PP Online reveals the biggest pensions stories of 2019.
A pension schemes bill was laid in parliament after the government announced a wide-ranging suite of reforms in the Queen’s Speech.
The much-anticipated legislation included plans to extend the powers of The Pensions Regulator and introduce regulations for the pensions dashboard.
Much of the content had been well-trailed and was derived from the government’s defined benefit white paper, published last March, and a raft of consultations over the past two years.
The Department for Work and Pensions (DWP) proposed increasing the general levy on occupational and personal pension schemes from 1 April 2020.
In a consultation published on 18 October, the DWP said the proposed rise comes as the levy’s cumulative surplus had, by the end of 2018, reduced to just over £2m from £24m in 2013. By the end of 2019, the government said it expected a £16m deficit, which is estimated to surge to over £50m by 2020.
It said this is linked to increased costs associated with levy-funded pension bodies – The Pensions Regulator, The Pensions Ombudsman, and the Money and Pensions Service – which have seen “continuing change and growth”.
The John Lewis Partnership announced plans to close the defined benefit (DB) section of its combined pension scheme.
The parent company to John Lewis & Partners and Waitrose & Partners currently operates a hybrid scheme, combining its defined contribution and DB schemes.
The closure of the DB section, which has 44,000 active members, to future accrual was approved by the retailer’s Partnership Council in May following a year-long review and consultation.
The People’s Pension’s plans to overhaul its charging structure have been delayed following system testing issues.
Speaking to Professional Pensions B&CE chief sales and marketing office Roy Porter said the organisation was working on resolving a problem that had surfaced during an initial testing period.
He said: “An issue surfaced during testing which we need to resolve before rolling this out to our 4.7 million members.
“We’ve communicated to our customers that there’s a slight delay and we’re working to get the benefit of lower rates to our members as soon as possible.”
Thomas Cook’s four UK defined benefit pension schemes were expected to enter the Pension Protection Fund as the company began insolvency proceedings.
The schemes had a combined £278m accounting surplus as at 31 December last year while assets totalled £1.4bn, compared to liabilities of £1.1bn.
However, the scheme had an estimated £100m surplus on a section 179 basis, meaning it was possible the schemes could wind up outside of the PPF.
A spokesperson for the Thomas Cook Pension Plan, the largest of the four schemes, said the scheme had actively been involved in discussions with the company management and other stakeholders, but now events had gone “beyond the control of the trustees”.
KPMG signed a conditional agreement to sell its UK pensions practice to private equity-backed firm NewCo.
The audit and advisory giant confirmed it was in discussions with NewCo’s backer Exponent Private Equity in late October to sell the circa £200m business.
The sale will see all 20 partners and around 500 staff from KPMG’s pension practice transfer to NewCo.
KPMG UK head of pensions Andrew Coles will move with the business, assuming the position of NewCo chief executive.
The Pensions Regulator was warned it would be afflicted with an exodus of staff after a review of its pay structure, while those remaining would be disaffected and demotivated.
The regulator introduced maximum and minimum pay limits on bands in January, with members of staff who exceed pay for their band told their salary will be frozen until the thresholds catch up.
The chief executive, executive directors, and directors will also be subject to minimum and maximum thresholds, although these are, in practice, over-ridden by the wider Civil Service pay cap.
Aon confirmed it would not make an offer for Willis Towers Watson after “preliminary” discussions with the global consultant.
The global consultancy had said it was considering an “all-share business combination”.
However, in a further announcement in March, the company said it was no longer pursuing the venture.
In a statement, Aon said: “Consistent with Aon’s stated focus on return on invested capital the firm regularly evaluates a variety of potential opportunities within and adjacent to its industry. Aon had considered such a possibility with regard to Willis Towers Watson.”
Pensions and investment consultancy Mercer came under fire after taking ten months to complete a defined benefit (DB) transfer.
Philip J Milton Chartered financial planner Felix Milton, told PP sister title Professional Adviser that he had posted all of the necessary documents for the DB transfer to Mercer on 24 September 2018 and only received the payment on 29 July – some 10 months after the application to transfer was submitted.
The Devon-based adviser said: “This is abnormally long – some [transfers] can be done in as little as two weeks. It all depends on the scheme, the scheme administrators and how they choose to act.”
Marsh & McLennan Companies brought together its UK health and benefits teams under the Mercer March Benefits brand following its acquisition of Jardine Lloyd Thompson Group and made a series of key leadership appointments to the business.
The business said its new leadership team would include appointments from JLT, Jelf, Mercer and Thomsons Online Benefits.
Mercer said the move positioned MMB to “accelerate the growth of its health and benefit consulting, broking and technology solutions.”
B&CE launched a redundancy consultation with members of staff as part of a plan to reduce costs and become more efficient.
The organisation said in October that the expected number of posts at risk is fewer than 60 from a total workforce of 600, but noted the net impact would be lower as it will continue to hire in “areas of need”, such as customer facing positions.
B&CE said the move follows a period of substantial growth for the business – with its staff numbers trebling over the past five years as its master trust offering, The People’s Pension, has grown to have around 4.5 million members and around £8bn in assets under management.
Rothesay Life agreed to the UK’s largest ever bulk annuity deal to date – a £4.7bn buyout of the GEC 1972 Plan, making 2019 officially a record-breaking year.
The transaction, announced in September, insured benefits for 39,000 members, split roughly between 70% pensioner members and 30% deferred members.
However, while there was an agreement for a buyout to take place, this was not expected to be completed until 2022, with the initial deal structured as a buy-in as the first of two phases. Nevertheless, the agreement was 15 years ahead of the scheme’s original 2034 target date.
Independent Trustee Services became a fully independent firm after undertaking a management buyout from Mercer.
The transaction – completed in June – was instigated after ITS raised conflict of interest concerns arising from the merger of Mercer’s parent company, Marsh and McLennan, and JLT in April.
The professional trustee firm was set up in 1991 and had been part of JLT since 2000, but is now owned wholly by its board of directors.
The year-long gap between advisers falling off the Financial Conduct Authority (FCA) register and being included on the new directory could raise significant challenges for advised defined benefit pension transfers for a 12-month period.
The FCA revealed in March that there would be a 12-month period between December 2019 and December 2020 when advisers will not be searchable on any regulated public register or directory.
Advisers who are not held to be ‘senior managers’ under the regulator’s new Senior Manager & Certification Regime will be taken off the financial services register from 9 December 2019, when the regulation came into play.
Justice Antony Zacaroli approved the settlement deal between British Airways (BA) and the trustees of the Airways Pension Scheme (APS).
The High Court approval of the deal in November followed a court hearing looking at the details of the deal, which plans to gradually return the indexation of pensions in payment to align with the Retail Prices Index (RPI) by 2021, with back payments made for the last six years. A further £250m contingency payment will also be unlocked for APS’ sister scheme.
This ended the court battle over the trustees’ decision to unilaterally award themselves sole power to award discretionary increases in 2011, and then the grant of a 0.2% discretionary increase to members in 2013.
Pension schemes were warned that they may now face a more challenging legal test if they wish to fix drafting errors.
Where trustees discover that a document that they entered into does not reflect the intentions of the parties, they can apply to the courts for the contract to be rectified to reflect their intentions.
While not a pensions case, a Court of Appeal judgment, FSHC Group Holdings v GLAS Trust Corporation, confirmed that the test applied to determine what the parties’ original intentions were is a subjective one by reference to their actual beliefs. This is rather than based on how an objective observer would have understood the parties’ intentions.
Around £40bn of defined benefit liabilities were insured this year, including another giant buy-in by the Asda Group Pension Scheme with Rothesay Life.
Asda’s parent company, Walmart, said it had secured £3.8bn of the Asda Group Pension Scheme’s liabilities with the insurer in October. The deal covers the benefits of all 4,800 pensioner and 7,500 deferred members.
Conducted in anticipation of a buyout in late 2020 or early 2021, the transaction was enabled with an £800m one-off contribution from Asda.
Buck launched a solution to help pension schemes equalise guaranteed minimum pensions (GMPs) in a cost-effective way with minimum hassle.
It followed the landmark ruling by the High Court in October 2018 mandating defined benefit schemes must equalise GMP benefits for men and women.
The consulting firm said the product, called Square, will address the complex technical implications and uncertainties of GMP equalisation, while keeping costs low and not compromising on quality or technical rigour.
Arthur J. Gallagher bought Anthony Hodges Consulting in a bid to become a major global employee benefits company.
AHC – a communications consultancy specialising in pensions and employee benefits – will become part of Gallagher Group’s UK-based communications business. The terms of the transaction were not disclosed.
AHC was founded in 1996 and serves customers across the UK, US, and Australia from its headquarters in Wakefield and offices in Minneapolis and Melbourne.
The Rolls Royce UK Pensions Fund insured benefits for around 33,000 pensioners in a record-breaking buyout with Legal & General.
The deal was in excess of £4.6bn, the largest buyout ever conducted in the UK, vastly surpassing the £2.5bn transaction completed between L&G and automotive firm TRW in November 2014.
As part of the buyout, the RRPF also transferred its hedging portfolio and restructured one of its existing longevity swaps. It will reduce the company’s post-retirement obligations by around £4.1bn and reduce risk for the remaining 43,000 members.
Climate activists from Extinction Rebellion interrupted the Pensions and Lifetime Savings Association’s local authority conference as a minister rejected calls for intervention.
Minister for local government Rishi Sunak was in the middle of speaking when a group of four protestors stood and called for the Local Government Pension Scheme to divest from fossil fuels.
Unfurling a banner, another activist yelled: “There are no pensions on a dead planet. Your return on investment in fossil fuels is absolutely zero. The investment in fossil fuels of £14bn from people in this room is totally wrong and should be stopped.”
The HSBC Bank Pension Scheme hedged its longevity risk with Prudential Insurance Company of America in the second-largest ever deal of its type.
The insurer, a subsidiary of Prudential Financial, covered the longevity risk of around £7bn of pensioner liabilities, providing long-term protection to the scheme.
The deal used a captive solution with an HSBC-owned insurer in Bermuda, with PICA then reinsuring the transaction, which relates to around half of the scheme’s pensioner liabilities.
Lane Clark & Peacock appointed Aaron Punwani as its first chief executive as the firm reshaped its management structure in a bid to support growth and innovation.
Punwani has overall responsibility for defining and delivering the pensions and investment consultancy’s strategy, and is joined by Tom Porter and Carla Lakey who took on the new positions of strategy director and head of people.
The trio took on their new positions in May but continue to work on projects and with clients in their existing remits.
More than 100,000 savers face being landed with huge tax bills following tiny uplifts to their pension, a Freedom of Information (FOI) reply revealed.
The FOI reply supplied to Royal London showed that ‘fixed protection’ for thousands of savers could be invalidated if they see an increase in their defined benefit pension rights following the High Court’s landmark ruling to equalise guaranteed minimum pensions.
When the lifetime allowance for pension tax relief was cut from £1.8m to £1.5m, then to £1.25m and then to £1m, savers who already had high levels of pension savings could ‘lock in’ those higher limits, giving them ‘fixed protection’.
The Pensions Regulator will consider if schemes should be required to have professional trustees and assess the case for greater regulation of administrators and system providers.
In an exclusive interview with Professional Pensions, the watchdog’s executive director for regulatory policy, analysis and advice David Fairs said the regulator had been supportive of the industry work that has been done to develop standards and accreditation for professional trustees.
But he said the regulator was now looking at how it could use this accreditation more broadly and would be consulting on the issue in the future.