justice (ECJ), in Luxembourg on 1st June.
BA pilots set to take action over the threat to their pensions (12/1/06)
The Parliamentary Ombudsman's Report on behalf of the victims of scheme wind-ups has been delayed yet again. (20/11/05)urner report in Spring.(8/11/05)
From the Times (28/10/05): Pensions Regulator to plug loophole following hiving off the Marconi pension fund.
The Office for National Statistics has issued the first edition of a new publication "Pension Trends" (27/10/05)
From a Sunday Times article on pension deficits (16/10/05): British Airways accused of preventing its staff from learning anything about their pensions except the company's own biased view.
From the FT (15/10/05): Companies accused of being too slow in implementing the Myners reforms.
From Pensions News (15/10/05): Employers succeed in persuading the Accounting Standards Board to consider easing the "too strict" FRS17 pension accounting rules.
From the FT (14/10/05): Employers win big concessions after protests at cost of PPF but bankers have warned the PPF that acceptance of "pledges" of contingent assets could prove uncollectable if an employer becomes insolvent.
From the Daily Mail (13/10/05): Disclosure of longevity assumptions sought in company accounts.
From the Daily Telegraph (10/10/05): NAPF suggests the formation of a permanent independent Pensions Commission to take future pensions decisions out of the political arena.
From the Sunday Times (9/10/05): British Airways doubled its contributions to its pension fund to £225m but the deficit still rose by £205m to £1.4 billion. Tackling the deficit is a top priority for the new Chief Executive, Willie Walsh.
From the FT (6/10/05): CBI proposes that PPF benefits should be cut.
From the Daily Mail (6/10/05): Total UK pension fund deficit estimated to be £130bn.
From Professional Pensions (6/10/05): Despite recent increases in employers' contributions to pension funds It will still take more than a decade to eliminate the deficits in occupational schemes.
From the Times (5/10/05) Frank Field proposes that the pension fund members should pay for the PPF, not the sponsoring companies.
From the Times (5/10/05) Tory leader candidate, David Davis, promises to reverse Labour's £5bn pensions raid.
From Private Eye (30/09/05) Adair Turner points out that state pension is administered at an annual cost of less than 0.1% and the fund management industry typically charges about 5% when you put your money into a fund and another 1.5% pa after that.
From the FT (1/10/05): Pension fund trustees are generally confident about the advice they receive, but do not feel well equipped to challenge the advice. "There is a temptation to defer to the experts."
Brendan Barber attacks employers on pensions (11/9/05)
From Pensionswatch2005, (9/9/05): TUC report looks at pension provision amongst the UK's top companies and exposes the vast gulf between directors' and employees pensions.
From the Times, (01/09/05): The Engineering Employers Federation support indexation of a reformed basic state pension to the Average Earnings Index. More.. Meanwhile Blunkett has delayed the introduction of the Scheme Specific Funding Scheme for occupational pensions until 31 October '05.
Fund Deficits
Lane, Clark & Peacock Annual Survey of Pension Schemes: During 2004, nearly half the Footsie companies declared dividends that were more than their pension deficits. If the total declared dividends by the top flight companies of £39bn were used to fund the companies' pension schemes, the deficit would be wiped out at a stroke. Companies with the largest pension deficits include BAE Systems, British Airways, BT, ICI, Royal & Sun Alliance and Rolls Royce. (10/08/05)
From the FT (15/08/05): UK actuarial firms are willing to use a very wide range of economic assumptions in calculating the size of corporate pension deficits, helping to grow or shrink what is reported in company accounts, a new study shows.
From the FT (12/08/05): Inflation rises with age according the research by the Alliance Trusts calling into question the current method of inflation-proofing pensions.
From the FT (04/08/05): Accounting rules, by failing to require disclosure of mortality assumptions, will allow firms to disguise the true state of their balance sheet by making inflated assumptions about the performance of pension equities.
From The Times (22/07/05): Pensions experts at Watson Wyatt reckon that, as at the end of June, the FTSE 100 leading companies were running a collective deficit in their pension funds totalling £69.9 billion. Some forecasters have predicted that this deficit will rise as high as £100 billion. And Mercers, the human resources consultant, estimates that the deficit at FTSE 350 companies had reached £76 billion by the end of last year
From the FT (10/07/05): Contributions by companies in the FTSE 100 index were at a similar level in 2004 to the previous year, at £11.4bn. But after meeting the cost of new pension promises and interest costs on last year's deficit, less than £1bn was left to reduce the £60bn underlying deficit, the research concludes.
Meanwhile, John Ralfe (formerly of Boots) points out that the pension deficit is not uniformly spread among FTSE 100 companies. Just five companies - British Airways, BAE Systems, ICI, Rolls-Royce and British Telecommunications - account for 20 per cent of the total.
Pension "Savings". From Brewin Dolphin Wealth Management (11/07/05): Companies are saving an estimated £4bn a year by closing their final salary pension schemes. (By coincidence this is about the same sum that pension funds have lost due to the loss of tax credit on share dividends and that companies gained by the abolition of advanced corporation tax.)
The New Men in Charge (10/05/05)
 Following the election on 5th May David Blunkett has been appointed as the Secretary of State for Work and Pensions and Stephen Timms as the Minister for Pensions. The OPA will be seeking interviews with both at the earliest opportunity.
Morris Review of the Actuarial Profession - Final Report (14/03/05)
The report has now been published and can be downloaded from here. On pension scheme actuaries it recommends that:
- pension fund trustees, the scheme sponsor and the Scheme Actuary should explicitly agree that they perceive no material conflicts of interest prior to the Scheme Actuary advising both the trustees and the scheme sponsor;
- if any of the three parties, i.e. any one of the trustees, the Scheme Actuary or the scheme sponsor, deem at any point that a material conflict of interest has emerged, in relation to the same actuarial advisor advising both parties, then the trustees should have the option to retain the existing adviser and the sponsor should secure separate actuarial advice; and
- the Profession, or another appropriate body, should develop guidance for actuaries on the issues that they should take into account when considering the materiality of potential conflicts.
Trustees' Conflict of Interests (24/02/05)
The urgent need for the speedy introduction of 50% Member Nominated Trustees has just been very well demonstrated by a study from the London Business School. The findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports the view that company directors or insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily scheme members. Download the paper in full here.
The Finance Act 2004 (03/03/05)
The new Act changes the tax status for pension schemes paying a bereavement grant on the death of a pensioner over the age of 75. However following discussions with the OPA the Government has since reconsidered this issue and has confirmed that it will be introducing a further small package of supplementary measures in the Finance Bill 2005. There will be a new transitional rule to allow certain funeral expenses currently paid by occupational pension schemes to continue to be paid tax free where a right to receive them exists on 5th April 2006. The Government recognises that some people may be counting on these payments being made and have concluded that it would be right to change the rules in this way. See Inland Revenue Technical Note. The position on ex-gratia payments of pension for 90 days following the death of a member is yet to be clarified.
UK pensions told to dump equities. Financial Times (25/02/05): Watson Wyatt says schemes should reduce holdings in shares. Final salary schemes which have closed to new members should progressively reduce their equity holdings to 30 per cent over the next 10 years, and below that in the longer term, says the report.
DB trustees should assess their sponsors strength. Financial Times (25/02/05): Trustees should keep the credit-worthiness of their sponsoring company under constant review. According to Standard & Poor's analyses the 10yr probability of default increases rapidly once the rating falls below BBB. Both Courts and Allders were below BBB for the last 5 years.
From the BBC (26/04/04): A study argues that predictions of increased longevity may not be realised and may actually decrease. The PPF and Mature Pension Funds
Roger Turner, OPA Executive Officer, quoted in an article in Pensions Week (29th March '04), explained that existing pensioners in defined benefit schemes which automatically included an element of indexation prior to 1997 could lose out considerably. If their company were to become insolvent the PPF will not provide any increases to pensions in payment for those who retired before 6 April 1997.
"Promises made should be honoured and years ago these pension promises would have included indexation. For a widow or any dependent to lose this is dire" he said.
Turner said that the PPF will let down those expecting their pensions to continue to increase - increases they have actually paid for - and this limitation has only been brought in to reduce the costs of the PPF at outset.
The OPA is also alarmed that because the PPF will not include the liabilities of future increases to payments then the PPF could view schemes that are being wound up as technically not having a deficit.
When the PPF does a scheme valuation it will exclude the pre-1997 indexation which for the more mature schemes will remove much of the liabilities which could mean that the scheme is not in deficit.
The actuaries, Lane, Clark & Peacock, have said: "A scheme with sufficent assets to cover the value of the PPF benefits wouldn't be taken on by the PPF and it would have to wind up in the normal way. One has to wonder if any of the unfortunate cases that gave rise to the PPF's creation would have fallen straight through the safety net if the PPF had been in force a couple of years ago."
The government rejected the indexation amendment submitted by the OPA which would have corrected this injustice on the grounds of the affordability of the PPF. (See report.)
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