Posts tagged "NAPF"

Pensions revolution will compel 10 million people to start saving

Automatic pension scheme will target private sector workers, where those saving for old age dipped under 3 million last year

A scheme to enrol millions of people into workplace pensions automatically will be launched on Monday. Up to 10 million are expected to be enrolled eventually in what is hailed as the biggest pensions revolution since David Lloyd George ushered in state pensions a century ago.

A handful of the largest employers, with 120,000 or more workers, must place eligible workers into schemes. Firms will join the scheme in a staging process over the next six years.

More than half a million people will have joined by Christmas, according to government estimates. Savers will typically need to put aside just over £2 a week to get them started, according to Nest, a not-for-profit pension scheme set up under the new rules.

In the first four years, workers contribute a minimum of 0.8% of earnings, around £2.37 a week for someone on £20,000, Nest estimates. Employers will contribute nearly £3 per week, and almost 60p will be added in tax relief, meaning the total going in is just under £6 a week: £25 a month or £309 a year.

But by 2018, as the minimum contribution increases, employees will be putting aside around £12 of their pay every week, in return for almost £9 from their employer and nearly £3 in tax relief, leading to average annual contributions of £1,235, Nest said. Automatic enrolment aims to tackle growing concerns about an old-age poverty crisis, as people live for longer but fail to put enough away for their later years. Recent official figures show that the number of private sector workers paying into a pension is at its lowest since records began in 1953. Last year 2.9 million private sector workers put money into schemes, the first time active membership has dipped below 3 million.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: “The UK is drifting towards an iceberg when it comes to paying for its old age pensioners, and we need radical reform like this.”

NAPF said its research shows that only a quarter (24%) of workers earning £14,000 or less save into a workplace pension. “Crucially, this reform will reach those who have no pension: the young, the low-paid and those working for small businesses,” Segars said.

Estimates of opt-out rates are varied, although the government believes the reforms will eventually lead to between 6 and 9 million people beginning saving or saving more in all forms of workplace pensions.

The TUC’s general secretary, Brendan Barber, said: “With this government and the last helping ensure a wide consensus around the reform package, we have some certainty that we are now at the beginning of a pensions new deal. Of course it can and should be made better, but we now have what should be a stable framework.”

Some analysts have said the government should go further in encouraging people to save, for example by making pensions more flexible so that workers can take some cash out if they need to – or by increasing tax-free Isa allowances.


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Posted by admin - October 1, 2012 at 08:27

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Boardroom pay needs overhaul, say leading pension funds

Group led by Hermes EOS calls for three-year bonuses linked to earnings per share to be replaced by simpler schemes

Britain’s biggest pension funds have called for a radical overhaul of boardroom pay in an effort to end the “jackpot” payouts to top bosses.

The pension funds, led by the influential Hermes Equity Ownership Services, are calling for an end to three-year bonuses linked to earnings per share and a replacement of these long-term incentive plans by a simple method of cash bonuses and awards of shares that must be held for the longer term.

Colin Melvin, chief executive of Hermes EOS, which is owned by Britain’s largest occupational pension fund at BT, said the reform was needed because “we are at a moment of crisis in the evolution of publicly listed companies and their relationship with their shareholders, with a poor economic backdrop and minimal growth intensifying the need for reform”. He said the complexity of boardroom pay meant that when executives received bonuses based on earning per shares over three years they regarded it as “like winning the jackpot” even though their pay deals were so complex that it was not obvious what targets they had to hit to achieve the payouts.

Hermes EOS and the National Association of Pension Funds discussed the ideas for changes at a meeting last month with remuneration committee chairmen from almost half the companies in the FTSE 100. David Paterson, head of corporate governance at the NAPF, will now set up a high-level working group of pension fund investors and remuneration committee members to devise ways to better link pay to performance that are expected to be based on the Hermes EOS ideas.

Hermes EOS is publishing its discussion paper at the same time that business secretary Vince Cable – who attended the meeting last month – is consulting on how to hand investors a binding vote on pay, in addition to the current vote on remuneration reports which has been in place since 2004. Cable’s department discussed the consultation with investors on Monday.

Hermes EOS warned that a binding vote could have “significant unintended consequences” by making shareholders less likely to vote.

Melvin acknowledged that ideas set out by Hermes did not directly address the exact period that pay should be measured over or how much directors should receive. “We do need to [resolve] … how much is too much and how long is long term,” said Melvin.

He said there was a need to narrow the gap between top and average pay, and called for an end to the practice where the average annual boardroom rise was up to 8%, compared with 2% for those outside, suggesting executives could take pay rises in shares.

The main beneficiaries of complexity in executive pay are the remuneration consultants which design the schemes, he said, as he called for a vote on the appointment on consultants to match the way auditors must be approved by shareholders at annual meetings.

In its discussion paper, Hermes EOS said: “If we accept that three years is too short term and that alignment can be best achieved by long-term share ownership then payment of shares for achieving shorter-term objectives, with those shares owned for a longer period seems a better model than that currently used today.”

The paper also warned of a “crisis of credibility” as “directors at larger companies sometimes appear immune to the effects of the economic crisis, such as falling living standards faced by the rest of society”.


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Posted by admin - March 27, 2012 at 17:37

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Pension funds back George Osborne’s infrastructure plan with £4bn

Chancellor’s vision of building recovery with private cash for roads, high-speed railways and power stations a step closer

British pension funds aim to launch a multibillion-pound infrastructure fund next year that will invest up to £4bn in government projects from roads and high-speed rail lines to power stations.

The Pension Protection Fund and the National Association of Pension Funds are in discussions with 20 others to create a vehicle that will consider investing in the projects outlined by the chancellor, George Osborne, in last year’s national infrastructure plan. That shortlist will be whittled down to between 10 and 12 contributors, who are expected to put in starter capital – to fund staff hires – and a further cash injection to launch the investment fund. The NAPF and PPF are aiming to raise between £1bn and £2bn in an initial fundraising drive that could rise to between £3bn and £4bn with leverage, as they target a launch date of January 2013.

Alan Rubenstein, chief executive of the PPF, said: “Our focus is building a core of something like 10 to 12 funds who will put up development capital to take us forward to formal launch in January 2013. We are making good progress.”

Rubenstein expects the founder funds to contribute about £1bn, with a further £1bn raised by subscriptions from other investors.

The fund could follow the example of Australia’s Industry Funds Management, an investment vehicle whose infrastructure interests, which include Anglian Water in the UK, are worth A$10bn (£6.8bn). The PPF envisages that the fund will be a not-for-profit entity, with any surplus reinvested in further projects, although initial earnings will be used to pay off the startup capital and loans. “One thing pension funds have told us is they don’t like unnecessarily costly fee structures, so we are looking to set the platform up as a not-for-profit vehicle,” said Rubenstein.

Another model the fund could follow is Borealis in Canada, which takes a significant stake in deals and is co-owner of a 30-year concession to operate the High Speed One rail line between London and the Channel Tunnel.

It is understood that the NAPF and PPF have not ruled out sharing management of the fund with a leading infrastructure investor. The PPF’s bullishness is in contrast to scepticism over whether the government will be able to secure the £20bn in investment it is seeking from pension funds and the insurance community. KPMG warned last week that British funds do not have the skill set to invest in infrastructure, while new solvency regulations for insurers could impede putting such projects on their balance sheets.

The infrastructure fund is the product of a memorandum of understanding signed by the NAPF and PPF with the government last November, in which the groups pledged to develop an investment vehicle for big projects.

According to the national infrastructure plan published in Osborne’s autumn statement last year, the government needs £200bn of investment in transport, power and telecoms projects over the next five years and the majority of the funding will come from the private sector.

The PPF has about £10bn under management and was launched in 2005 to run the pension assets and liabilities of companies that have folded with underfunded defined-benefit schemes, covering about 12 million members. The NAPF represents 1,200 pension funds who hold assets worth £800bn.

Investors are believed to be mulling some outstanding issues with the fund, such as insuring against the construction risk inherent in new-build or “greenfield” projects, from high-speed rail lines to power stations. Investors are traditionally nervous of underwriting construction projects that could, for a variety of reasons, run over budget or suffer from serious technical problems once launched.

Investors are discussing whether the government can provide a guarantee for construction risk or whether state-controlled banks could get involved, possibly through issuing convertible bonds that transform into equity upon completion of the project.


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Posted by admin - March 4, 2012 at 16:37

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Workplace pensions shake-up

Steve Webb says a consultation to simplify occupational pension schemes could see a ‘bonfire of the regulations’

The government is planning to reinvigorate workplace pensions by conducting a “bonfire of the regulations” in the spring.

Pensions minister Steve Webb said the Department for Work and Pensions would conduct a formal consultation into which rules should be scrapped, with every regulation up for discussion “from the absolutely trivial to the huge”. “Every piece of regulation will go unless we can justify its existence,” he said.

Laith Khalaf, pension expert with independent financial adviser Hargreaves Lansdown, said simplification would be welcome, but it depended on “what regulations they intend scrapping”.

The National Association of Pension Funds (NAPF) said there was “an urgent need to reinvigorate workplace pensions” and that it would offer some recommendations for regulations that could be cut.

Darren Philp, director of policy at the NAPF, said: “Pension schemes have struggled with increasing regulation burdens, and the tough economic climate has made the need for simplification even more pressing.

“We need a regulatory regime that supports pension saving and that is fit for the 21st century.”

Webb has already announced his intention to abolish short service refunds – the repayment of contributions to both employers and staff when an employee who is moving jobs opts to cash in a small pension fund rather than have it transferred to another scheme.

He is also believed to be considering changing the rules on indexation of final salary pensions in an attempt to prevent the few remaining private sector schemes from closing. Although the government recently changed the rate at which pensions paid by such schemes increase from RPI to CPI, scrapping this requirement altogether would make funding them easier.

Eradicating the indexation link could wipe £7bn off the value of the pensions of employees who are still working and contributing, but would not affect those already drawing their pensions.

Webb also said the UK would combine forces with other governments, including those of Germany, Ireland and the Netherlands, to fend off European proposals of applying a higher capital requirement, known as Solvency II, to pension funds to ensure their solvency.

If the Solvency II requirements were implemented businesses would have to inject £300bn into their final salary schemes, inevitably leading to the closure of more schemes in the private sector, according to the National Association of Pension Funds.

Webb said: “Solvency II is completely inappropriate for defined benefit [schemes] in the UK. It is just inconcievable that we could apply S2 in that form.”

On the day the government started an £11m advertising campaign extolling the benefits of investing in workplace pensions, Webb also defended the decision to delay the introduction of auto enrolment. Firms with fewer than 50 employees will be given an extra 13 months to implement the scheme, while those with fewer than 3,000 will be given an as yet unspecified extension.

This means about 4 million people – the 44% of employees who work for smaller firms and are the least likely to have a workplace pension – will now have to wait until at least May 2015, while start-up businesses will have to enrol their employees on or after 2016.

The auto enrolment scheme requires employers to enrol all staff members on their workplace pension. Employees who do not want to make contributions will actively have to opt out after being enrolled.

The first stage of the scheme will begin with nine big employers enrolling their staff from October 2012, but the government believes up to 9 million people could eventually benefit from it.

Contributions will start at 1% from the employee and 1% from the employer. But once all employers have implemented auto enrolment, contributions will increase in stages with firms eventually putting forward at least 3% of their employees’ salary, and the employee adding at least 4%. Their contributions will also benefit from 1% tax relief.

The DWP will publish a timetable for the roll out of auto enrolment and staging of contributions in the next few days.


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Posted by admin - January 24, 2012 at 17:30

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Workplace pensions set for shake-up, says minister

Steve Webb says a consultation to simplify occupational pension schemes could see a ‘bonfire of the regulations’

The government is planning to reinvigorate workplace pensions by conducting a “bonfire of the regulations” in the spring.

Pensions minister Steve Webb said the Department for Work and Pensions would conduct a formal consultation into which rules should be scrapped, with every regulation up for discussion “from the absolutely trivial to the huge”. “Every piece of regulation will go unless we can justify its existence,” he said.

Laith Khalaf, pension expert with independent financial adviser Hargreaves Lansdown, said simplification would be welcome, but it depended on “what regulations they intend scrapping”.

The National Association of Pension Funds (NAPF) said there was “an urgent need to reinvigorate workplace pensions” and that it would offer some recommendations for regulations that could be cut.

Darren Philp, director of policy at the NAPF, said: “Pension schemes have struggled with increasing regulation burdens, and the tough economic climate has made the need for simplification even more pressing.

“We need a regulatory regime that supports pension saving and that is fit for the 21st century.”

Webb has already announced his intention to abolish short service refunds – the repayment of contributions to both employers and staff when an employee who is moving jobs opts to cash in a small pension fund rather than have it transferred to another scheme.

He is also believed to be considering changing the rules on indexation of final salary pensions in an attempt to prevent the few remaining private sector schemes from closing. Although the government recently changed the rate at which pensions paid by such schemes increase from RPI to CPI, scrapping this requirement altogether would make funding them easier.

Eradicating the indexation link could wipe £7bn off the value of the pensions of employees who are still working and contributing, but would not affect those already drawing their pensions.

Webb also said the UK would combine forces with other governments, including those of Germany, Ireland and the Netherlands, to fend off European proposals of applying a higher capital requirement, known as Solvency II, to pension funds to ensure their solvency.

If the Solvency II requirements were implemented businesses would have to inject £300bn into their final salary schemes, inevitably leading to the closure of more schemes in the private sector, according to the National Association of Pension Funds.

Webb said: “Solvency II is completely inappropriate for defined benefit [schemes] in the UK. It is just inconcievable that we could apply S2 in that form.”

On the day the government started an £11m advertising campaign extolling the benefits of investing in workplace pensions, Webb also defended the decision to delay the introduction of auto enrolment. Firms with fewer than 50 employees will be given an extra 13 months to implement the scheme, while those with fewer than 3,000 will be given an as yet unspecified extension.

This means about 4 million people – the 44% of employees who work for smaller firms and are the least likely to have a workplace pension – will now have to wait until at least May 2015, while start-up businesses will have to enrol their employees on or after 2016.

The auto enrolment scheme requires employers to enrol all staff members on their workplace pension. Employees who do not want to make contributions will actively have to opt out after being enrolled.

The first stage of the scheme will begin with nine big employers enrolling their staff from October 2012, but the government believes up to 9 million people could eventually benefit from it.

Contributions will start at 1% from the employee and 1% from the employer. But once all employers have implemented auto enrolment, contributions will increase in stages with firms eventually putting forward at least 3% of their employees’ salary, and the employee adding at least 4%. Their contributions will also benefit from 1% tax relief.

The DWP will publish a timetable for the roll out of auto enrolment and staging of contributions in the next few days.


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Posted by admin -  at 17:19

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