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NAPF
review
Reporting
from the heart of Birmingham, Arveen Luthra
highlights the key issues covered at the NAPF’s annual pensions
conference
We’re
not sure what prohibition has to do with pensions, but the spiked
teas from the Comino’s stand were an unexpected jolt at this
year’s National Association of Pension Funds conference which
took place in the heart of Birmingham. Colourful characters dressed
in period costume at the pensions IT solutions and service provider’s
stand recreated a piece of American 1930s history with a bar scene
selling tea. Comino pioneered the cocktail bar at pensions conferences,
although this year they decided to go dry – or rather they
tried to.
Fortunately the topics covered at this year’s conference were
not dry. A few of the popular issues included socially responsible
investments, the changing role of trustees, stakeholder pensions,
technology, and pensions for today’s contemporary relationships.
Chairman Alan Pickering’s opening address highlighted the need
for integration of pension schemes in future pension provision.
Discussing the elements that a good pension scheme needs to have,
Pickering cited diversity, inclusiveness, simplicity and stability
as the elements of a successful system. He said: “A premier
league pension system should be all embracing. There is no room
for any other divisions nor should there be the prospect of relegation
to the social exclusion which is the pensions equivalent of non-league
football.”
He argued that choice over pension provision was a key issue both
in UK and Europe. “Within each country, there should be a variety
of pension opportunities. These opportunities should not, however,
be confused by marketing hype. Our pension systems should not be
state or private but state and private. Defined benefit and money
purchase each have their place. Work-based arrangements of all types
should dovetail with the personal financial arrangements that each
of us should individually tailor,” he told delegates.
The subject of MFR was one that featured heavily in last year’s
conference, and this year the chairman commented that the abolition
of the MFR and Paul Myners’ proposals pointed to the prospect
of employers and employees regaining control of their own schemes.
Paraphrasing Myners, he added: “Out with the straitjacket,
in with the brain should be our corporate hymn.” With the election
fast approaching, Pickering underlined the need for politicians
to make decisions and then let pension experts do their job: “Politicians
should agree on what they agree on and then let the rest of us know.
In the wake of the forthcoming election there will be a window of
opportunity that will allow politicians to strike a concordat on
a pensions system built upon a public/private partnership. Once
this concordat has been signed, politicians should withdraw from
the pensions playing field and let the rest of us get on with it.”
Stakeholder
Stakeholder replaced MFR in this year’s spotlight with the
programme repeated on the second day. “Changing the landscape”
was the theme for the talks on these sessions and encompassed topics
like the death of final salary schemes and the difficulties of identifying
relevant employees when setting up and implementing stakeholder.
Dick Stratton from William M Mercer said of DC stakeholder: “It
will herald the main change in landscape, the burgeoning cost of
final salary and the burden of red tape.”
The talk by Joanne Segars, senior pensions officer for the TUC,
focused on the benefits of stakeholder to employees in certain job
sectors. She claimed that research indicated a large proportion
of those without pensions were in the catering and retail industries.
“TUC figures show that 85 per cent of employees are covered
by an occupational pension scheme, with five and a half per cent
earning less than £35,000 a year. This indicates that stakeholder
fills a majority niche in society,” she said.
Trustees
The sessions on trustees were heavily attended, perhaps as the industry
rightly anticipates changes going forward in this area. Trustees
have faced challenging new horizons this year, with factors such
as the Myners review raising important issues that will certainly
affect them in the long-term.
As Steven Cameron, manager of business development at Scottish Equitable,
outlined in his speech, stakeholder, the DC tax regime, and pension
sharing are all issues that trustees have to get to grips with.
He posed the question: “Will the abolition of the Minimum Funding
Requirement genuinely make defined benefit schemes more attractive
to employers, or will it conversely prompt a decline? And are trustees
likely to start being paid for their duties?”
Richard Thomas, a professional trustee from the Law Debenture Trust
Corporation, discussed the new pensions environment, the forces
that shape it and the importance of the professional trustee within
it. He said: “Corporate activity, as companies buy, sell or
close down divisions, is causing substantial turnover amongst member
trustees. Of course, company appointed trustees are not immune from
this, and both types of trustee suffer attrition from redundancy,
promotion, assignment elsewhere and retirement. This loss of continuity
is a very significant problem for some schemes.”
He added: “Other influences are the volume of regulation, the
increase in regulatory activity, and the increasing complexity and
consequent difficulty of compliance. This is the new environment,
in which all trustees must work, but where the professional trustee
is more and more needed.”
Emerging
issues
Pensions experts have not failed to notice the increasing number
of unmarried partners, dependents and same-sex relationships that
are prevalent in society, and the issue of pension provision for
these groups was covered in the session on pensions and contemporary
relationships.
Ruth Goldman, partner at Linklaters and Alliance, asserted that
although half the UK population is married, benefits are of much
importance to some four and a half million cohabitees. She said:
“79 per cent of private pension schemes provided benefits for
cohabitees, but the majority of these pay only at the trustees discretion.
Only five per cent provide cohabitees with a pension as a matter
of course and, perhaps more surprisingly, only 25 per cent pay,
as long as dependency can be established. In the public sector,
14 per cent of schemes provide cohabitees with a pension on the
exercise of a discretion and 57 per cent pay one under no circumstances
at all.”
Goldman pointed out that legal challenges over same sex relationships
and access to benefits were likely to increase, partly as a result
of legislation on human rights last year. “There is a greater
chance now of discrimination claims by same-sex couples than ever
before. If claims are successfully brought, approximately 50 per
cent of all private schemes and 77 per cent of public sector schemes
will have to change,” she claimed.
Times have definitely changed. Trustees are taking more interest
in the way their funds are managed and invested and their responsibilities
are more entrenched in legislation, while becoming more complicated
due to the increasing amount of change in pensions law and regulatory
changes that they must come to grips with. Stakeholder will add
to their workload while the acceptance of the expanded definition
of relationships will see a greater number of people being considered
for benefits.
–
Pensions Age June 2001–
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