1 / 26

UK pensions: the landscape

Pension regulation in the United Kingdom Tony Hobman Chief Executive, the Pensions Regulator Warsaw, September 2006. UK pensions: the landscape. The UK pensions landscape. Large numbers of occupational schemes circa 10,000 DB or hybrid schemes circa 74,000 DC schemes, most of which are small

darryldrake
Download Presentation

UK pensions: the landscape

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Pension regulation in the United KingdomTony HobmanChief Executive, the Pensions RegulatorWarsaw, September 2006

  2. UK pensions: the landscape

  3. The UK pensions landscape • Large numbers of occupational schemes • circa 10,000 DB or hybrid schemes • circa 74,000 DC schemes, most of which are small BUT … • Most members belong to large schemes • over 85% of member records are in 1,600 large schemes

  4. Biggest proportion of members is in large DB … 17.3m private sector scheme member records in total 86.5% of member records are in large DB / hybrid Source: The Pensions Regulator (Pension schemes in the UK, 2005)

  5. … but biggest proportion of schemesis small DC 85% of schemes are small DC 84,600 ‘live’ occupational private sector schemes in total Source: The Pensions Regulator (Pension schemes in the UK, 2005)

  6. The UK pensions landscape • The trend is from DB to DC • very few new schemes registered in the UK since January 2000 are DB • it is possible that by 2012 there will be equal numbers of active DB and DC members BUT … • DB membership (especially deferred and pensioners) will remain significant for many years to come • DB assets in UK are circa £700bn (over €1,000bn)

  7. Active membership in private sector occupational schemes (millions) 7.0 6.0 5.0 Prediction >> 4.0 3.0 2.0 1.0 0.0 1979 1983 1987 1991 1995 2000 2004 2008 2012 2016 DB membership DC membership Active DC membership is growing…

  8. 20 15 Membership in millions 10 5 0 1995 2000 2004 DB active DB deferred / pensioner DC active DC deferred / pensioner … but even with the shift to DC, DB will remain important

  9. The risks

  10. What are the main risks to scheme members? • DB • underfunding • avoidance • DC • administration • members’ understanding • All schemes • trustee competence • investment • fraud

  11. 2005: A new regulator

  12. The new regulator • Before 2005: the old regulator (Opra) • emphasis on compliance • limited powers, reactive • New legislation in 2004 • April 2005: the Pensions Regulator is created • risk-based • wider powers, proactive • Pension Protection Fund also created

  13. A new regulator • Our objectives • protecting members’ pension benefits • raising standards • reducing risks to the Pension Protection Fund • Our approach • identifying risks • providing support, preventing problems • education and guidance • intervention when required

  14. Our regulatory powers • Gathering information and identifying risks • the scheme return • ‘whistleblowing’ reports • ‘notifiable’ events • DB recovery plans • Preventing problems and putting things right • improvement notices / third party notices • recovering unpaid contributions • freezing orders • disqualifying trustees

  15. Our regulatory powers • Taking action against avoidance of, or insufficient support for, DB liabilities • contribution notices • financial support directions • issuing clearance for corporate transactions

  16. Looking back: our first year 2005 – 2006

  17. Main themes for 2005 – 2006 • Developing a risk-based approach to regulation • Helping to support scheme funding • Working with the PPF to protect members from employer default • Working to raise standards: codes of practice, guidance, training materials

  18. Developing a risk-based approach • Categorising risks • level and nature of risk • number of members potentially impacted • Collecting data • environmental scanning • reports from and about individual schemes, intelligence • the scheme return • Appropriate use of resources • when is active intervention appropriate?

  19. Spotting a needle in a Haystack (MI5 Intelligence) Must win the War (Active Intervention) Intelligence based action ActiveIntervention High priority Medium priority Risk Low priority Bobby on The Beat (Proactive Monitoring) Educate & Support (Very Light Touch) Minimal scheme specific action Proactive Monitoring Size The risk and intervention model

  20. Supporting scheme funding • DB underfunding presents a potential risk to scheme members • Trustees and employers must develop prudent funding targets / recovery plans suitable for their schemes • We use risk-based filters to review recovery plans • Problems must be reported to us (e.g. failure to reach agreement)

  21. Clearance: protecting scheme members • Corporate activity has the potential to put members benefits at risk • We can take action if • there has been deliberate avoidance • a scheme is not properly supported • Optionally, companies can apply for clearance

  22. Raising standards • Codes of practice • help trustees, employers, advisers etc to understand their responsibilities • have evidential status • subjects include ‘whistleblowing’, funding, late payments • Other guidance, eg on cross-border schemes • ‘The trustee toolkit’ • online learning for trustees • free, available to all

  23. What next? 2006 and beyond

  24. Main themes • Continuing to support the process of scheme funding • Improving standards of governance • Tackling risks to DC scheme members

  25. Getting a clearer picture • Policy must be based on • high-quality, up-to-date information • consultation with the regulated community • Governance survey • independent, anonymous • Key findings include: • smaller schemes more likely to need support • importance of training • need for risk management • need to manage conflicts of interest

  26. In conclusion … • A new risk-based regulator • Emphasis on education and prevention • Stronger powers to • gather information • take action • set standards • DB funding a key focus: we are equally concerned with DC issues and governance overall

More Related