Blog : BOARD TALK
|Posted on October 6, 2016 at 2:15 PM|
#Pensioncrisis is calling out for close attention paid to governance.
In recent days in the UK:
1.A parliamentary committee has said it will consider proposals to allow private sector pension schemes to cut costs by suspending inflation-linked increases for pensioners.There are 6,000 private sector pension schemes, with about 11 million members, according to the Financial Times.
2.Tesco has cheered investors by saying sales are up but it could be forced to hike payments into its staff pension scheme – after an increase in the deficit to as much as £5billion.
3. The Fortune 100 company Honeywell (profits $1.26bn) has just announced joined the trend with plans to close its UK defined benefit pension scheme (75% of UK employees are registered).
#FT: "The proposed closure, which will affect 1,300 employees, comes a year after the ..company’s £3.3bn purchase of Melrose Industries’ Elster meter business, which included the transfer of three pension schemes with combined deficits of £134m.
“This proposed change is in line with UK market trends, with approximately half of FTSE 100 companies either having no defined benefit scheme or freezing their DB schemes to future accruals,” Honeywell said in a statement.
FT quotes Linda McCulloch, national officer for Unite, Britain’s biggest trade union: “Unite members are very disappointed that Honeywell, a very profitable company, has seen fit to propose closure of its defined benefit scheme and to offer members a poor-quality defined contribution scheme, given that such plans rely on the vagaries of the stock market. The management is not offering any compensation for this proposed change.”
Business choice against a backdrop of societal expectation on pensions alongside economic reality in times of #pensioncrisis were explored recently here on Forbes. Research by Mercer shows that the annual accounting cost of building up new defined benefit (DB) pensions for the UKs largest 350 listed companies has increased by over £2 billion ($2.6 billion) since the start of 2016.
Sackers, the commercial law firm specialising in advising pension schemes, employers and providers, has launched a Governance Health Check to help pension schemes improve their standards of trusteeship and governance.
It said the service has been launched in response to the Pension Regulator’s focus on the quality of governance in occupational pension schemes.
The Governance Health Check will review a scheme’s processes and procedures, assessing key aspects of its management and identifying gaps for better governance. It will focus on:
· conflicts of interest
· risk management
· trustee training
· breaches of law and whistleblowing
· procedures for dealing with dispute
· balance of powers
· trustee board business planning
Helen Baker, Sackers.
“With the changing pensions landscape and challenging economic environment, it has never been more important for schemes to ensure that the arrangements they have in place are fit for purpose. TPR’s recent discussion paper on 21st century trusteeship and governance demonstrates the increased focus on good governance" said Helen Baker, partner at Sackers.
The UK regulator the Financial Conduct Authority (FCA) has just stated that asset managers will be required to disclose transaction costs on group pension investments in a standardised format under proposed rules.
It has set out rules for asset managers to enable independent governance committees (IGCs) and trustees to report on costs and charges more effectively.