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2014 Employer Covenant Consultants of the Year – M&A Awards

Jackal Advisory are pleased to announce that they have been awarded “Employer Covenant Consultants of the Year”, for 2014, by Acquisition International’s M&A Awards. Our Director of Pensions, Simon Kew said “This is a fantastic achievement for our team, which reflects the splendid work we have undertaken in the covenant advisory space.”. He added “We are great believers in providing a top-quality service with clear, pragmatic advice at an affordable cost – it really is super to see this reflected in an award.”.

Jackal Advisory has been a key innovator in providing support to schemes and their employers, through covenant, affordability and restructuring advice. We are continuing to innovate and are close to launching a new service designed specifically for the SME market. More details on that will follow in a matter of days.

 

Category : Savants in the News — admin @ 1:23 pm June 30, 2014

June 2014

As we creep into, what we laughingly call, Summer I also find that we have hit peak ‘hay-fever season’. I, along with millions of others, are suffering itchy eyes, sneezing and myriad different symptoms as they carry out their pension duties. Speaking of pension duties, here are a few highlights from the last month…

Retire early, retire poorer

We are told that government research shows those who retire 10 years short of their ‘retirement age’ (which will probably be in the region of 90, by the time I get to call it a day!) could lose more than a third of their pension. Apparently, it may also affect someone’s mental health, through “boredom, loneliness and poverty”.

The comedian Dave Allen once said “We spend our lives on the run: we get up by the clock, eat and sleep by the clock, get up again, go to work – and then we retire. And what do they give us? A clock.”…if the government research is correct, the clock may be the only thing to keep us company in penury.

Comfort for £15,000

The National Employment Savings Trust (NEST) has stated that people planning their retirement should aim for at least £15,000 per annum to ‘feel comfortable and more financially secure’. It is claimed that 43% of those in the £15-£20k category felt financially comfortable, only 24% did so when receiving under the magic £15k mark.

To put saving this amount into perspective, we are given some handy figures for a 30 year old, saving until they are 68. For instance, cutting one takeaway coffee out per week, could generate £11,800. Ditching a weekend takeaway will bring around £50,900 and taking a packed lunch to work a whopping £63,700 – assuming one doesn’t pack beluga caviar and blinis.

It was noted, however, that there is no ‘happiness benefit’ above £40,000 a year…I am sure the majority of the Nation will breathe a collective sigh of relief…

Three more years

At the end of May, the Pension Protection Fund (PPF) issued its consultation on their Levy for the next three years. This encompasses the move from Dun & Bradstreet (D&B) to Experian, with a ‘PPF-specific model’ designed to help them predict insolvency risk more accurately, providing bespoke insolvency risk scores along the way.

It has been stressed that the new system is not designed to tinker with the aggregate levy raised, more to help redistribute it, with higher-risk schemes/employers paying more.

There is a greater focus on the figures, rather than the background information, to provide a more reliable picture of the chance an employer may fail. With the old system, a broadly irrelevant event e.g. an extra Director joining the Board, could have impacted on the levy calculation. Hopefully, this revised process will successfully avoid these anomalies.

As with any change, there will be some ‘winners’ and some ‘losers’, with levy payments falling or rising depending on risk. The new scores will not be used until October 2014, so that does give trustees the opportunity to investigate what will happen to their scheme.

I apologise if there have been any typos in this month’s missive, it isn’t easy to type when sneezing and rubbing my eyes…now, where did I put the Claritin?!

Category : A month in the life of pensions — admin @ 12:09 pm June 17, 2014

Unions face pensions crisis

Campaigning union forced to cut benefits at its own staff pension scheme

The Public & Commercial Services Union (PCS) has fought some of the toughest campaigns of recent years to protect the pension rights of around 250,000 members.

There have been public sector walk-outs and a ‘68 is too late’ offensive to tackle the austerity-led Coalition’s plan to raise the retirement age.

Yet the PCS has a pension crisis of its own: a deficit of around £65.5m against a declining annual income that is currently £27.6m.

The repairs needed to solve this issue are as hard-hitting as anything the PCS has opposed. One proposal has been for PCS staff to receive half their salary on retirement only after 45 years of service, against 30 years today.

“We read about that and thought our own changes won’t look so bad,” laughs a senior member of the trade union movement.

Many of the more public sector and industrial-focused unions face similar problems.

Unison, for example, had a liability of £120.4m in 2012, up from £106.6m the previous year, against income of £173.1m. Unite, the country’s biggest union with 1.4m members, saw its liabilities grow by nearly one-fifth to £144m the same year, narrowing the gap on its income of £155m.

” There is also a broader issue of the change in demographic of their staff ”

The PCS has struggled partly because of civil service cuts which have resulted in a fall in membership and therefore the income needed to address the pension burden.

Union sources point out that there is also a broader issue of the change in demographic of their staff.

“Until 10 or 15 years ago shop stewards would go and work for the unions as a last career stop in their 50s,” says one union negotiator. “That changed so younger people, even of around 21, were being hired. The pension was meant for a different type of person.”

Lucrative final salary schemes were an incentive and a reward for experienced shop stewards to move to a union’s headquarters. Only working for around a decade would mean that they built up a good extra pension pot, but did not work for the time that would result in huge, unaffordable payouts.

“Traditionally unions were rather like charities, paying low wages but having good benefits”

That change started to hit at the point when the economy, and therefore investment income, was in a downswing. The situation might worsen as more staff with big pension pots retire in the coming years.

Unions introduced these attractive pensions to lure the best staff because salaries were rarely competitive with other organisations.

Simon Kew, director of pensions at Jackal Advisory, says: “Traditionally unions were rather like charities, paying low wages but having good benefits. The vast majority of these are historic benefits, quite mature benefits – it’s all a legacy problem when they’re seeing falling membership and falling revenues, so even a moderate deficit will look disproportionate.”

And if the unions don’t take tough action now, that burden will only grow.

Category : Savants in the News — admin @ 6:28 am June 11, 2014

May 2014

I’m pulling this month’s missive together, immediately after the second May Bank Holiday. I often wonder if the extra day away from the desk is worth it, given the additional work pre and post the Monday off!

Time to Act

I will start with what is now known as the Pensions Act 2014 (PA14), which received Royal Assent on 14 May. Possibly the largest element is the introduction of the single-tier state pension, which has attracted considerable publicity. Because of that, I thought I would look at a couple of the lesser known parts.

The Pensions Regulator (TPR) has, finally, been given the power to prohibit or suspend corporate trustees, where one or more of the directors have been prohibited by TPR previously (PA14 s46). I always found it quite strange that an individual could be prohibited, but then allowed to set up their own company employing others to do the very thing they have been banned from doing.

Another strange quirk of legislation, which has now been addressed, is in relation to the escalating penalty notices introduced as part of the Pensions Act 2008 (PA08). Up until now, it was not clear whether TPR could issue an escalating penalty notice, when a s72 request had not been complied with – be that as part of the Employer Compliance Regime (the intention) or  when discharging its duties under the 2004 Act (the implication). Clarity comes in PA14, stating that the penalties only apply in relation to the PA08 compliance regime.

Personal deficit

It was reported recently that Auto-Enrolment may be less than suitable for oder workers, that have considerable debts e.g. mortgage / credit cards. It was claimed by the Pensions Policy Institute that people in the 50 to 64 age group should be wary when considering whether to remain enrolled. Presently, c. 15% of workers who aged 50+ opt out of the scheme, which is higher than any other age group. The PPI report said “There is a concern that some people for whom automatic enrolment is not suitable…because they have other priorities, such as paying down debt, will not opt out.”.

No such thing as a free review?

The Financial Conduct Authority (FCA), the other regulator of pensions in the UK, has spoken to to highlight the dangers of ‘free pension reviews’. Enterprising, if shady, cold callers are piggy-backing the recent Budget’s ‘guidance for all’ claim, to help relieve retirees of their pension savings. The FCA said “most of the companies offering this ‘service’ are not authorised by us, and we’re concerned that the reviews often end with pension pots placed in higher risk, unregulated investments”…like the 16.30 at Doncaster, perhaps?

In short, if anyone reading this is called, out of the blue, by someone purporting to provide a ‘free pension review’, the FCA advise that the call is terminated immediately. Personally, I will try to obtain as many details from them as possible and shop them to the relevant authorities. ‘Pension’ is a word with questionable value to the person on the Clapham omnibus, so anything I can do to help eradicate this sharp practice and restore some faith in retirement saving, I will gladly undertake.

And so, back to the disproportionate pile of paper on my desk, emails in the inbox and messages on the phone…roll on 25 August!

Category : A month in the life of pensions — admin @ 5:51 am

April 2014

Isn’t it amazing how the Tuesday after a Bank Holiday weekend, feels like a ‘Mega-Monday’? Three days worth of time away from the desk to catch up on, with only four days left in the week to do so. To help lighten the load, here’s my brief take on the last month in the world of Pensions.

All change, please

The single largest piece of news in the last few weeks has to be the announcement from George Osborne, in his budget speech, that there were to be significant changes to the decumulation phase of pensions.

Kicking off on 27 March with the first of these changes, retirees were given greater access to their pensions savings. Lump sum withdrawals will now be allowed up to £30k, 25% of which will be tax-free. The remainder will be charged at the individual’s Income Tax rate, rather than the previous 55% levy.

Latterly, in April 2015, the restriction on drawdowns and the compulsory purchase of an annuity will be removed entirely meaning that, according to our long-surviving Pensions Minister, pensioners can “buy a Lamborghini but know that they’ll end up just living on the state pension”. Of course, as a Minister of State, the decision to purchase a sports car would be made much simpler with a £98,740 annual salary and gold-plated pension to match.

Dont know what youve got til its gone

I know that I mentioned Scottish Independence in my last missive, but I felt that the speech from Gordon Brown (remember him?) merited a short review. Our former Prime Minister broke cover to speak on behalf of the ‘Better Together’ movement, which is anti-independence.

He claims that pensioner numbers are rising faster in Scotland than in the rest of the UK and that, as Scots have been paying National Insurance ‘all their lives’, it is right that the British welfare system foots the bill. I do wonder whether the estimated £100bn public sector pensions cost, which Scotland would likely take on should the independence campaign be successful, is the main reason for raising his head above the parapet.

Its a Mr. Deathor somethinghes come about the reaping?

Finally for this month, I thought I’d touch on the proposed ‘reality check’ for those about to retire. Steve Webb is concerned that retirees often underestimate how long they might survive for, when they stop working. His plan is to set them straight on that and welcome them to retirement with a ‘broad-brush’ statement that indicates how long they can expect to enjoy it for. He goes further, stating that “there’s no point being all British and coy about it”. The wording for these statements has not been agreed as yet, although there are rumours that “Congratulations on retiring! Buy your Lamborghini, but we suggest that you only tax it for six months” has already been ruled out.

I return, now, to the vast numbers of emails in my inbox – hoping to reduce their number by the time the next Bank Holiday comes along…

Category : A month in the life of pensions — admin @ 5:50 am

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