May 2009
'S&P outlook downgrade is set to reduce deficits' David Cule comments:
"If the market believed the likelihood of a downgrade is higher, the prices could fall further and long-dates gilts yield increase more."
Cule added that since schemes are also holding government bonds, the overall impact depended on how each scheme was matching its liabilities through its bond holdings. Professional Pensions, 28 May 2009
'Regulations lift the lid on pre-packs'. Richard Jones is quoted:
However Richard Jones, principal at Punter Southall Transaction Services, which sponsored the round table, said other creditors such as the pension scheme sponsored by a company going through a pre-pack, were putting in a place "anti-embarrassment clauses".
He said there was an unwritten rule at the Pension Protection Fund, which provides a UK safety net to retirement scheme members, that if they take on a pension scheme as part of the administration or pre-pack, they will take some equity.
Jones said: "If you have got any connection at all with the company before the administration the PPF wants a third of the equity. If you are completely new and clean then they will take 10% of the equity and this is known as the anti-embarrassment stake." Financial News, 25 May 2009
'Restructuring teams are already busy, but expect more to come'. Richard Jones is quoted:
Jones: Well, one thing I would say about the restructuring cases we have worked on is the quite interesting behaviour of the banks. First, they don't really want to be owning these businesses themselves and they would much rather have somebody to come in and take over these businesses and manage them, but the competing tension against that is that they don't want to take write-offs. So economically, they take write-offs, but they restructure the deal in such a way that allows them to keep it at book value. So, they get worse debt priced at the same par value at day one.
Jones: Pensions is a good area in this sort of situation, because there is a lot you can do. If you are going in there to improve a business, to make the business better, then the pension scheme finds that a very attractive thing for you to do. Pension schemes are willing to assist you and the regulators have been quite open that the pension scheme is allowed to help you out.
That could be a variety of different ways. One of the most straight forward ways is because most pension schemes have deficits; you would normally have to put cash into the pension scheme in a takeover.
If you come in with new money to fix the company then you can get a deferral for that cash cost for three years, for examples, where you do not have to put any money into the pension scheme while you concentrate on the business.
There are also lots of aspects of the pension scheme that are controlled by trustee, whose consent you need to do things such as changing the benefits or investment strategy that the actual money is invested in.
If you are doing something for the benefit of the pension scheme in the long run by fixing the company then you have a lever with the trustees to go to them and say "Okay we need to change the benefits in order to make this deal work" Or: "We need to take out or increase some risk from the pension scheme", if you are feeling daring. There is a role to play for the pension scheme, and the regulators have been quite supportive of this sort of approach.
Jones: The only thing I would say is not to be too negative on pension schemes. There is quite a lot of value that can be added in pension schemes, and actually that are not the toxic waste people seem to think they are.
There is quite a lot of value that can be added in pension schemes, and actually they are not the toxic waste people think they are.' Private Equity News, 25 May 2009
'PPF Selects Punter Southall as outsourced scheme caseworker' Alan Wilkes is quoted:
The Punter Southall team, led by principal Alan Wilkes, will take on the role with immediate effect. Wilkes says "We are delighted to have been appointed as the PPFs first ever external case worker.
"Our team is looking forward to assisting trustees in the acceleration of the process through which members can receive assistance for their otherwise lost pensions.
"We are also looking forward to building a strong and lasting relationship with the PPF." Money Marketing Online, 19 May 2009
'Fujitsu services plans to close its final salary pension scheme' Simon Banks comments:
"We believe today's announcement marks the beginning of another wave of scheme closures. We know many other companies are considering similar action, and some are in advanced discussions with trustees.
"The turbulence in the markets over the last 12 months has reminded employers of the volatility they are exposed to through their pensions plan. At the same time, many are squeezed for cash and are having difficulty repaying deficits in the timescales they previously agreed. In such situations, the funding regime introduced in 2005 steers employers and trustees towards closure to future accrual and using the savings to address the deficit.
"This approach means trustees are placed in a difficult position, balancing the future benefits of members against the security of the benefits already promised." HR Magazine, 15 May 2009
'Pension Protection fund sees deficit worsen' David Cule comments:
"In current conditions UK companies are required to provide at least £240 billion of support for UK pension schemes – more if benefits are expected to be provided in full." Pay & Benefits, 1 May 2009
'Longevity swap market to exceed £5bn over coming year ' Matthew Furniss is quoted:
Despite this, Punter Southall Senior Consultant Matthew Furniss was more cautious.
He said: "This is a welcome move in the journey for schemes looking to remove risk. However, most of the longevity risk within schemes relates to non-pensioners where few products are currently available and so each scheme must consider whether the cost is worth it for the risk reduction achieved". Professional Pensions Online, 13 May 2009
'PwC calls for trustee diligence on insolvency' Simon Banks is quoted:
Punter Southall principal Simon Banks said: "Ultimately more company failures mean more pension schemes forced to wind up, and probably with significant deficits given the current market situation.
Banks said the rate of other corporate insolvencies was approximately 0.3%, although there is an element of double counting between these two figures.
"It is to be hoped that companies with pension schemes are underrepresented in this group otherwise scheme members could potentially have lost pensions worth up to £1.6bn" he warned. Professional Pensions, 7 May 2009
'CashFac teams with Altus for STP solution' Dave Watkins comments:
"It is very refreshing to see two key STP players introducing real solutions to process issues rather than focusing entirely on the technology." Professional Pensions, 7 May 2009
'Talking Points: The pensions regulator's corporate plan' Simon Banks comments:
We welcome the regulator's comments on recovery plans, which have been our view from the start of this regime. They are necessary because many pension trustees have become entrenched on the regulator's "trigger point" of ten years. Previously only a small minority of employers found this unaffordable, but this is not now the case. We would urge employers to review, with their advisers, the affordability of contributions in the light of the impact the recession has had on their cash flow and, if necessary, ask trustees to re-negotiate. We already see more employers and trustees asking for help in assessing affordability as covenant strength. Pensions Insight, 01 May 2009
'UK urged to issue 30-35 billion stg longevity bonds' Joanne Livingstone is quoted:
Last week ahead of the budget announcement, Joanne Livingstone of pension actuary Punter Southall called for sovereign longevity bonds to be issued. Reuters, 1 May 2009
'PPF 7800 shortfall reaches £242bn' David Cule comments:
"This is significantly greater than the quantitative easing package put together and is on a par with the level of support being put together for the UK banking system." Pensions Management, 1 May 2009
'Recovery Position' Danny Vassiliades is quoted:
Danny Vassiliades, principal at consulting actuary Punter Southall raised concerns about the new tax rate.
"There is a risk that this will affect a much wider range of people that that implied by the Government's top 1 per cent designation. The greatest impact is likely to be on the lone breadwinner family rather than on the 'super' wealthy who are likely to be able to continue to manage the impact and could move to more advantageous tax jurisdictions." Chartered Secretary, 1 May 2009
Punter Southall Pensions Bulletin - July 2010