Southern Pensions conference       Keeping control in challenging                  times      Blake Lapthorn, New Kings Co...
Southern Pensions conference 2011Agenda and timetable 9.30 am    Introduction 9.45 am    What really worries me is …… 10.0...
Questions Is there such a thing as a risk free investment? Can I ever know what our liabilities really are? Data, what dat...
More questions  What does it take to make DC adequate?  What is adequate?  Is auto enrolment just a precursor to more tax?...
Assessing Scheme liabilities…….              or falling down the rabbit holeNicola WalkerBlake Lapthornnicola.walker@bllaw...
Why worry?‘Sentence first, verdict  afterwards’
Danger areas Equalisation GMP equalisation Drafting problems Closure to future accrual Data Defined contribution or define...
EqualisationDitto said Tweedledum.Ditto, ditto cried Tweedledee.
GMP Equalisation     ‘We’re all mad here’
Drafting problems    Then you should say what you mean, the March Hare went on.    I do, Alice hastily replied;  at least-...
Scheme closure“Begin at the beginning and go on till you come to the end: thenstop”
Data       It is wrong from beginning to end, said the Caterpillar
Defined benefit or defined contribution‘Let me see: four times five is twelve, and four times six is thirteen, and four  t...
CPI/RPI“Curiouser and curiouser!”
How to be proactive‘Oh my ears and whiskers, how late it’s getting’
‘Now, I give you fair warning, either you or yourhead must be off!’
Blake Lapthorn Southern Pensions ConferenceRichard Murphy – 24 November 2011What to do today andtomorrow
AgendaUK plc Why are there DB pensions? DB liabilities in perspective The challenges for employers and trusteesSteps today...
Why do employers have defined benefitpension schemes?    Help                        Smoothing of                         ...
Pension risks and challenges                  Benefit        Interest                      Asset Legislation              ...
The big picture£80bn                                                      Active accruing - DB                            ...
So where are we now?   £4000bn   £3500bn   £3000bn   £2500bn   £2000bn   £1500bn   £1000bn    £500bn      £0bn            ...
How does it all fit together?A long-term plan for UK plc Pension Scheme            Progressive buy-ins         Insurance p...
Equities underperform liabilities by 21%Double whammy over the summer                     Equities (GBP, TR) vs Index-link...
What can be done?By employersBy trustees
Government announcementsCPI might help a bit…                             Annual increase in Retail and Consumer Prices   ...
Immediate change Impact on UK Plc Pension Scheme Projected benefit payments                                               ...
Probably my most important slide ofthe sessionThe importance of good dataRisk                                             ...
Pensioner buy-outs and buy-insOverview           Equities      37%          57%            Equities     Residual          ...
Pensioner buy-in pricing
Quote        “It is currently the case that for        pensioners insurance may be        cheaper than holding gilts.”    ...
“Liability management”Buzzwords for… Transfer value                                       Member option to convert to a le...
Plugging the deficitAsset backed partnerships and the rest …                                                              ...
Scope     This generic presentation should not be relied upon for detailed advice or taken as an     authoritative stateme...
Blake Lapthorn Southern Pensions ConferenceKevin Frisby – 24 November 2011Making your assets worksmarter
AgendaFiduciary Management for DB SchemesDC Scheme Investing Life-styling Default optionsLatest investment ideas Emerging ...
Fiduciary management for DB SchemesWhat is Implemented Consulting / Fiduciary Management?RationaleMarket providersPros and...
Running a pension schemeHow hard can it be?                     £1,000m                       (£0m)                    (£1...
What is fiduciary management?  Asset management  With liability benchmark  Different things to different  people!Advisory ...
Rationale for Fiduciary ManagementDelegated low governance alternative  Designed to overcome perceived weaknesses of tradi...
Market providers   Investment consultants                  Asset managers                  No two offerings are the same
Pros and cons of Fiduciary Management Faster decision-making               Responsibility remains with Trustees Reduced go...
DC Scheme InvestingDefault options / Life-stylingDiversified Lifestyle OptionRelative performance
Investment - what do DC memberswant? Focus on outcomes, not inputs  – Eventual pension benefit is the key factor  – Assets...
Traditional Lifestyle option                   100%                    90%                    80%                    70%  ...
Diversified Lifestyle option                   100%                    90%                    80%                    70%  ...
Diversified Lifestyle model Growth phase – 50% DGFs & 50% passive global equity  – Incorporates a more diversified range o...
Lifestyle strategies risk vs return3 years to 30 September 2011
Investment ideasEmerging market multi asset fundsDiversified growth fundsSwitching triggers
The EMMAF conceptA multi-asset approach to emerging markets                               Equities                        ...
The multi-asset approachAdvantages of multi-asset approach to emerging markets  Diversification – access to a large and gr...
Diversified Growth FundsStrong risk adjusted returns over time
Trigger based switching strategiesAutomated strategic shifts to capture relative outperformance                           ...
Conclusions Pros and cons to fiduciary management arrangements  – May be suitable for some schemes  – Most of the benefits...
Scope     This generic presentation should not be relied upon for detailed advice or taken as an     authoritative stateme...
Blake Lapthorn Southern Pensions ConferenceAndy Cheseldine – 24 November 2011Auto-enrolment and DCadequacy
AgendaWhy auto-enrolment is necessary – DC adequacyWhat is auto-enrolment?Implementation issues for you  Identifying diffe...
Why auto-enrolment is necessary –DC adequacy
The international contextPercentage gross replacement rates for averageearners from mandatory pensions Source OECD, Pensio...
The benefit strainMillions of people aged 60 and over receivingincome related benefits Source: ONS, Pension Trends, Chapte...
Private pensions to the rescue?Millions of active members of occupationalpension schemes by sectorPercentage of 16 to 64 y...
Private sector DC provisionDistribution of members by employer contribution rate Source: ONS, Pension Trends, Chapter 8, 2...
The answer is auto-enrolment? How many will opt-out? What will 8% of Qualifying Earnings buy at retirement? How many 22 ye...
What is auto-enrolment?
In a nutshell… From October 2012 onwards UK employers will be required:   – to automatically enrol eligible employees (“el...
Implementation issues for you
Identifying different types of worker        Age   75                                                                OPT I...
Staging date flexibility (1)          Company A              Company B          PAYE CODE       PAYE CODE      PAYE CODE
Staging date flexibility (2)          Company C                Company D   SUBSIDIARY   SUBSIDIARY   SUBSIDIARY   SUBSIDIA...
Quality Requirements - DCDC and personal pensions – the core requirement  Employer must contribute at least  3% of QE  Tot...
Staging and DC phasingStaging datedependent on no. ofemployees                     October October October October October...
Quality requirements - DCDC and personal pensions – alternatives to allow certification  7% of pensionable pay (inc minimu...
Managing costs (2)                                    Front Sheet      Outputs      Employer contributions                ...
Managing costs - options                                               Trust-based      Phasing-in of DC                  ...
Communication and disclosure At least seven different versions of     George Bernard Shaw communication required at stagin...
Administration processes and systemsreview                    Eligible jobholder?            No                           ...
Administration processes and systemsreview                     Eligible jobholder?            No                          ...
Administration processes and systemsreview                     Eligible jobholder?            No                          ...
Administration processes and systemsreview                   Eligible jobholder?                                         Y...
Administration processes and systemsreview                  Eligible jobholder?                                           ...
Administration processes and systemsreview                  Eligible jobholder?                                           ...
Case studyPutting these issues into context
Earnings “spikes”  The earnings trigger applies pro-rata in every pay period – so £622.92 in a  month or £143.75 in a week...
Case study (A)A national charity Background  Characteristics of industry                           Challenge  Multiple sit...
Provider update
NEST Occupational DC scheme set up under trust Designed to help employers meet DC quality requirements (employer and emplo...
Other potential providers
What should you be doing now?
What should you be doing now?  Understand what   you need to do                                   Understand when         ...
Questions
Appendices
Identifying different types of worker (1)                                            £38,185                              ...
When? The requirements will apply from October 2012 Subject to:  – staging whereby the duty to auto-enrol will be imposed ...
Staging Based on number of PAYE employees as at 1 April 2012 Employers due to auto-enrol in 2012 can bring forward their s...
Automatic enrolment scheme Automatic enrolment scheme                Qualifying scheme  must be a “qualifying scheme”;    ...
Quality requirements Five types of quality requirement                 DC                  DB             hybrid          ...
Quality requirements - DB    The scheme is                 The scheme satisfies    contracted-out          OR      the tes...
Quality requirementsQualifying Earnings  Qualifying Earnings (“QE”)   – earnings between Qualifying Earnings Threshold (£5...
Managing costs (1)£300,000                                                                                                ...
TUPE implications The minimum contribution rate is 3% from employers and 5% from employees If you use a trust based arrang...
Non-UK nationals All eligible jobholders must be auto-enrolled But of the 29 million people working in the UK, 2.5 million...
Case study BA financial services company Background  Characteristics of industry                          Challenge  High ...
Case study CA pub/restaurant chain Background  Characteristics of industry                             Challenge  Multiple...
Staging dates Number of PAYE employees                                                                                    ...
Regulator powers Regulator will have the power to issue  – a compliance notice  – a third party compliance notice  – an un...
Scope     This generic presentation should not be relied upon for detailed advice or taken as an     authoritative stateme...
Removal of the       Default Retirement Age (DRA)Clare WalkerBlake Lapthornclare.walker@bllaw.co.uk
The end of the Default Retirement Age (65) The DRA was abolished on 6 April 2011 so ‘Retirement’ is no longer a ‘fair’ rea...
Choices for employersEither…..  A - Abandon fixed retirement ages altogether – any dismissal  must therefore fall under on...
Dealing with an older workforce - Practical Steps  Need to eradicate any age discriminatory practices or if not, you  shou...
1) Performance Management Systems Tighten up your performance management, appraisals and capability policies and procedure...
2) Future Planning Processes Pre-retirement courses/tax planning seminars – getting all staff to think about their options...
2) Future planning processes – workplacediscussions Do:                          Don’t:  – Hold regular               – As...
Case Study - Retirement Sprightly Limited want to retire Wendy, aged 65. They are concerned she is not up to the job as th...
Case Study - Retirement1. What should/could Sprightly have done better, if anything?2. How should they deal with their con...
3) Documentation Remove fixed retirement ages from contracts and other documentation and notify staff of the change(s). Re...
4) Benefit policies  Typical employee benefits include:   – Pension scheme (DB or DC);   – Private medical insurance;   – ...
The Exemption Employers can withdraw or not offer group risk insured benefits for employees when they reach 65 years of ag...
Risk benefitsUseful exemptions                     • Life assurance                     • Income protection and related fi...
In summary…..the six step process1.   Establish what the treatment is2.   Make sure that there is a relevant comparator3. ...
Summary - Objective justification What is my legitimate aim? Is there a less discriminatory way to achieve that aim? Does ...
Southern Pensions conference 2011       Flexible Retirement and Pension       ProvisionAdrian LambBlake Lapthornadrian.lam...
What do we mean by flexible retirement? Narrow sense  – Essentially, more flexibility over late retirement options        ...
Objective justificationWhat is my legitimate aim?Is there a less discriminatory way to achieve that aim?Does the policy ac...
Legal structure – Employer provides a contractbased scheme                                       Insurance Company        ...
Legal structure – Employer participates in anoccupational pension scheme                               Trustees           ...
What are employers doing at the moment? Money purchase schemes  – Continued employer contributions beyond age 65 Defined b...
Must you provide narrow flexible retirement?  Narrow flexible retirement   – Probably – no exemption in age discrimination...
Must you provide wide flexible retirement? No requirement outside of age discrimination legislation. Could age discriminat...
Age discrimination risks in not providing wideflexible retirement?  The issue was not addressed in the Government’s final ...
What should you be doing? - Formulating a FlexibleRetirement Strategy  What is your HR strategy on flexible retirement – b...
What should you be checking? – Implementing yourstrategy  What does the employment contract say?  If an occupational pensi...
The future of retirementOr ……   A future without retirement?   Is there a future for retirement?   Challenges for employer...
TOO BIG TO FAIL!   TOO SMALL TO MATTER?
Life expectancy rises by 44 days in just one year
Most of Europe is worse than this!!!!
The future              – for individuals?  Live for longer = work for longer  Medical advances  More than one career/job ...
The future            – for employers (1)?Ageing workforce for UK plc ….. but what is your position?Skills v productivityF...
The future               – for employers (2)?   Changing role of the state?   Segmented workforce – one size fits all cons...
A    =AsteroidsAttritionAuto enrolmentAccuracyAssetsAgeing workforceAffordabilityAction (not activity)
To Do List Liabilities and data Assets – can you make them work better? Know when auto enrolment applies to you and how it...
Question time
Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011
Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011
Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011
Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011
Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011
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Blake Lapthorn and Lane Clark & Peacock LLP Southern Pensions conference - 24 November 2011

  1. 1. Southern Pensions conference Keeping control in challenging times Blake Lapthorn, New Kings Court, Chandler’s Ford 24 November 2011Adrian LambBlake Lapthornadrian.lamb@bllaw.co.uk
  2. 2. Southern Pensions conference 2011Agenda and timetable 9.30 am Introduction 9.45 am What really worries me is …… 10.00 am Will I ever know what our liabilities really are? - Nicola Walker 10.25 am Derisking – what could we do tomorrow? What can we do today?- Richard Murphy 10.50 am Making assets work smarter – Kevin Frisby 11.15 am Coffee break 11.40 am Auto enrolment, etc. - Andrew Cheseldine 12.10 pm Dealing with older employees – Clare Walker 12.35 pm The future of retirement 12.45 pm Questions and open forum 1.00 pm Lunch!
  3. 3. Questions Is there such a thing as a risk free investment? Can I ever know what our liabilities really are? Data, what data? Can I do anything about this (other than pray)? Is there such a thing as an equity risk premium now … or is it just an equity risk? Can I get smarter with my/our investment strategy?
  4. 4. More questions What does it take to make DC adequate? What is adequate? Is auto enrolment just a precursor to more tax? Can it work? What do we need to do? How can we cope with more older workers? Who can I blame? Can I sue anybody?
  5. 5. Assessing Scheme liabilities……. or falling down the rabbit holeNicola WalkerBlake Lapthornnicola.walker@bllaw.co.uk
  6. 6. Why worry?‘Sentence first, verdict afterwards’
  7. 7. Danger areas Equalisation GMP equalisation Drafting problems Closure to future accrual Data Defined contribution or defined benefit? CPI/RPI
  8. 8. EqualisationDitto said Tweedledum.Ditto, ditto cried Tweedledee.
  9. 9. GMP Equalisation ‘We’re all mad here’
  10. 10. Drafting problems Then you should say what you mean, the March Hare went on. I do, Alice hastily replied; at least--at least I mean what I say--thats the same thing, you know.‘
  11. 11. Scheme closure“Begin at the beginning and go on till you come to the end: thenstop”
  12. 12. Data It is wrong from beginning to end, said the Caterpillar
  13. 13. Defined benefit or defined contribution‘Let me see: four times five is twelve, and four times six is thirteen, and four times seven is…oh dear! I shall never get to twenty at that rate!’
  14. 14. CPI/RPI“Curiouser and curiouser!”
  15. 15. How to be proactive‘Oh my ears and whiskers, how late it’s getting’
  16. 16. ‘Now, I give you fair warning, either you or yourhead must be off!’
  17. 17. Blake Lapthorn Southern Pensions ConferenceRichard Murphy – 24 November 2011What to do today andtomorrow
  18. 18. AgendaUK plc Why are there DB pensions? DB liabilities in perspective The challenges for employers and trusteesSteps today or tomorrowCertainty from uncertainty
  19. 19. Why do employers have defined benefitpension schemes? Help Smoothing of outcome Flexibility of employees Cost effective Rewards between timing on plan for saving members and loyalty contributions retirement over time Simple for Efficient Rewards Flexibility Employees individuals targeting of high-flyers for HR like them to death understand benefits
  20. 20. Pension risks and challenges Benefit Interest Asset Legislation Inflation administration rates performance Corporate Contingent Turnover of Solvency II Longevity bond benefits employees for pensions spreads Salary Regulatory Trapped Member Communication growth bodies surplus options
  21. 21. The big picture£80bn Active accruing - DB Active accrued - DB£60bn Deferreds Pensioners£40bn£20bn£0bn 2011 2021 2031 2041 2051 2061 2071 2081 2091 Year
  22. 22. So where are we now? £4000bn £3500bn £3000bn £2500bn £2000bn £1500bn £1000bn £500bn £0bn Total benefit Assets Technical Insurance payments provisions premium
  23. 23. How does it all fit together?A long-term plan for UK plc Pension Scheme Progressive buy-ins Insurance premium and technical provisions converge Insurance premium ? TechnicalRPI to CPI ? “Liability provisions management” Assets Non-cash funding solutions Auto enrolment demands on employer cash flow 2011 2030 2060
  24. 24. Equities underperform liabilities by 21%Double whammy over the summer Equities (GBP, TR) vs Index-linked Gilts120110100 90 80 7031/12/2010 31/03/2011 30/06/2011 30/09/2011 Global Equities >5Yr ILG RelativeSource: Bloomberg 24
  25. 25. What can be done?By employersBy trustees
  26. 26. Government announcementsCPI might help a bit… Annual increase in Retail and Consumer Prices Statutory minimum Indices (% pa) indexation switching from RPI to CPI Annual RPI inflation Annual CPI inflation – Average long run 6% Increase (% pa) difference 0.7% pa 4% 2% 0% 2005 2006 2007 2008 2009 2010 2011 -2%Source: ONS data
  27. 27. Immediate change Impact on UK Plc Pension Scheme Projected benefit payments Insurers not £4000bn currently Pensioners Deferreds Active accrued reducing £3500bn Reduction premiums£80bn for CPI £3000bn of £360bn£60bn £2500bn Reduction £2000bn£40bn of £73bn £1500bn£20bn £1000bn £500bn£0bn £0bn 2011 2031 2051 2071 2091 Total benefit Assets Technical Insurance payments provisions premium Year
  28. 28. Probably my most important slide ofthe sessionThe importance of good dataRisk Data issues Paying the wrong Benefits uncertain benefits Lost records Good Funding uncertainty data Spouses’ benefits only Premium loading on required on the paper record insurance Unrecorded benefits Impact Cannot proceed with managing risk Over pay to reduce the risk Unexpected liabilities emerge
  29. 29. Pensioner buy-outs and buy-insOverview Equities 37% 57% Equities Residual Liabilities Liabilities Bonds Bonds Insurance Pensioner Policy Liabilities Before After For buy-ins trustee (and company) gain exposure to insurer’s covenant Larger schemes have additional flexibility when structuring transactions
  30. 30. Pensioner buy-in pricing
  31. 31. Quote “It is currently the case that for pensioners insurance may be cheaper than holding gilts.” Pension Insurance Corporation – 8 November 2011
  32. 32. “Liability management”Buzzwords for… Transfer value Member option to convert to a level exercise pension 8000 Pension per year (£) Settlement gain 6000 Highervalue? Fair pension Enhancement now to transfer 4000 Pension value Fixed for liability 2000 lifetime Standard Transfer 0 Value 65 70 75 80 85 Age
  33. 33. Plugging the deficitAsset backed partnerships and the rest … Parent companySponsoring Pension guarantees employer scheme G R en Negative pledges rtn d am pa ent er Pa mite er al re ym al P st Li en ar e ts tn Triggers for additional er m co contributions In Scottish Limited Partnership Charges over assets Cross-company Property Contracts Whisky Brands guarantees
  34. 34. Scope This generic presentation should not be relied upon for detailed advice or taken as an authoritative statement of the law. If you would like any assistance or further information, please contact the partner who normally advises you. While this document does not represent our advice, nevertheless it should not be passed to any third party without our formal written agreement.LCP is part of the Alexander Forbes Group, a leading independent provider of financial and risk services. Lane Clark & Peacock LLP is a limited liability partnership registered in Englandand Wales with registered number OC301436. LCP is a registered trademark in the UK (Regd. TM No 2315442) and in the EU (Regd. TM No 002935583). All partners are members ofLane Clark & Peacock LLP. A list of members’ names is available for inspection at 30 Old Burlington Street, London, W1S 3NN, the firm’s principal place of business and registered office.The firm is regulated by the Institute and Faculty of Actuaries in respect of a range of investment business activities. Locations in London, Winchester, Belgium, Switzerland, theNetherlands, Ireland and the UAE.
  35. 35. Blake Lapthorn Southern Pensions ConferenceKevin Frisby – 24 November 2011Making your assets worksmarter
  36. 36. AgendaFiduciary Management for DB SchemesDC Scheme Investing Life-styling Default optionsLatest investment ideas Emerging market multi asset funds (EMMAFs) Diversified growth funds (DGFs) Switching triggers
  37. 37. Fiduciary management for DB SchemesWhat is Implemented Consulting / Fiduciary Management?RationaleMarket providersPros and cons
  38. 38. Running a pension schemeHow hard can it be? £1,000m (£0m) (£1,000m)Surplus (Deficit) (£2,000m) (£3,000m) (£4,000m) (£5,000m) 11 11 11 10 11 11 11 1 1 11 11 r1 l1 n b ar ay n ec ct p g Ju Ap Ja Fe Ju Se Au O M D M 31 30 31 31 30 28 31 31 30 31 31 Source: LCP Visualise
  39. 39. What is fiduciary management? Asset management With liability benchmark Different things to different people!Advisory Fiduciary Fund manager Fund manager Tactical asset Strategic asset selection allocation rotation allocation Investment objectives cannot be delegated 39
  40. 40. Rationale for Fiduciary ManagementDelegated low governance alternative Designed to overcome perceived weaknesses of traditional model which requires trustees to be ever more knowledgeable about investment issues in the context of – Increased complexity of investment strategies – Desired speed of implementation of decisions – Greater governance burden Fiduciary management – Delegates investment strategy and manager selection decisions to a single professional provider… – Who can make and implement decisions quickly and reduce trustee governance burden
  41. 41. Market providers Investment consultants Asset managers No two offerings are the same
  42. 42. Pros and cons of Fiduciary Management Faster decision-making Responsibility remains with Trustees Reduced governance time Conflicts of interest Greater professional involvement Limited track records may lead to superior returns Concentration of manager risk Access to “best in class” Potentially higher fees managers Complex and expensive to unwind Access to alternative asset Still requires monitoring classes for smaller Schemes Many of the perceived benefits of fiduciary management can be achieved through the traditional advisory model, such as: - Triggers for de-risking and hedging - Diversified growth funds - Adding more expertise to the trustee group - Impromptu ISC meetings
  43. 43. DC Scheme InvestingDefault options / Life-stylingDiversified Lifestyle OptionRelative performance
  44. 44. Investment - what do DC memberswant? Focus on outcomes, not inputs – Eventual pension benefit is the key factor – Assets used to produce this are merely the means to an end Most members are risk averse – Big losses are more significant than big gains Most members do not feel comfortable taking investment decisions – Design of the default strategy is therefore crucial – Most appropriate default strategy is a lifestyle option
  45. 45. Traditional Lifestyle option 100% 90% 80% 70% % Allocation 60% 50% 40% 30% 20% 10% 0% 25+ 20 15 10 5 0 Years to retirement Global equities Bonds Cash 45
  46. 46. Diversified Lifestyle option 100% 90% 80% 70% % Allocation 60% 50% 40% 30% 20% 10% 0% 25+ 20 15 10 5 0 Years to retirement Global equities Diversified growth fund Cash Fixed interest gilts Corporate bonds Index-linked gilts 46
  47. 47. Diversified Lifestyle model Growth phase – 50% DGFs & 50% passive global equity – Incorporates a more diversified range of assets than just global equities – Adding one or more DGFs reduces the risk of unacceptably low benefits – Passive element keeps costs at a reasonable level Switching period – 15 years – Longer switching period (rather than the 5/10 years for ‘traditional’ models) – Should give more protection in adverse scenarios, although marginal reduction in benefits in most other conditions Pre retirement portfolio – Final portfolio: 75% bonds, 25% cash – Bonds are half ILGs, quarter corporate bonds, quarter fixed gilts – Intended to be a reasonable solution for fixed or inflation linked annuities
  48. 48. Lifestyle strategies risk vs return3 years to 30 September 2011
  49. 49. Investment ideasEmerging market multi asset fundsDiversified growth fundsSwitching triggers
  50. 50. The EMMAF conceptA multi-asset approach to emerging markets Equities EMMAF Currencies Bonds
  51. 51. The multi-asset approachAdvantages of multi-asset approach to emerging markets Diversification – access to a large and growing opportunity set, not confined to one asset class Potential for attractive returns with lower volatility - efficient use of risk budget Active management – inefficient markets being targeted by skilful managers – Managers add value through dynamic asset allocation and stock selection Wider stock selection opportunities – Pick an attractive company, then invest in most attractive part of its capital structure
  52. 52. Diversified Growth FundsStrong risk adjusted returns over time
  53. 53. Trigger based switching strategiesAutomated strategic shifts to capture relative outperformance 90% 75% Relative performance differential 60% 45% 30% 15% 0% First switch implemented Relative performance -15% on 4 Jan 2011 Triggers -30% 2009 2010 2011 2012 2013 2014 2015 Year Locks in outperformance of equities relative to scheme liabilities when affordable to do so Locks in outperformance of equities relative to scheme liabilities
  54. 54. Conclusions Pros and cons to fiduciary management arrangements – May be suitable for some schemes – Most of the benefits can be achieved under the traditional model Lifestyle and default options remain key for DC schemes – Diversification of growth and bond elements – Consider longer switching period to dampen volatility of returns EMMAFs can provide a risk conscious way to access emerging markets DGFs continue to provide a lower risk alternative to equities Automated trigger based switching strategies enable trustees to lock in outperformance relative to scheme’s liabilities
  55. 55. Scope This generic presentation should not be relied upon for detailed advice or taken as an authoritative statement of the law. If you would like any assistance or further information, please contact the partner who normally advises you. While this document does not represent our advice, nevertheless it should not be passed to any third party without our formal written agreement.LCP is part of the Alexander Forbes Group, a leading independent provider of financial and risk services. Lane Clark & Peacock LLP is a limited liability partnership registered in Englandand Wales with registered number OC301436. LCP is a registered trademark in the UK (Regd. TM No 2315442) and in the EU (Regd. TM No 002935583). All partners are members ofLane Clark & Peacock LLP. A list of members’ names is available for inspection at 30 Old Burlington Street, London, W1S 3NN, the firm’s principal place of business and registered office.The firm is regulated by the Institute and Faculty of Actuaries in respect of a range of investment business activities. Locations in London, Winchester, Belgium, Switzerland, theNetherlands, Ireland and the UAE.
  56. 56. Blake Lapthorn Southern Pensions ConferenceAndy Cheseldine – 24 November 2011Auto-enrolment and DCadequacy
  57. 57. AgendaWhy auto-enrolment is necessary – DC adequacyWhat is auto-enrolment?Implementation issues for you Identifying different types of worker Identifying your staging date Managing costs Communication and administrationCase studies – putting these issues into contextWhat should you be doing now?
  58. 58. Why auto-enrolment is necessary –DC adequacy
  59. 59. The international contextPercentage gross replacement rates for averageearners from mandatory pensions Source OECD, Pensions at a Glance 2011
  60. 60. The benefit strainMillions of people aged 60 and over receivingincome related benefits Source: ONS, Pension Trends, Chapter 5, 2011
  61. 61. Private pensions to the rescue?Millions of active members of occupationalpension schemes by sectorPercentage of 16 to 64 year oldscontributing to private pensions Source: ONS, Pension Trends, Chapter 7, 2011
  62. 62. Private sector DC provisionDistribution of members by employer contribution rate Source: ONS, Pension Trends, Chapter 8, 2011
  63. 63. The answer is auto-enrolment? How many will opt-out? What will 8% of Qualifying Earnings buy at retirement? How many 22 year olds will have a 46 year contribution history at State Retirement Age? What will the 2017 review bring? – Compulsion? – Increase in employer contributions? – Increase in member contributions? – Widening of Qualifying Earnings definition?
  64. 64. What is auto-enrolment?
  65. 65. In a nutshell… From October 2012 onwards UK employers will be required: – to automatically enrol eligible employees (“eligible jobholders”) into a pension scheme of sufficient quality (an “automatic enrolment scheme”) – to automatically re-enrol them every three years if they opt out – to contribute to that scheme for auto-enrolled employees But it is not “one size fits all” – different quality requirements for DB, DC and Hybrid schemes – clients with dissimilar workforce demographics will probably want fundamentally different solutions – don’t forget your existing scheme members; and – contribution costs will, in many cases, be lower than administration costs in the early years
  66. 66. Implementation issues for you
  67. 67. Identifying different types of worker Age 75 OPT IN Employer contribution SPA OPT IN OPT IN AUTO-ENROL No employer Employer Eligible contribution contribution jobholder (“Entitled workers”) Qualifying Earnings (QE) 22 OPT IN Employer contribution 16 Earnings £5,715 £7,475 £38,185 Qualifying Earnings Upper Earnings Trigger Limit Threshold
  68. 68. Staging date flexibility (1) Company A Company B PAYE CODE PAYE CODE PAYE CODE
  69. 69. Staging date flexibility (2) Company C Company D SUBSIDIARY SUBSIDIARY SUBSIDIARY SUBSIDIARY PAYE CODE PAYE CODE PAYE CODE
  70. 70. Quality Requirements - DCDC and personal pensions – the core requirement Employer must contribute at least 3% of QE Total contributions must be at least 8% of QE These rates will be phased in between 2012 and 2017 Employer Employee Contribution Contribution 3% 5%
  71. 71. Staging and DC phasingStaging datedependent on no. ofemployees October October October October October 2012 2013 2014 2015 2016 120,000 400 employees employeesRequired DC ER 1% ER 2% ER 3%contribution rate Total 2% Total 5% Total 8%(% of QE) October October October October October October 2012 2013 2014 2015 2016 2017
  72. 72. Quality requirements - DCDC and personal pensions – alternatives to allow certification 7% of pensionable pay (inc minimum of 3% from employer) - subject to 100% of earnings being pensionable 8% of pensionable pay (inc minimum of 3% from employer) – pensionable pay can exclude variable earnings subject to pensionable pay constituting at least 85% of total pay bill 9% of “basic pay” (inc minimum of 4% from employer) – pensionable pay can exclude variable earningsNotes: Phasing applies in all three approaches “Basic pay” is deemed to include all elements of pay that do not vary (so potentially not just basic salary)
  73. 73. Managing costs (2) Front Sheet Outputs Employer contributions Minimum Contributions£300,000 based on Qualifying Earnings£250,000 9% Certification£200,000 8% Certification 7% Certification£150,000 Existing scheme design£100,000 Alternative scheme design£50,000 £0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 Note: the above is generic output from LCP’s Auto Enrolment Modeller, the output from which is employer and scheme specific.
  74. 74. Managing costs - options Trust-based Phasing-in of DC scheme (short contributions service refunds) Salary sacrifice Changes to, or Waiting period for “levelling down”, membership of existing pension benefits
  75. 75. Communication and disclosure At least seven different versions of George Bernard Shaw communication required at staging date Playwright, critic, political activist 1856 – 1950 Early engagement Consultation The problem with Communications review communication is the illusion that it has happened.
  76. 76. Administration processes and systemsreview Eligible jobholder? No Opt in notice - Issued by employer Regular review - One month - Returned to employerIneligible due to Jobholder information- Age - From employer to scheme- Salary Employer required to pay contributions
  77. 77. Administration processes and systemsreview Eligible jobholder? No Joining notice - Issued by employer Regular review - One month - Returned to employerIneligible due to Below Qualifying Jobholder information Earnings Threshold- Age - From employer to a scheme- Salary Employer NOT required to pay contributions
  78. 78. Administration processes and systemsreview Eligible jobholder? No Opt in notice - Issued by employer Regular review - One month Between Qualifying - Returned to employerIneligible due to Earnings Threshold Jobholder information and Eligibility- Age Trigger - From employer to scheme- Salary Employer required to pay contributions
  79. 79. Administration processes and systemsreview Eligible jobholder? Yes Enrolment information Auto-enrol - Issued by employer - One week if using waiting period / month otherwise - Bespoke - Details of opt-out Jobholder information - From employer to scheme
  80. 80. Administration processes and systemsreview Eligible jobholder? Yes Opt out form - Requested by jobholder Auto-enrol - Issued by scheme - One month - Prescribed format Opt-out? - Returned to employer Yes Employer duty - Notify scheme of opt out
  81. 81. Administration processes and systemsreview Eligible jobholder? Yes Scheme actions Auto-enrol - Membership unscrambled - Contributions returned to employer by “refund date” Opt-out? Employer actions - Contributions returned to Yes jobholder
  82. 82. Case studyPutting these issues into context
  83. 83. Earnings “spikes” The earnings trigger applies pro-rata in every pay period – so £622.92 in a month or £143.75 in a week For example, John normally earns £460 per month, so is not auto-enrolled as he earns below the Earnings Trigger of £7,475. However in December 2013 (for one month only) John earns £800 – over the £622.92 trigger John must be auto-enrolled in December even though his total expected annual earnings are still less than the Trigger. Total contributions are 2% of £323.75 (£800 less £476.25 QET) – ie £6.48 for the pay period In January to July 2014 he earns £460 each month, below the QET, so no contributions are deducted In August 2014 he gets a 5% pay rise, and earns £483, so contributions need to be paid in respect of £6.75 of monthly earnings At 2% that is a contribution of £0.14 for the pay period
  84. 84. Case study (A)A national charity Background Characteristics of industry Challenge Multiple sites and employers Multiple staging dates Variable earnings System requirements Paternalistic Cash constrained Solution Opted for one staging date to simplify communications Considering a master trust Will auto-enrol all employees irrespective of earnings trigger at 5% match on basic earnings (with option for employee to reduce on a 1:1 basis) Introducing salary sacrifice
  85. 85. Provider update
  86. 86. NEST Occupational DC scheme set up under trust Designed to help employers meet DC quality requirements (employer and employees can pay higher contributions) Maximum total contribution of £4,200 pa per member A 1.8% contribution charge plus 0.3% annual management charge Six funds available, with Target Date funds as default Active members already contributing Limited employer support
  87. 87. Other potential providers
  88. 88. What should you be doing now?
  89. 89. What should you be doing now? Understand what you need to do Understand when you need to do it Can you / should you use existing How much will Plans? contributions cost? Who will / can do the admin and record How much will keeping? administration cost? Who will / can do the project management?
  90. 90. Questions
  91. 91. Appendices
  92. 92. Identifying different types of worker (1) £38,185 Upper Limit Worker Jobholder Total earnings Eligible jobholder £7,475 Earnings Trigger £5,715 Qualifying Earnings Threshold
  93. 93. When? The requirements will apply from October 2012 Subject to: – staging whereby the duty to auto-enrol will be imposed on employers in stages – for DC schemes, phasing whereby the contribution requirements are phased in – for DB and hybrid schemes, transitional provisions
  94. 94. Staging Based on number of PAYE employees as at 1 April 2012 Employers due to auto-enrol in 2012 can bring forward their staging date to no earlier than 1 July 2012 Others can potentially bring forward their staging date to no earlier than 1 October 2012 Example staging dates: Number of employees Staging date 120,000 or more 1 October 2012 50,000 – 119,999 1 November 2012 … … 800 – 1,249 1 October 2013 500 – 799 1 November 2013 … … <50 1 August 2014 – 1 February 2016
  95. 95. Automatic enrolment scheme Automatic enrolment scheme Qualifying scheme must be a “qualifying scheme”; an occupational or personal must not prevent auto-enrolment, re- pension scheme; enrolment or opting-in a registered pension scheme does not require the employee to make under Finance Act 2004 any choices or provide any information meets the quality requirements in order to remain a member
  96. 96. Quality requirements Five types of quality requirement DC DB hybrid personal non-UK pension schemes Certification typically required
  97. 97. Quality requirements - DB The scheme is The scheme satisfies contracted-out OR the test scheme standard Accrual rate of at least Provides a pension 1/120th of average for life from QE in the last State Pension Age three tax years
  98. 98. Quality requirementsQualifying Earnings Qualifying Earnings (“QE”) – earnings between Qualifying Earnings Threshold (£5,715 in 2010/11 terms) and Upper Limit (£38,185 in 2010/11 terms) – subject to earnings exceeding the Eligibility Trigger of £7,475 (in 2011/12 terms) Wide earnings definition eg includes commission, bonuses and overtime
  99. 99. Managing costs (1)£300,000 Alternative scheme design£250,000 Existing scheme design£200,000 7% Certification 8% Certification 9% Certification£150,000 Minimum Contributions based on Qualifying£100,000 Earnings £50,000 £0 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 Auto enrolment year from OctoberNote: the above is generic output from LCP’s Auto Enrolment Modeller, the output from which is employer and scheme specific.
  100. 100. TUPE implications The minimum contribution rate is 3% from employers and 5% from employees If you use a trust based arrangement to meet your obligations and then transfer employment under TUPE – the employees will typically continue to contribute 5% (through inertia) – and the new employer will need to increase their contributions to 5% – because the TUPE minimum (for trust based schemes) is to match employee contributions up to 6% That increase in employer costs will be reflected in the sale price of the business Alternatively, if you use a contract based arrangement (eg GPP) – the employees will typically continue to contribute 5% (through inertia) – and the new employer will can continue contributing 3% – because the TUPE minimum (for contract based schemes) is to match the existing level of contributions
  101. 101. Non-UK nationals All eligible jobholders must be auto-enrolled But of the 29 million people working in the UK, 2.5 million are non-UK nationals (source: ONS) Of those 2.5 million, about 35,000 are secondees from other EU countries (source: DWP). Auto-enrolling these secondees will create a cross-border scheme Among the rest of the 2.5 million, almost all will be tax resident in the UK (by definition). Roughly half (LCP estimate) are likely to be “not ordinarily tax resident in the UK” and, therefore, most commercial providers (especially GPPs) will not accept them as membersHow can you meet your auto-enrolment duties for non-UK nationals?
  102. 102. Case study BA financial services company Background Characteristics of industry Challenge High earners £4,200 pa limit in NEST Non-UK nationals GPPs unwilling to accept Solution Trust based solution works best for auto-enrolment, but stand-alone, sub-section of existing DB scheme or master trust? – In this case sub-section of existing scheme – Because it allows transfer from that sub-section to the more generous main DC section after two years’ service
  103. 103. Case study CA pub/restaurant chain Background Characteristics of industry Challenge Multiple sites and employers Multiple staging dates Frequent buying and selling of premises TUPE requirements High staff turnover – 30% Administration High number of non-UK nationals GPPs unwilling to accept Solution Opted for one staging date to simplify communications Still analysing the likely impact of a 2% potential increase in employer contributions on sale (and purchase) prices Trust based for short service refund makes sense while it lasts NEST a likely provider for at least some staff Keep GPP for managers and head office staff
  104. 104. Staging dates Number of PAYE employees Staging date 120,000 or more 1 October 2012 50,000-119,999 1 November 2012 30,000-49,999 1 January 2013 20,000-29,999 1 February 2013 10,000-19,999 1 March 2013 6,000-9,999 1 April 2013 4,100-5,999 1 May 2013 4,000-4,099 1 June 2013 3,000-3,999 1 July 2013 2,000-2,999 1 August 2013 1,250-1,999 1 September 2013 800-1,249 1 October 2013 500-799 1 November 2013 350-499 1 January 2014 250-349 1 February 2014 240-249 1 March 2014 First tranche with fewer than 50 employees based on last two digits of PAYE reference 1 April 2014 150-239 1 May 2014 90-149 1 June 2014 50-89 1 July 2014 Remaining employers with fewer than 50 employees allocated by last two digits of PAYE reference 1 August 2014-1 February 2016 Different staging dates potentially apply for employers with fewer than 10 (full-time equivalent) employees
  105. 105. Regulator powers Regulator will have the power to issue – a compliance notice – a third party compliance notice – an unpaid contributions notice – a fixed penalty notice (up to £50,000) – an escalating penalty notice (up to £10,000 per day) Criminal sanctions for failure to comply with specified duties (up to two years in jail) Legislation also includes safeguards, for example, prohibiting employers from inducing employees to opt-out
  106. 106. Scope This generic presentation should not be relied upon for detailed advice or taken as an authoritative statement of the law. If you would like any assistance or further information, please contact the partner who normally advises you. While this document does not represent our advice, nevertheless it should not be passed to any third party without our formal written agreement.LCP is part of the Alexander Forbes Group, a leading independent provider of financial and risk services. Lane Clark & Peacock LLP is a limited liability partnership registered in Englandand Wales with registered number OC301436. LCP is a registered trademark in the UK (Regd. TM No 2315442) and in the EU (Regd. TM No 002935583). All partners are members ofLane Clark & Peacock LLP. A list of members’ names is available for inspection at 30 Old Burlington Street, London, W1S 3NN, the firm’s principal place of business and registered office.The firm is regulated by the Institute and Faculty of Actuaries in respect of a range of investment business activities. Locations in London, Winchester, Belgium, Switzerland, theNetherlands, Ireland and the UAE.
  107. 107. Removal of the Default Retirement Age (DRA)Clare WalkerBlake Lapthornclare.walker@bllaw.co.uk
  108. 108. The end of the Default Retirement Age (65) The DRA was abolished on 6 April 2011 so ‘Retirement’ is no longer a ‘fair’ reason for dismissal. Any dismissal because of age will now constitute direct age discrimination (and an unfair dismissal) under the Equality Act 2010 – apart from in rare cases where it can be objectively justified. If it can be objectively justified, the dismissal will fall under SOSR. As most employers accept that they cannot objectively justify = emphasis now on correctly and fairly managing performance/capability issues, whatever the age of the employee.
  109. 109. Choices for employersEither….. A - Abandon fixed retirement ages altogether – any dismissal must therefore fall under one of the other five fair reasons for dismissal (eg capability); or B – Retain a fixed retirement age for all or part of the workforce – but if you do – you must be able to objectively justify why you still need one.
  110. 110. Dealing with an older workforce - Practical Steps Need to eradicate any age discriminatory practices or if not, you should be able to objectively justify different/unfavourable treatment. Consider the impact and adjust the following: 1) Performance management systems; 2) Future planning processes; 3) Various documentation; 4) Various benefit policies;
  111. 111. 1) Performance Management Systems Tighten up your performance management, appraisals and capability policies and procedures; Train managers in effective and objective performance management techniques; Keep evidence of discussions and feedback on performance; Provide training and time to improve where appropriate; Beware of inconsistent treatment and managers reluctance to manage older employees - young employees can claim age discrimination too!
  112. 112. 2) Future Planning Processes Pre-retirement courses/tax planning seminars – getting all staff to think about their options and be realistic about how much longer they will need to work; Workplace discussions – review ACAS Guidance;
  113. 113. 2) Future planning processes – workplacediscussions Do: Don’t: – Hold regular – Ask discriminatory questions appraisals/reviews for such as ‘why don’t you retire to workforce planning – avoid an undignified sacking?’ at least annually or indicate that older workers – Discuss employees’ are blocking younger workers future plans – short, – Focus these discussions only medium, long-term on certain age groups – ask the – Provide training to same questions of all management on age employees discrimination
  114. 114. Case Study - Retirement Sprightly Limited want to retire Wendy, aged 65. They are concerned she is not up to the job as the markets have become so competitive and she has not been meeting her targets. Plus, they dont feel she now fits the ambitious team of managers they have recruited over the years. However, they do not want to upset her and because of this, they have turned a blind-eye to some of her failings and have also paid her a discretionary bonus. Sprightly have received an email from another employee John, aged 34, which raises concerns over how the directors criticised his performance in their last quarterly meeting. He states other colleagues do not appear to be treated the same. John was not paid a bonus. Sprightly are not really concerned as it was clear John had not met his targets, the bonus is discretionary and so, they state, what is he complaining about?
  115. 115. Case Study - Retirement1. What should/could Sprightly have done better, if anything?2. How should they deal with their concerns with Wendy?3. How should they deal with John’s concerns?
  116. 116. 3) Documentation Remove fixed retirement ages from contracts and other documentation and notify staff of the change(s). Revise retirement policy documentation. Positively stating you will not retire at a fixed age will help to defend claims Share scheme rules may require amendment – good leaver/bad leaver
  117. 117. 4) Benefit policies Typical employee benefits include: – Pension scheme (DB or DC); – Private medical insurance; – Life assurance; – Long-term disability insurance; – Flexible benefits; What are the options?
  118. 118. The Exemption Employers can withdraw or not offer group risk insured benefits for employees when they reach 65 years of age without fear of age discrimination. The age at which these benefits can be removed will rise in line with rises to State Pension Age (“SPA”) SPA rising to age 66 by 2020 (or perhaps earlier) SPA rising to age 67 by 2036 (could be earlier) SPA rising to age 68 by 2046 (could be earlier) NB – could still be a breach of contract/give rise to constructive dismissal claim
  119. 119. Risk benefitsUseful exemptions • Life assurance • Income protection and related financial Risk schemes – servicesbenefits can cease at 65 • Private medical, dental and sickness insurance • Accident insurance • Uninsured benefits/employers who self-insure • Cover in non-employment based Not exempt relationships • Arguably if the cut off age is higher than 65 or SPA
  120. 120. In summary…..the six step process1. Establish what the treatment is2. Make sure that there is a relevant comparator3. Decide if there is any discrimination4. If there is, see if there is an exemption which covers it5. If there is not, consider objective justification6. If this is also not possible, remove discriminatory feature (or risk claims!)
  121. 121. Summary - Objective justification What is my legitimate aim? Is there a less discriminatory way to achieve that aim? Does the policy achieve that legitimate aim? Is any discrimination outweighed by the benefit? Do any features of the policy contradict the purported legitimate aim?
  122. 122. Southern Pensions conference 2011 Flexible Retirement and Pension ProvisionAdrian LambBlake Lapthornadrian.lamb@bllaw.co.uk
  123. 123. What do we mean by flexible retirement? Narrow sense – Essentially, more flexibility over late retirement options Drawing benefits at 65 whilst continuing to work Drawing benefits at 65 whilst continuing to accrue Not drawing benefits at 65 but continuing to accrue Wide sense – Drawing benefits in different stages at any permitted age whilst continuing to accrue Combination of age discrimination and scrapping DRA – but you still have objective justification!
  124. 124. Objective justificationWhat is my legitimate aim?Is there a less discriminatory way to achieve that aim?Does the policy achieve that legitimate aim?Is any discrimination outweighed by the benefit?Do any features of the policy contradict the purported legitimate aim?
  125. 125. Legal structure – Employer provides a contractbased scheme Insurance Company PRIMARY CONTRACT (to provide a pension) Employer Employee SECONDARY CONTRACT (to contribute)
  126. 126. Legal structure – Employer participates in anoccupational pension scheme Trustees TRUST Employer sponsor (governed by deed and rules) Members
  127. 127. What are employers doing at the moment? Money purchase schemes – Continued employer contributions beyond age 65 Defined benefit schemes – choice at 65 of: – Continued accrual – Immediate pension – Late retirement uplift Can you offer a money purchase alternative at age 65?
  128. 128. Must you provide narrow flexible retirement? Narrow flexible retirement – Probably – no exemption in age discrimination legislation for scheme provision that prevents accrual beyond 65 – Indirect age discrimination risk if rules impose a leaving service requirement before pension can come into payment – Objective justification likely to be difficult
  129. 129. Must you provide wide flexible retirement? No requirement outside of age discrimination legislation. Could age discrimination be an issue? Original DTI Guidance suggested an indirect discrimination risk: “A rule which stops members who are already drawing a pension from continuing to accrue benefits may be indirectly discriminatory. For instance, if proportionately more 55 year old members than, say, 64 year old members would like to continue to work, accrue benefits and draw a pension, rather than having to make a choice between drawing a pension and accruing benefits, then the rule disadvantages 55 year olds compared with the 64 year olds and will be indirectly discriminatory, unless it can be objectively justified.”
  130. 130. Age discrimination risks in not providing wideflexible retirement? The issue was not addressed in the Government’s final guidance. How could age discrimination arise in practice? – Evidential difficulties – Test should be based on actual circumstances rather than potential interest – There can be no comparator if part payment of benefits is not allowed to any member at any age – Objective justification?
  131. 131. What should you be doing? - Formulating a FlexibleRetirement Strategy What is your HR strategy on flexible retirement – both wide and narrow? Does your strategy give rise to any age discrimination risks? Do you need the buy-in from of any third party before it can be implemented? Do you understand the costs of implementing your strategy? When and how do you communicate with employees?
  132. 132. What should you be checking? – Implementing yourstrategy What does the employment contract say? If an occupational pension scheme – check your rules: – Do they allow additional accrual beyond age 65? – Have they retained a leaving service requirement? – Do they allow for the possibility of wider flexible retirement? – Permissive power or detailed rule amendments? If a contract based scheme: – Check scope with the provider
  133. 133. The future of retirementOr …… A future without retirement? Is there a future for retirement? Challenges for employers, trustees, and individuals
  134. 134. TOO BIG TO FAIL! TOO SMALL TO MATTER?
  135. 135. Life expectancy rises by 44 days in just one year
  136. 136. Most of Europe is worse than this!!!!
  137. 137. The future – for individuals? Live for longer = work for longer Medical advances More than one career/job + mid life gap years? No cliff edge retirement Integrated savings/debt repayments NEST/auto enrolment Auto escalation compulsory retirement savings? Tax incentives or just higher taxes? AffordabilityWE ARE LIVING LONGER, HEALTHIER LIVES
  138. 138. The future – for employers (1)?Ageing workforce for UK plc ….. but what is your position?Skills v productivityFlexible recruitment – target different age groups?Different retention policies for different ages?Fewer people able to afford outright retirementFlexible retirement Flexible reward packages
  139. 139. The future – for employers (2)? Changing role of the state? Segmented workforce – one size fits all consigned to history Planning and action needed Employer facilitates access (and pays/funds)? More unfunded liabilities – explicit or implicit? Review your pay and benefits package and your practices, procedures and performance criteriaEffective HR becomes more importantMore people working is actually better for theeconomy
  140. 140. A =AsteroidsAttritionAuto enrolmentAccuracyAssetsAgeing workforceAffordabilityAction (not activity)
  141. 141. To Do List Liabilities and data Assets – can you make them work better? Know when auto enrolment applies to you and how it will affect you Review your policies for older workers! Be active rather than reactive
  142. 142. Question time

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