Understanding Pensions


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Managing any kind of pension scheme today is a complex task and one that needs expert guidance. Grant Thornton can offer a wide range of expert pension services to employers, trustees and individuals. We pride ourselves in finding innovative, cost effective and commercial solutions to the problems they face.

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Understanding Pensions

  1. 1. UnderstandingPensionsPensions services for employers, trustees and individuals
  2. 2. Managing any kind of pension scheme today is a complex taskand one that needs expert guidance. Grant Thornton can offera wide range of expert pension services to employers, trusteesand individuals. We pride ourselves in finding innovative, cost-effective and commercial solutions to the problems they face.We help the trustees and sponsors of defined benefit (DB)pension schemes to evaluate the risks and costs of runningtheir scheme and help them manage the key relationships withtrustees, employees and the Pensions Regulator.While most of the industry’s attention has been focused onmanaging final salary schemes, the future of employer pensionprovision is defined contribution (DC) and we recognise theimportance of the role it will play in the workplace of the future.Pensions can be equally confusing for high-net worthindividuals, with an enormous number of complex and confusingoptions. We provide a personal service to determine a coursewith the aim of providing the best benefit.For companies and trustees, our services include scheme design,actuarial consulting, pensions assurance, accounting, covenantassessment, as well as investment, de-risking and tax advice. Forindividuals, we provide clarity and bespoke solutions. For all ourclients, we aim to help run their pension schemes more efficientlywhile minimising costs.We look forward to talking to you about how we can use ourunderstanding of pensions to help you.
  3. 3. Taxation Individual Covenant Review Defined Investment Contribution Consulting Individual Consulting Advice Benefit Design Employer Scheme De-risking International Actuarial Consulting Consulting Covenant Scheme Review De-risking Individual Advice Investment Actuarial Consulting Consulting Audit & Trustee Taxation Assurance Services Services Governance Asset Tracing & Risk & Fraud Management Outsourced Scheme AccountingCovenant AssessmentThe Pensions Regulator and common sense suggest that the trustees and the employers of schemes with every size ofhaving an independent review of the strength of a scheme’s funding deficit. We also have particular experience advisingemployer covenant is a good idea. on the impact a restructuring, re-financing, sale or acquisition It can assist trustees with their fiduciary responsibilities and will have on the scheme.help them understand the ability of the employer to support We have strong working relationships with both thethe scheme and the impact of corporate transactions, such as Pensions Regulator and the Pension Protection Fund,when the employer is refinanced or bought or sold. Pension allowing us to provide clients with a clear insight into theschemes are now such an important part of a company’s regulatory regime. We helped the Pensions Regulator toobligations that any significant change could have an impact design and operate its scheme funding and clearance guidance.on the strength of the covenant. We are collaborative in approach and are conscious of the Each scheme is unique and so too is its sponsoring importance of maintaining the vital relationship between theemployer. We carry out a detailed individual analysis to employer and the trustees. There is no such thing as a one sizedeliver an accurate assessment of the scheme’s covenant. This fits all approach in pensions and our service and advice aregives a clear picture of the financial strength of sponsoring tailored to suit the scheme and employer circumstance.employer and its ability to cover any deficit, either now orin the future. We have considerable experience advising both
  4. 4. Pension Scheme De-risking Pension Investment ConsultingThe proliferation of deficits in DB pension schemes under We can provide trustees and employers with the knowledge,all valuation bases - accounting, Scheme Specific Funding tools and support to set a pension scheme investment strategyand full buy-out - mean that investment strategy decisions that delivers broad investment objectives, based on an abilityneed to be sharper and smarter. Furthermore, the need for to evaluate the detailed structural outcomes of the variousreal-time and mark-to-market valuations means that the options available.investment strategy needs to be more detailed and granular Our Investment Consulting and Financial Planning teamsin its approach. Getting the strategy right and monitoring its give pension investment advice to pension scheme trustees andperformance in detail is critical for both good governance and individuals.meeting scheme funding objectives. Pension scheme buyouts, buy-ins and longevity hedging Our comprehensive service offers:have become an important aspect of managing pension risk. • a robust investment process that manages risk and costsOur team advises on solutions that fit client requirements • asset-liability modelling of the effect of volatilities inand don’t force a single approach. Our experience as a result inflation, bond yields and equitiesof our banking, insurance and actuarial background gives • advising on formulating and reviewing Statements ofour team a solid understanding of the market and they know Investment Principleswhen a strategy is appropriate and when it is merely overly • advice tailored to each client’s specific circumstances andcomplex. requirements • independent, exceptional value whole-of-market adviceWe advise on the most innovative solutions in the marketincluding:• Liability driven investment strategies Actuarial Consulting• Longevity swaps Employers face an enormous challenge in evaluating all of• Standard pension buy-ins, deferred premium pension buy- the risks and costs involved in running a pension scheme. ins and collateralised pensioner buy-ins Increasingly they are turning to their own advisers,• Buy-out and full liability settlement independent of those appointed by the trustees, who can• Design and implementation of flight path-based de-risking challenge the existing assumptions but still work effectively• Enhanced transfer values and pension increase exchange with their scheme trustees. exercises Grant Thornton’s actuarial team has considerable• Early retirement exercises experience advising employers on pensions, particularly issues relating to DB pension schemes. Our actuarial backgroundWe understand how important a consideration cost is for a gives us a deep understanding of the funding and valuationpension scheme and we negotiate hard with providers to get of pension schemes, which can be critical when advisingthe best deal within the risk appetite and budget of the trustee on the impact of a benefit change or a liability managementand employer. programme, or in a transaction situation. We provide all the services that would be expected from a leading consultancy including: • preparing or reviewing the necessary accounting disclosures • assessing the liabilities for accounting purposes • providing due diligence in the case of transactions • reviewing a scheme’s liabilities and impact on future cash flows We pride ourselves in simplifying complex problems and providing workable solutions. We help organisations to manage their DB pension scheme and its risk more efficiently.
  5. 5. Pension Assurance Outsourced Scheme AccountingWhilst the majority of schemes have a statutory requirement for Whilst many schemes have the Annual Report and Accountsan audit of their Annual Report and Accounts, an investment prepared by their third party administrators, an increasingin a high quality specialist audit can deliver significant value in number are seeking a more cost-effective method, bysupporting the trustees’ governance of the scheme. A employing specialist pension scheme accountants like GrantGrant Thornton audit is much more than just minimum Thornton. As thought leaders in the sector, and the authorcompliance. of ‘Pension Schemes: An Industry Accounting and Auditing Our trustee-centric risk-based approach to statutory audit Guide’, we are well-versed in both the mandatory and evolvingresults in effective two-way communication with the trustees. best practice disclosures within scheme Annual Reports.This collaborative style, combined with our extensive sector We can also offer a fully outsourced accounting serviceexperience, ensures that the specific issues that concern the for larger schemes that require regular management accountstrustees are addressed, as are the key areas in the sector as a and detailed investment accounting processing throughoutwhole, via a fully tailored audit bespoke to their scheme. the year, as well as the production of the year end statutory Our commitment to utilise only specialist pensions audit Annual Report and Accounts.teams, and a higher proportion of senior staff time designated tothe audit, not only results in a very smooth and efficient auditprocess, but also provides value added observations on best Governance and Risk Managementpractice to scheme management, in order to aid the continuous The standards of trustee governance expected by theimprovement of processes and procedures. Pensions Regulator, and the corporate standards imposed by Our position as a leading firm in developing the IDEA sponsoring employers, are increasing to ever higher levels.data interrogation software, and the strength and breadth of Grant Thornton has significant experience of a wide rangeour in-house specialist teams, ensures that we deliver a highly of UK schemes and can help trustees initially to assess, andinnovative, effective and targeted audit service. We provide the then continually to improve, their governance processestrustees with the additional assurance they need, in meeting and procedures. This is achieved by working in partnershipever more challenging governance standards, in a cost effective with the trustees and their other core advisers, via facilitatedseamless manner. discussions and workshops, together with benchmarking against relevant peer schemes. Sessions often consider specificOur other audit and assurance services include: areas such as fraud risk, the review of the scheme risk register,• benefit calculation reperformance or an overview of trustee governance processes.• extended testing of internal controls As schemes continue to change and evolve, so does the• independent valuation of complex investments environment in which they operate. As a result risk registers• benchmarking against a relevant peer group of similar schemes and other governance processes must also remain under• auditing transitions between investment managers/custodians regular review. They must be working documents, not a large• timeliness and accuracy of contributions consultancy report gathering dust on a shelf. The• internal audit Grant Thornton approach results in an easy-to-digest action• AAF01/06, AAF02/07 and ISAE3402 reporting on plan and risk register that can become standing agenda items internal controls for trustees, to be reviewed regularly and updated as needed.• trustee training
  6. 6. Asset Tracing and Recovery in Pension Taxation ServicesScheme Fraud We provide pensions tax advice to businesses and individuals,The risk of fraud is higher during an economic downturn combining technical expertise, a commercial approach, industryand pension schemes are not immune. Schemes are understanding and exceptional client service and delivery.vulnerable to abuse by individuals either operating ontheir own or in collusion with the scheme’s advisers, yet Direct taxcompanies pay far more attention to their financial accounts Our tax capabilities include assistance withduring difficult times and are more likely to uncover fraud. • the design and launch of investment funds Grant Thornton has a range of experts including forensic, • dealing with multi-jurisdictional and high value withholdinginsolvency, tax and pension professionals. Over the last tax reclaims for both investment and pension fundsthree years, we have recovered more than £300m of assets, • monitoring the impact of the European Court of Justice andincluding a significant proportion that had been transferred other legal decisions for investment fund and pension fund clientsoverseas and where the perpetrator had vanished into hard- • structuring investments in the most tax-efficient manner,to-access jurisdictions. We have wide experience acting for especially involving alternative asset classesall UK prosecuting authorities and government departments, • tax compliance for any entities within your pension groupsuch as the Serious Fraud Office, Financial Services requiring such servicesAuthority and HM Revenue and Customs. VAT We advise funds investing in property and complex investment vehicles on how to optimise their VAT position, with an approach that ensures that clients are aware of current and future legislative changes so that they can take a proactive approach to their VAT accounting. Our work includes monitoring VAT recovery methodologies to ensure that what they are using is the most appropriate and that they take into account any changes in the structure of the investment portfolio. Global Compliance and Outsourcing Services We offer a single point of contact for all compliance obligations and transparency over the status of the service at any time. We work closely with your in-house and outsourced delivery teams, using rigorous review processes, documentation and service delivery of the highest quality.
  7. 7. Individual Pensions Advice for Employee BenefitsEntrepreneurs and Individuals The introduction of auto-enrolment and the National Employment Savings Trust (NEST) has galvanised employersIt is not always appreciated just how complex a business into focusing on the future. Not only do companies need topensions can be for high-net worth individuals and business provide pensions for new auto-enrolment members, but theowner-operators. In recent years high charges and poor Pensions Regulator has recently reminded scheme sponsorsunderlying investment performance have tarnished the of their duty to provide the best possible retirement forperception of pension schemes, causing many individuals to their members.shy away from them. This should encourage companies to conduct a root and The jargon and mystique surrounding pensions shroud branch review of the benefits they offer their employees, andtheir huge benefits. They are a very tax efficient investment while pensions are the largest part of a company’s benefitswrapper, which can in some cases provide over 50% relief package, the review should not only be limited to pensionon contributions of up to £200,000. Such a gift from the provision, it should also include all benefits, to ensure thatgovernment should not be ignored, especially in today’s tight they mesh together in an intelligent fashion.economic times. We understand all of the potential benefits Grant Thornton offers advice to employers on the mostand can provide bespoke advice to help individuals to effective benefits structure, ensuring schemes are up to date,determine which particular pension scheme aims to provide reflect current legislation and are tax efficient and value forthem with the best benefit in a clear and understandable manner. money. Our team can provide advice in agreeing the rightinvestment strategy for each individual’s risk appetite to Our services include:ensure that the tax benefits of a pension can be maximised. • design and implementation of pension schemesPension schemes can also be used in conjunction with an • guidance with pensions auto-enrolment requirementsindividual’s business, so a commercial property purchase can • reviewing existing pension scheme arrangements andbe owned by a pension scheme or another investment vehicle benefit structuresto realise the full value prior to the sale of the company. • structuring Group Risk and Healthcare insurances • recommending Flexible Benefits and Salary Exchange arrangements • providing individual investment advice and guidance • advice on international benefits structures We have a national team of specialists, dedicated to providing the best level of advice. Our advisers are authorised to give financial advice, which means that we can advise employees on their pensions decisions rather than just outline their options. We listen to the business challenges that our clients face and then work with them to deliver pragmatic solutions in line with their business goals and values.
  8. 8. ContactCovenant Assessment Actuarial Consulting Individual Pensions AdviceDarren Mason Paul Cook Neil MessengerPartner Director PartnerT +44 (0)20 7728 2433 T +44 (0)20 7728 3070 T +44 (0)7966 446397E darren.m.mason@uk.gt.com E paul.cook@uk.gt.com E neil.messenger@uk.gt.comKeith Hinds Asset Tracing Richard WheatleyPartner Nick Wood PartnerT +44 (0)20 7865 2716 Partner M +44 (0)7968 324695E keith.hinds@uk.gt.com T +44 (0)20 7728 2426 E richard.wheatley@uk.gt.com E nick.s.wood@uk.gt.coPension Scheme De-riskingKelvin Wilson TaxationAssociate Director Dana WardT +44 (0)20 7865 2402 PartnerE kelvin.wilson@uk.gt.com T +44 (0)20 7728 3316 E dana.ward@uk.gt.comInvestment ConsultingPeter Loughridge Employee BenefitsDirector Ian HartnellT +44 (0)28 9031 6523 DirectorE peter.loughridge@uk.gt.com T +44 (0)20 7728 3018 E ian.hartnell@uk.gt.comPension Assurance & GovernanceFiona Baldwin Matthew BeamanDirector Senior ManagerT +44 (0)161 953 6461 T +44 (0)121 232 5363E fiona.baldwin@uk.gt.com E matthew.a.beaman@uk.gt.comNeil KnightsDirectorT +44 (0)20 7865 2873E neil.a.knights@uk.gt.com© 2012 Grant Thornton UK LLP. All rights reserved.‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership.Grant Thornton is a member firm of Grant Thornton International Ltd (Grant Thornton International). References to ‘Grant Thornton’ are to the brand under which the Grant Thornton member firms operate andrefer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, whichare not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.grant-thornton.co.ukV21640