This morning , Pension PlayPen will have a proper debate about what we mean by “risk transfer”.
Well done Iain and Claire for stepping forward to discuss “Risk Transfer” in the Pension PlayPen. We have a healthy disrespect for the “received idea” that pension schemes are in an end-game. With 5,000 DB schemes currently running on there are plenty of decisions to be taken on how to spend the surplus!
More fundamentally, is the current “opportunity” all that it seems. In a week when we learn the WPC is “desputing” TPR’s optimistic view of DB pension solvency, we can expect a lively debate on the current state of the buy-out market.
Here’s this morning’s postbag of comments on this blog
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Ideally, the policy considerations should not be for Trustees to worry about.
But, the (expected) scale of the transfers to Insurers is so enormous, do they (or the actuarial advisers under new TAS300) need to start considering the whole system impact and risk.
And are Trustee immune from challenge if they assign away expected surpluses to the benefit of third parties (ie Insurers)?
My understanding is that the PRA regime requires prudent person investment and in embedded day-1 surplus. So Trustee must now know that they are giving away a clear expected surplus, never to be accessed by any of the intended scheme beneficiaries, never to access that surplus to fund expected (albeit) discretionary increases to protect against high cost of living increases.
Pilate like, Trustees will look to wash their hands of this, but political will and retribution has a long memory and I doubt the political landscape will always be so protective of Trustees who are gleefully handing over tens, nae hundreds £billion of scheme assets and gains to the City, when others are more deserving?
Yes, we should celebrate the ability of the City to supply capital and create wealth, but this current exercise feels like the largest regressive wealth transfer in history, taking money out of the pockets of workers’ and pensioners, funnelled in an orderly fashion to the City and beyond….
How do we feel about insurance company margins?
And what other choices are there for trustees – sitting in surplus?
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The First named objective for the Pensions Regulator set by the Pensions Act 2004 reads:
“5 Regulator’s objectives
(1)The main objectives of the Regulator in exercising its functions are—
(a)to protect the benefits under occupational pension schemes of, or in respect of, members of such schemes,
Is seeking to protect the benefits through a higher cost insurance company buy-out protecting the benefits under an occupational pension scheme?