William McGrath is “C-Suite” a group of people thinking about pensions and in this case about the use of TAS 300. This blog is not for the faint-hearted but if you are flying or training up to Edinburgh this is for you, and if you’re not, it is a good alternative to PLSA investment 2025.
The rest is William…
Consultations and inquiries from HMT, DWP and DBT and Parliamentary Select Committees in recent months have all helped highlight the scope for Defined Benefit pension schemes to add cement to Government Concrete Proposals for Growth. FRC’s Technical Actuarial Standard 300 Version 2.1 can be the unheralded accelerator.
C-Suite’s response to the latest consultation on TAS300 is below or downloadable from this link.
Regulators can have confidence in the frameworks in place and with more scrutiny of sector practice, positive outcomes aligned to the Government growth and investment agenda follow. A Risk-Benefit assessment is the corner stone which provides regulators with substantive data they need.
- Risk-Benefit assessment is a numerical analysis for member and sponsors. It can be produced at the time of setting DWP’s Funding and Investment Strategy. It can become a core requirement and is needed to comply with TAS300V2.1
- Government can impact both risk and benefit calculations with incentives linked to stated asset allocation. They can remove “fiduciary duty” anxieties of trustees by their impact on the Risk-Benefit assessment.
- Sponsor solvency and life expectancy and investment return calculations should be discrete, separately assessed assumptions impacting Risk-Benefit assessments.
- Scrutiny of Risk-Benefit assessments by cross-regulator team would have a major impact on pension sector practices and standards. That facilitates reducing compliance reporting in other areas.
The pension sector and life insurers have proved astute at adding complexity and making change slow and uncertain. The need for substantive new legislation on fiduciary duty, investment mandating and over-ride of scheme rules to facilitate surplus use is not established. Rather, relentless focus on actual numbers can now cut through and see large scale reallocation of resource into more productive areas.
These papers are able to download from these links; ” longevity swaps and other unforced errors”
The unsustainable ESG pensions ESG pensions carve-out
Run on for good , funding strategy for 2025
Carol critiques risk transfers
DB Pensions and Growth : Government Action Points
The Fiduciary Duty and UK Productive Assets Connection
DB pension schemes have the assets available to provide an immediate material benefit to economic growth strategies and to members. The fiduciary duty concerns of trustees about asset allocations and protecting benefits prevents it happening. They can be addressed directly.
- Well funded schemes certifying they hold a set level of UK productive assets will enjoy:
– No reduction to benefits on joining PPF on sponsor failure (subject to 2.5% inflation cap)
– An ability to make Authorised Payments from surpluses, tax free, to improve pension benefits and fund / improve current pensions (subject to a cap of 3% of assets per year)
At the same time Government asks relevant regulators PRA / TPR / FRC / CMA and industry bodies to monitor closely compliance and business practices in the risk transfer market. ARGA to be given a specific subject remit.
The initiatives will mean a DB pension sector reset. Many in the sector are ready for it. More money will be directed and recycled into the UK economy. UK capital markets will have a major boost to liquidity. The minimised technical changes to existing frameworks will galvanise a sector realising it is on the watch list. Big benefits follow.
