Open-access content
10th August 2012
Pensions/ Insurance/ Motor claims
DC pension defaults 'poorly aligned' with members' interests
There is a 'clear disconnect' between the way that defined contribution pension schemes are designed and reviewed and the aim of providing a good retirement income for scheme members, according to Hymans Robertson.
Only 31% of human resources and finance directors at the 102 large companies surveyed by the firm said they set the strategy for their defined contribution (DC) default investment fund - the one chosen by most scheme members - with the aim of "delivering a target level of replacement income in retirement".
One in five of those surveyed were "unaware" of whether they set their strategy in line with this goal, while 25% set their strategy with the "loose aim" of "maximising returns for members".
Lee Hollingworth, head of DC at Hymans Robertson, said: "The evidence suggests that many DC schemes have been set up without any real thought as to the outcome or impact of their design, particularly from an investment point of view."
Regulator's process-based performance indicators ignore pensions outcomes
It is impossible to judge whether The Pensions Regulator is effectively protecting the benefits of members of workplace pension schemes, the National Audit Office has said.
In a report on the regulation of defined contribution pension schemes, auditors found that the indicators used to measure the performance of The Pensions Regulator (TPR) tended to be based on processes rather than the outcomes from its regulatory action.
This does not provide a stable basis for measuring performance over time, making it difficult to assess progress. The situation is further complicated by TPR sharing regulatory responsibility for contract-based schemes with the Financial Services Authority without any "overarching objectives" against which overall regulatory action on pensions can be assessed.
Auditor general Amyas Morse said: "The regulator's overall approach is sound, but its performance management system is not strong enough. The agencies involved need to develop a concerted approach."
For more on this story, visit bit.ly/S2w1CL
UK life insurers set to increase pensions work
Private sector pensions represent an "opportunity for growth" for UK life insurance companies, according to ratings agency Fitch.
Insurers could benefit from companies offloading risks in defined benefit pension schemes, as well as from auto-enrolment.
To date, their involvement in pension funds has largely been through buying out schemes and transferring all the assets and liabilities to the insurer, or simply insuring the liabilities.
Fitch said it also expected to see an increase in insuring risks faced by schemes - in particular, increases in life expectancy.
"Banks compete with insurance companies, because the transactions are large enough for banks to syndicate the risks to their clients," it explained. "We expect insurance companies to write more of this directly as contract size shrinks and pricing becomes more uniform."
For more on this story, visit bit.ly/LLNFHf
Pension deficits double despite sponsors' efforts
The combined deficit of FTSE 100 companies' pension schemes more than doubled to over £40bn between May 2011 and May 2012, despite firms spending £11bn on closing their deficits, Lane Clarke & Peacock (LCP) has said.
In its annual Accounting for Pensions report, the consultancy estimates the total deficit of the pension schemes run by the UK's leading companies was £41bn as of 31 May, compared with £19bn 12 months earlier.
Under the IAS19 standard accounting measure, this equates to liabilities of £447bn versus assets of £406bn. The deficit increased despite FTSE 100 companies paying £21.4bn into their pension schemes in 2011. Of this, almost £11bn was targeted at removing deficits.
The report's author, LCP partner Bob Scott, said the deficit reflected record low yields from corporate bonds and "drifting" equity markets.
For more on this story, visit bit.ly/NcInHF
Guarantee pension income
The pensions industry should offer savers more products that provide greater certainty over their retirement income, according to pensions minister Steve Webb.
He said providers should seize on the "gap in the market" for innovative pension products that might include some form of cost-efficient guarantee.
bit.ly/MWvO3b
Motor injury claims rising
The proportion of motor accidents resulting in a personal injury claim increased by a record amount last year, costing the insurance industry £400m, figures published by the Actuarial Profession have revealed.
The increase came despite an 11% decline in the number of damage claims last year.
bit.ly/NBYcmV
Alternative assets close to $5trn mark
The total value of alternative assets under management on behalf of institutional investors reached $4.871trn worldwide at the end of 2011, according to research published by Towers Watson.
bit.ly/LbTeNC
There is a 'clear disconnect' between the way that defined contribution pension schemes are designed and reviewed and the aim of providing a good retirement income for scheme members, according to Hymans Robertson.
Only 31% of human resources and finance directors at the 102 large companies surveyed by the firm said they set the strategy for their defined contribution (DC) default investment fund - the one chosen by most scheme members - with the aim of "delivering a target level of replacement income in retirement".
One in five of those surveyed were "unaware" of whether they set their strategy in line with this goal, while 25% set their strategy with the "loose aim" of "maximising returns for members".
Lee Hollingworth, head of DC at Hymans Robertson, said: "The evidence suggests that many DC schemes have been set up without any real thought as to the outcome or impact of their design, particularly from an investment point of view."
Regulator's process-based performance indicators ignore pensions outcomes
It is impossible to judge whether The Pensions Regulator is effectively protecting the benefits of members of workplace pension schemes, the National Audit Office has said.
In a report on the regulation of defined contribution pension schemes, auditors found that the indicators used to measure the performance of The Pensions Regulator (TPR) tended to be based on processes rather than the outcomes from its regulatory action.
This does not provide a stable basis for measuring performance over time, making it difficult to assess progress. The situation is further complicated by TPR sharing regulatory responsibility for contract-based schemes with the Financial Services Authority without any "overarching objectives" against which overall regulatory action on pensions can be assessed.
Auditor general Amyas Morse said: "The regulator's overall approach is sound, but its performance management system is not strong enough. The agencies involved need to develop a concerted approach."
For more on this story, visit bit.ly/S2w1CL
UK life insurers set to increase pensions work
Private sector pensions represent an "opportunity for growth" for UK life insurance companies, according to ratings agency Fitch.
Insurers could benefit from companies offloading risks in defined benefit pension schemes, as well as from auto-enrolment.
To date, their involvement in pension funds has largely been through buying out schemes and transferring all the assets and liabilities to the insurer, or simply insuring the liabilities.
Fitch said it also expected to see an increase in insuring risks faced by schemes - in particular, increases in life expectancy.
"Banks compete with insurance companies, because the transactions are large enough for banks to syndicate the risks to their clients," it explained. "We expect insurance companies to write more of this directly as contract size shrinks and pricing becomes more uniform."
For more on this story, visit bit.ly/LLNFHf
Pension deficits double despite sponsors' efforts
The combined deficit of FTSE 100 companies' pension schemes more than doubled to over £40bn between May 2011 and May 2012, despite firms spending £11bn on closing their deficits, Lane Clarke & Peacock (LCP) has said.
In its annual Accounting for Pensions report, the consultancy estimates the total deficit of the pension schemes run by the UK's leading companies was £41bn as of 31 May, compared with £19bn 12 months earlier.
Under the IAS19 standard accounting measure, this equates to liabilities of £447bn versus assets of £406bn. The deficit increased despite FTSE 100 companies paying £21.4bn into their pension schemes in 2011. Of this, almost £11bn was targeted at removing deficits.
The report's author, LCP partner Bob Scott, said the deficit reflected record low yields from corporate bonds and "drifting" equity markets.
For more on this story, visit bit.ly/NcInHF
Guarantee pension income
The pensions industry should offer savers more products that provide greater certainty over their retirement income, according to pensions minister Steve Webb.
He said providers should seize on the "gap in the market" for innovative pension products that might include some form of cost-efficient guarantee.
bit.ly/MWvO3b
Motor injury claims rising
The proportion of motor accidents resulting in a personal injury claim increased by a record amount last year, costing the insurance industry £400m, figures published by the Actuarial Profession have revealed.
The increase came despite an 11% decline in the number of damage claims last year.
bit.ly/NBYcmV
Alternative assets close to $5trn mark
The total value of alternative assets under management on behalf of institutional investors reached $4.871trn worldwide at the end of 2011, according to research published by Towers Watson.
bit.ly/LbTeNC
Filed in: