Here’s a splendid piece of writing from Nick Reeves of Pension Expert
The road ahead
While the own-trust model offers control and flexibility now, First Bus is not ruling out other options for the future. The company is keeping a close eye on developments in the master trust market, as well as the emergence of collective DC schemes, which could combine some of the best features of defined benefit and defined contribution arrangements.
“With the Pension Schemes Bill on the horizon, we didn’t want to ‘pick a horse’ before knowing what our options are,” Hadadi says.
“We’re proud to be taking a different path, and we believe it’s the right one for our people. By keeping our scheme in-house, we can focus on what matters most: delivering great outcomes for our members, both now and in the future.”
In an evolving pensions market, First Bus’ decision to launch its own DC trust is a reminder that there is no one-size-fits-all solution. Sometimes, choosing a new route is the best way to put members first.
There are not many pension managers with the fortitude to run their own pension arrangement. Muntazir Hadidi , Monty as he’s better known, is in charge of the DC occupational scheme at First Bus known as the “Retirement Savings Plan “. Having been separated from a hybrid scheme last year, this plan is for bus workers actively at work
Maybe “savings plan” is looking a little out of date, what with the PLSA becoming Pensions UK and dropping the “Lifetime Savings”.
The question for DC schemes such as First Bus (and there are precious few of them who aren’t consolidating into master trusts) is where a company can add value.
My guess is that it won’t be the “savings”bit but the “pensions” bit – “decumulation rather than accumulation” if you like polysyllables (I don’t!).
There are ways forward which don’t involve selling the member an individual annuity. The Nest solution is to provide a DC pension, it may be backed up by an annuity or equivalent but the member gets a promise of a pension. It needs scale to do it with the ease Nest will be able to. We now know that the rate 14m savers will get pensions paid will be designed to match the amount of annuity payments paid to Nest when they get old. It sounds beatable for an ambitious pension team and trustees.
If you are running your own scheme, as Monty intends to carry on doing , perhaps a more ambitious approach to “value for money” may be attractive. My conversations with Monty have usually involved time talking CDC and this certainly looks the alternative to annuities where either the employer’s or multi-employer CDC scheme can collectively provide the insurance needed for people to have pension till they die, backed up by fellow pensioners still surviving, some yet to draw their CDC pension.
Monty’s scheme may use such an arrangement for those still to retire but there are many savers who may want the security of an annuity – only a little bit more in terms of pension paid. This pension pay rise can be achieved using a capital backed pension with support from specialists. I have been in this game a number of years and am looking at ways to move forward for those for whom CDC have come too late.
Monty can do a lot to help the people who depend on First Bus to get them more than a “me too” master trust solution. I wish him luck and if there is anything that he needs by way of help, he gets my full support! What can do to help him, we will!
