March 2009
'Government should pay half of 2009 PPF levy' says Joanne Livingstone
The government should pay half of this year's Pension Protection Fund levy in a bid to help scheme sponsors, Punter Southall says.
Technical director Joanne Livingstone said while the government would not underwrite the lifeboat fund it would be "very helpful if it at least undertook to pay some of the PPF levies required from sponsors of defined benefit schemes".
She explained: "For example, it would be enormously helpful if they undertook to meet say half of each sponsor's levy.
"If this was done for all sponsors then the system could be cheaply administered, it would provide much needed relief for sponsors who cannot afford the levies and would allow extra contributions to go directly into the schemes of those whose sponsors can afford the higher levy."
Livingstone said the need for levies to be made manageable is of "paramount concern" and there are fears it may need to rise even more sharply in the future. Professional Pensions Magazine
'Pension schemes bury heads in the sand over scheme funding' Jane Beverley comments:
"the survey has pointed out some important lessons for those about to embark on their second funding valuation."
"Working collaboratively is key: trustees and employers should recognise the fact that changes in employer covenant and funding deficits are likely to complicate their funding negotiations next time round, and so should adopt a collaborative approach to the valuation as soon as possible" she said.
"We would recommend that trustees and employers review their experience of the first valuation with their advisers to see what lessons can be learned to improve the process." Pensions Age, 28 March 2009
'Pension scheme trustees lack understanding of effects of the recession on their fund' Jane Beverley comments:
"Knowledge and understanding will be critical success factors in effective funding negotiations second time around.
"Trustees should consider undertaking focused training and corporate decision-makers might now wish to consider improving their understanding of pensions issues to ready themselves for what it is likely to be a much more difficult round of valuations." Human Resources Magazine UK Online, 23 March 2009
'Pension Scheme strategy pays off for prudential ' Jane Beverley comments:
"Liability hedging and derisking are likely to play an increasingly significant role in scheme investment strategies.
"Most trustee boards are considering changes in their scheme's investment strategy and four in 10 schemes are considering placing an increased focus on liability hedging." Financial News Online, 23 March 2009
'Schemes unaware of funding status issues' Jane Beverley comments:
"Working collaboratively is key: trustees and employers should recognise the fact that changes in employer covenant and funding deficits are likely to complicate their funding negotiations next time round, and so should adopt a collaborative approach to the valuation as soon as possible.
"We would recommend that trustees and employers review their experience of the first valuation with their advisers to see what lessons can be learned to improve the process." Professional Pensions Online, 23 March 2009
'Pension schemes not up to speed on crisis' Punter Southall quoted:
It said: Significant gaps remain in trustee knowledge and understanding suggesting that many schemes do not have effective governance structures in place"
Punter Southall added that while the risk of people living longer was recognised as "critical" by pension trustees "this is not an area in which many trustee boards are confident in making their own decisions".
Instead in the short term most trustees would simply ask the actuary of the scheme "to tell them what mortality assumption to use". Daily Telegraph (Business), 23 March 2009
'Market volatility 'unlikely to drive buyouts' Richard Jones quoted:
Richard Jones, head of Punter Southall Transaction Services (PSTS), warned the buyout market has "basically dropped away completely" with less than £500m (€540m) of business in the first quarter so far, mainly because the market is uncompetitive in its pricing.
He suggested this is because the big insurers are facing capital issues as analysts are focusing on the corporate bond investments held in annuity books, while the smaller specialist firms need a second raising of capital to fund new business.
Pension funds have lost money and are less sure about selling assets to buy annuities that would lock in the losses, so Jones said: "These trends mean the buyout market is not there. Whenever the market moves around trustees start thinking how they can get rid of liabilities, the big problem is the price but none of these trends look to be reversing quickly." IPE.com, 17 March 2009
'Pensions black hole deepens to £2.9bn' Danny Vassiliades quoted:
'The government's move to reduce debt would dampen the value of corporate bond yields. One consequence of this will be a rise in the value of pension fund liabilities.
He said 'In this kind of scenario, pension funds will find it difficult to steer a sensible path through the changing economic conditions. Many employers will just give up, fed up at being at the mercy of Government policy. The future could well be even more volatile that the present'. Scotland on Sunday (Business), 15 March 2009
"BoE launches quantitative easing" Danny Vassiliades comments:
"The problem with this is what happens next - if the economy recovers, one can expect the extra money in the economy to stoke price inflation. Also, the future Government debt will need to be paid back and the issuance of more gilts will depress bond prices and increase yields. With many funding strategies measuring liabilities using a gilts-based interest rate, this will mean that the value of liabilities could fall." Interactive Investor, 11 March 2009
"Pensioners squeezed by bail-out plans" Danny Vassiliades comments:
"Quantitative easing seeks to remove government and corporate debt from the financial system – effectively replacing it with cash. By writing off its debt, the government will reduce the amount of debt in circulation and reduce the corresponding government and corporate bond yields as bond market prices rise.” Moneywise, 11 March 2009
"Downright liability" Richard Jones is quoted:
According to Richard Jones of the actuarial group Punter Southall, the recent fall in gilt yields (driven by QE) of around 50 basis points increases liabilities by around 10%. This has occurred at a time when, thanks to falling stockmarkets, assets have been falling. Economist Online, 11 March 2009
"Royal Mail highlights need to sponsor clarity" David Cule is quoted:
David Cule, principal at Punter Southall, said the Royal Mail Pension Trustees’ chairman’s letter to business secretary Peter Mandelson was designed to seek reassurances for trustees of the strength of their sponsor’s covenant.
Cule said: “The fact that the scheme has invested 35%-40% in equities makes it no different from any other company pension scheme. The question arises from how concerned the trustees were about the sponsor covenant. If they thought it was very poor, they may decide the investment strategy is too risky.”
He added that the Royal Mail scheme was in an unusual position since it was difficult to ascertain their sponsor’s strength, due to a lack of transparency from the government as shareholder.
“Trustees in this position will look for clarity. Trustee chairman Jane Newell’s letter seems to use the Hooper review as a trigger to seek clarification from the government,” he said. “If they can get those assurances they can feel comfortable with their level of risk on their investment strategy.” Pensions Week, 2 March 2009
Punter Southall Pensions Bulletin - July 2010