The pensions and investment sector saw substantial changes this year as a result of innovation, legislation, and controversy. Royal Mail launched its CDC pension scheme, while a new DC-to-DB product offering better retirement options was also introduced.
Elsewhere, Legal & General moved 2 million savers into a private markets fund, and National Insurance changes boosted salary sacrifice pensions.
The Pensions Regulator (TPR) finalised its DB funding code, putting regulation front and centre despite worries over trustee duties.
Meanwhile, a damning report from MPs blasted the FCA for its shortcomings in transparency and consumer protection. Controversies also included trustees being held accountable for a £5.2 million pension scandal and criticism of Wahed’s London advertising campaign.
Here’s another look at this year’s biggest stories:
1) Wahed defends advertising campaign after backlash
Islamic fintech startup Wahed has defended its new London advertising campaign which has sparked controversy for featuring preacher Mufti Menk and imagery of a briefcase of burning US dollar bills and euros. The advertisements, which have appeared on London buses and the underground, have been criticised by a number of newspapers as well as some Conservative members of the London assembly. In the past Menk has been banned from speaking at several UK universities, however, he has since retracted the comments, made more than 10 years ago, that caused this issue.
2) Budget NI changes could boost pension savings via salary sacrifice
The rise in employers’ national insurance could provide an unexpected boost for the pensions industry, via increased contributions to salary sacrifice schemes. Many are expecting more employers to offer these schemes, in a bid to reduce higher NI bills, which will increase from 13.8 per cent to 15 per cent in April next year. Employers do not pay NI on these pension payments.
3) First ever DC into DB product: “Politicians generally love it” – Truell
A product that offers a guaranteed 10 to 15 per cent more than annuities plus the potential for investment bonuses is being launched to target the workplace DC market and through advisers. Pension SuperHaven, the brainchild of Edi Truell, founder of private equity group Disruptive Capital, allows customers with defined contribution (DC) pots to transfer into a defined benefit (DB) arrangement and secure an income that has the ultimate protection of the Pension Protection Fund (PPF). The PPF will guarantee 100 per cent of benefits provided an income with an indexation of no more than 2.5 per cent is selected will be eligible for PPF compensation if it meets the entry requirements as set out in the PPF Regulations in the Pensions Act 2004.
4) Royal Mail’s CDC pension scheme launches promising better member outcomes
Royal Mail’s eagerly anticipated collective defined contribution (CDC) pension scheme, developed in collaboration with the Communication Workers Union (CWU), launches today. But its rollout has sparked ongoing discussions regarding the intricacies of its regulatory framework. CDC experts who were involved in the creation of the scheme for Royal Mail are voicing the importance of ensuring transparency, robust member protection, and clear communication regarding the scheme’s benefits. They say these measures are deemed crucial to mitigate potential misunderstandings about income fluctuations and associated risks, particularly during challenging market conditions.
5) L&G moves MAF investors into new private markets default
Legal & General is moving around 2 million contract-based DC pension savers into its Lifetime Advantage Fund which has a 15 per cent exposure to private markets at an increased fund management charge. Contract-based savers in the huge Multi Asset Fund will be moved across to the Lifetime Advantage Fund without direct member consent under the terms of L&G’s contracts, although employers will have the option to switch back to a lower cost default should they wish.
6) TPR finalises DB funding code rules
The Pensions Regulator has finalised guidance on how trustees can meet their obligations under the new funding code, which effectively comes into force today. The regulator has responded to criticism from the industry, and reduced the data trustees need to supply to meet the requirements of this new code. However consultants still warned that even with these revisions this is likely to be a time-consuming process for trustees, particularly those who need to make valuations under the ‘bespoke’ regime.
7) FCA branded “incompetent” by MPs in scathing report
In a damning report the Financial Conduct Authority (FCA) has been labelled “incompetent at best, dishonest at worst” by MPs from across both Houses of Parliament. The 350-page report accused the UK’s chief regulator of systemic failures, saying it had been too slow to act to protect consumers, had mishandled whistleblower information and there was a “defective culture” when it came to transparency and openness, leading to bullying and discrimination against those raising issues and challenging decisions.
8) CA Master Trust Conference: Opportunity to exceed Mansion House goals
Plans for DC schemes to invest 5 per cent of default funds in private market by 2030 are not “massively ambitious” according to Michael Moore, the chief executive of the British Private Equity and Venture Capital Association. Moore was setting out the progress that had been made to date since the first Mansion House Compact which has seen senior and technical experts from across pensions and private capital market come together on a Pensions and Private Capital Expert Panel.
9) 41pc of employers ‘very likely’ to introduce CDC
Almost half of all DC schemes (41 per cent) said they are ‘very likely’ to introduce a Collective Defined Contribution (CDC) pension scheme – or a risk sharing alternative – according to the latest research conducted by Hymans Robertson. The firm’s analysis shows that CDC is clearly appealing to many employers and providers. Nearly a third (29 per cent) of those surveyed said ‘protection against members exhausting their pension pot in retirement’ was the key attraction of a CDC scheme.
10) Trustees held personally liable for millions in pension liberation scandal
An investigation by the Pensions Ombudsman’s Pensions Dishonesty Unit (PDU) has resulted in a £5.2m repayment order for trustees found personally liable for breaching their duties and facilitating pension liberation arrangements. Trustees Simon Hamilton Kaigh and Michael McNally were held accountable for making high-risk, undiversified investments, including offshore funds linked to them, which violated their responsibilities and facilitated pension liberation.