The Problem
In the old days, when promised a pension from their company, most of our parents worked on the basis that the employer was sitting behind the promise and taking all the risk of paying a known i.e. defined, level of pension.
It is not what today’s generation can expect from a workplace pension. Millions of pensioners and savers, who today face imponderable decisions around investment and personalised longevity predictions, will be well served by the benefits of a mutually aligned pension construct that will take the worry out of their retirement.
When asked what they’d like from their money purchase retirement savings, the majority of us haven’t any real idea. Some describe an annuity, but say we wouldn’t buy one because the terms available on the retail market are not particularly attractive.
Pension savers face difficult questions as they approach retirement:
- How long am I going to live for
- How much do I need to put aside for nursing home care
- What is my risk tolerance
- How much to invest and what into
- How quickly do I run down my savings to pay for my life?
Until now, trustees of a money purchase pension schemes have not been able to find employers willing to take the additional risks onto their balance sheets and offer a defined pension to members on much better terms than available in the retail market.
An answer – Pension SuperHaven
Now we are pleased to announce Pension SuperHaven. The Pension SuperHaven pension will be just like an old style workplace pension – it will pay a regular pension out every month. For life – guaranteed.
In addition, if Pension SuperHaven does a good job with the investment, it will pay out ‘Christmas bonuses’ on top of the regular pension.
How will it work?
Savers become scheme members and can transfer their pension savings to the Pension SuperHaven scheme on preferential terms in exchange for a known, i.e. defined, ‘pension for life’.
The pension is paid at a fixed rate, or with agreed increases, chosen at outset. For new members, underwriting is carried out by Hanover Re; and in many circumstances the rate of pension will be increased from the outset to reflect the impaired health of the new member.
Pension SuperHaven is a registered occupational pension scheme, with a strong supporting sponsor. Pension SuperHaven aims to provide savers with consistently 10% to 15% higher rates than can be achieved from retail annuities, with equivalent security.
Pension SuperHaven can deliver better retirement outcomes for their members because it provides better value for every £1 of savers’ money. Pension SuperHaven is investing more productively in a wider range of asset classes than an insurer can. Furthermore, Pension SuperHaven operates with lower overheads and lower margins.
How is the promise of “equivalent security” achieved?
To operate as an occupational pension scheme offering defined benefits, Pension SuperHaven will need to be regulated by the Pensions Regulator. It has to demonstrate that there is sufficient capital behind each promise to justify its claims.
We are capitalised to ensure a 99% probability of paying pensions. In full. For life.
The Pensions Regulator is in place to protect member’s pensions.
Is this “like a mutual”?
Pension SuperHaven has attracted hundreds of millions of international capital to the UK to back the pension promise. These investors need to see the reasonable prospect of a return. So, Pension SuperHaven will return money over time by returning a proportion of returns to its investors.
Profit is also shared with pension members; and will be distributed as “Christmas bonus” to pensioners at the end of each year. Unlike annuities, Pension SuperHaven’s profits are shared rather being taken 100% by the insurance companies.
How does this integrate with existing retirement pathways?
Pension freedoms allow savers to use their pension pot as they choose.
The four pathways the FCA have promoted are “cash-out”, drawdown, annuity purchase and a roll-up of the fund.
The Pension SuperHaven is a fifth option that could be presented alongside others or as the primary option (akin to a retirement default option).
Individuals and Trustees are encouraged to take advice as to their best choices..
Does PSH create a residual risk to employers sponsoring a workplace pension?
The payment of a scheme pension requires a choice from the member. Even it is offered as a “preferred option” it cannot be offered via auto-enrolment.
It will be made clear to each pensioner prior to their selecting Pension SuperHaven that it is distinct from the pension scheme offered by the employer as its workplace pension.
Who is this for?
Any saver with a money purchase or defined contribution pension is eligible to join Pension SuperHaven. We will publish terms of entry including the minimum pot size, age restrictions and residency requirements. We can help non-UK residents with alternative international pension arrangements.
Pension SuperHaven will chiefly be marketed to members of a DC pension trust or contract-based workplace pension. However, people who have their money in a standalone SIPP or SSAS can also choose to use Pension SuperHaven to convert their ‘pot’ to a ‘pension for life’; and savers with multiple pots can consolidate into a single Pension SuperHaven pension.
The normal HMRC rules on eligibility for pension freedoms apply to Pension SuperHaven.
How does this compare with CDC?
A CDC pension is very similar to a scheme pension with two important differences
- It is currently unavailable as a retirement pathway as ”retail CDC” is as yet unsupported by legislation
- A CDC has no guarantee, so that the pension might go down as well as up
The Pension SuperHaven pension will be available shortly and will guarantee it will never fall in value; and pension increases, such as to help fight inflation, are also guaranteed to remain – for life.
How do we take this forward?
Please discuss your pension needs with us and we will offer you a range of support services to promote this option to your clients or staff (typically in a workplace pension and any age).
Enquiries should be addressed to :
07785 377768
