We review the latest Pensions Age conference, tackling the hot topics facing pension professionals today

Any signs of spring may have been slow to arrive this year, but the Pensions Age Spring Conference, ‘Meeting member needs’, got off to a flying start nonetheless as close to 200 pension fund managers, trustees, FDs and advisers gathered at the London Stock Exchange for this sell-out event.

Chairman of Stamford Associates, Roger Cobley, the conference chairman, welcomed the first keynote speaker of the day, The Pensions Regulator DC executive director Andrew Warwick-Thompson. Just a few days into his new role, Warwick-Thompson delivered a lively presentation on what the regulator is currently working on within the DC sector. The DC Code of Practice, he said, was at the “top of the regulator’s in-tray” and was in the process of being finalised, with 66 industry responses to the consultation now in. The new code, he promised, would be shorter, clearer and be easy to navigate, and should assist the industry in understanding what is meant by best practice in DC.

Warwick-Thompson then moved on to the issue of ‘quality’. The challenge for the industry, he said, is to ensure new members are enrolled into quality schemes run in members’ interests – but what is meant, he asked, by ‘quality’? Some sort of kite-mark, he stated, would be emerging over the next few months to help both members and schemes themselves understand what quality really means.

Other questions Warwick-Thompson raised were whether a trustee board approach to DC was likely to deliver better results than going the contract or GPP route; and whether small schemes were really good for the industry. Finally he touched on the contentious issue of pension liberation schemes which, he explained, wasn’t solely the TPR’s remit in that it involved other bodies such as HMRC, as well as intelligence and crime enforcements agencies, but was something that was “worrying” TPR and, with the increasing number of cases coming across his desk, he would be happy to hear the industry’s views on how to tackle this growing problem.

De-risking

The next session addressed one of the hottest topics in pensions at the moment – de-risking. Partnership Assurance head of de-risking solutions David Harvey, alongside his colleague, head of DB solutions Mike Walsh, focused on new innovations in the DB de-risking space, and dispelled some common myths in this area. Specifically, the pair explained how using individual members’ health and lifestyle information can help significantly reduce the cost of insuring liabilities and, drawing on their own experiences, the processes that can be used and the savings that can be made.

The morning continued with a presentation from Schroders’ head of portfolio solutions, Dr John McLaughlin, who looked at whether it was possible to achieve reliable downside protection without forgoing performance; or whether this was, as he put it, ‘mission impossible’. With a series of detailed slides, graphs and examples, he demonstrated that taking a combined judgemental and systematic approach can, in fact, produce long-term real growth combined with downside risk management, a strategy the firm would be launching imminently.

Moving the focus away from investment, director at ITM John Broker was next to present, and had one of the less glamorous but certainly no less topical issues to tackle – data. The importance of accurate data is something the pensions industry has ignored for far too long, but the message is finally hitting home with even The Pensions Regulator getting on board to help encourage schemes to not only shape up common data, but also now tackle conditional data. “Data is not exciting, but it is fundamental to getting things right”, stated Broker, and cleaning up conditional data, he said, would be “an expensive and painful task”, but should be welcomed.

Industry

After a coffee break and networking session, the conference continued with Aon Hewitt principal consultant Mathew Arends providing a summary of its 2013 Pensions Risk Survey of trustees, sponsors and pensions managers, covering three million scheme members and £300 billion worth of assets. The survey found that almost half of DB plans surveyed are closed to all accrual, with smaller schemes more typically closed than larger ones.

The survey also found that 84 per cent of respondents had a long term objective for how to manage their risk compared to only half four years ago. In 2009 most set out to have reached their objective in 11 years, by 2020, but this year’s survey found respondents expect to reach their goal after 13 years, an increase even though four years have passed since they were last surveyed. To help with de-risking, Arends recommended having a robust flight plan with a low risk well defined target and investment triggers.

J.P. Morgan Asset Management executive director, global multi-asset group, Daniel Oldroyd then talked through the evolution of DC default funds, from balanced funds, to lifecycle, towards target date funds and the advantages they provide as default funds for DC schemes. The use of target date funds establishes what target the member has for their retirement saving and aiming to achieve or beat that using a glide path by an estimated retirement date, Oldroyd explained.

With approximately 70 per cent of US DC pension funds in target date funds, Oldroyd concluded by providing an overview of the US DC market and dispelling the myth that US pension fund members are more engaged with their savings.

Clarifying the concept of fiduciary management was Mn managing director UK Remco van Eeuwijk. He explained how delegating to fiduciary managers can help trustees manage the complex relationships and investment decisions they need to make. Trustees still manage all the top level decisions but a fiduciary manager can take care of the bottom end, making sure the assets are invested in a certain way. Fiduciary management is a single point of control for all assets and liabilities. “Trustees still have to approve decisions but fiduciary managers drive the strategy. A fund manager is just like another fund manager, to be managed the same way”, van Eeuwijk explained.

Communications

Straight in after lunch, RPMI head of communications Jonathan Clark took to the stage to highlight the importance of effective communications.

According to Clark, pensions communication is now moving away from the more traditional methods and instead employing marketing-style techniques. This involves influencing social networks, along with generally being online and communicating through mobile apps. However, “print is not dead”, Clark added, but it is made more appropriate and personal to the individual member. “It’s all about choice, picking and choosing what works for us as individuals”, Clark summarised. The key is not to try and get all the information out at once, but just stating the main points and informing the reader how to find out more.

He added, somewhat controversially, that the use of jargon “can be ok” in communications. He advocated not relying on stereotypes for segmentation and to be emphatic, as “remember it’s the real world, people do not want to read ‘pensions are great’ messages if the company is making people redundant. “It’s about advocating membership, not preaching”.

Tales from a Trustee’s Casebook was the title of the next presentation, which came from industry veteran Alan Pickering, chairman of BESTrustees. Pickering, who is trustee of a number of pension schemes across the UK and internationally, gave the audience a fascinating insight into the world of trusteeship, sharing his experiences and the challenges he has faced as chairman of the Plumbing Industry Pension Scheme and his involvement in, among others, the Kellogg’s, Cable & Wireless, and Aviva pension schemes, The People’s Pension and finally, The Kosovo Pensions Savings Trust.
The closing keynote speaker for the day, NAPF director of policy Darren Philp, brought things full circle by focusing on the title of the event, ‘Meeting member needs’, as ultimately, he said, “that is what pensions is all about”.

Philp began by outlining four key areas of what he called the ‘pensions jigsaw’: foundation; participation; raising standards; and innovation.

Building the right foundations, Philp said, was key to helping members know what they were going to get in retirement, and for which a simple, single tier, flat-rate state pension was essential. Moving on to participation, Philp highlighted how auto-enrolment presented a “once in a generation opportunity to change our pension system”, and we needed to ensure members were enrolled into robust schemes that were going to deliver.

Philp also looked at the merits of super trusts, and stated that the NAPF was encouraged by what was happening in this area; the role of the Pensions Quality Mark; and also where DB stood in all of this. He concluded: “We have a real opportunity now, and the future depends on what we do today as an industry; we need to unite to provide good quality pension schemes.”

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