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21st July 2015

TRUSTEES DILEMMA IN A DC WORLD

By: Barbara Cole, Technical Consultant, Cartwright Group
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A Highly Unenviable Position

‘A highly unenviable position.’ The Pensions Ombudsman hit the nail right on the head when he used these words recently to describe the dilemma faced by trustees when considering whether to block transfers to suspected liberation schemes. But the question of transfers to questionable schemes is just one of a number of complex new dilemmas faced by trustees as they grapple with the uncertain regulatory landscape created by the Chancellor’s pension reforms.

What evidence of advice should be seen before transfers that are not covered by the guiding regulations are actioned? How should discretion around over-generous transfer values for those close to normal retirement date be exercised? How should the interests of transferring and remaining members be balanced? These are all equally taxing issues facing trustees.

By establishing a framework that encourages increased transfer activity, the pension freedom reforms have legitimised some activities that would previously have been considered dubious. This blurring of the lines between what is and what is not acceptable means trustees can find themselves coming under pressure from a member wanting to access flexibility while at the same time knowing they could come under scrutiny for allowing a transfer to a liberation scheme.

Many of those looking to transfer are basing their decision to do so on websites and other advertisements publicising transfers to arrangements that would allow them more flexibility, some of which are legal but some of which are dubious.

Before the Pension Schemes Act 2015 came into effect, trustees were powerless to prevent statutory transfers, but could still be held to some extent responsible for a dubious transfer. But trustees can now refuse to pay transfers where the right derives from law where they find that appropriate advice has not been taken on the transfer. Rights to transfer may, however, be embedded in scheme rules as well as in legislation, so trustees may wish to arrange for a review of their scheme rules and, if they are found wanting, pass a simple resolution to give them power to withhold transfer values where they are not satisfied appropriate advice has been taken.

This is not the only trustee dilemma relating to advice on transfers. Trustees are obliged by law to check for evidence that appropriate advice has been taken by a member with existing defined benefit rights totalling more than £30,000. This rule applies where a member is transferring rights from a defined benefit scheme to access the new benefit flexibilities, converting benefits under the same scheme to benefits that could be used as flexible benefits or requesting certain lump sum payments in respect of the benefits.

But should trustees, as a matter of good practice, check that appropriate advice has been taken whatever the circumstances of the transfer? It is advisable for trustees to put in place a policy on transfers or liaise with their third party administrator to ensure they are content with the practice on transfers.

Trustees face a further dilemma over whether to refuse discretionary transfers for those close to normal retirement date if the transfer costs are noticeably more that the value of the member’s benefits in the fund. Statutory rights to transfer DB benefits do not extend to the last year before normal retirement age, but scheme rules will often give trustees discretion to agree to do so.

So how should they exercise this discretion? From an employer viewpoint, whenever members transfer out, liabilities, risk and any deficit in the scheme are usually reduced. But where transfers are close to normal retirement age, the transfer value can sometimes be higher than the reserve held by the scheme under the technical provisions. An example is where the technical provisions basis makes allowance for commutation but the transfer basis does not, and the scheme’s commutation terms are ungenerous. So trustees need to be aware of this and work closely with their actuary to determine the cost implications. Options may be to refuse discretionary transfers, talk to the actuary about potentially reducing the amount quoted, or seek a top-up payment from the employer.

If trustees find that a trickle of transfer requests turns into a torrent they may need regularly to review factors and funding positions to ensure that the health of the scheme and the interests of remaining members are not jeopardised.

The new rules present opportunities for more suitable outcomes for both members and sponsors, but for trustees they mean coming to terms with complex new decisions.

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8th July 2015

RESULT HAPPINESS IN A DC WORLD

By: Barbara Cole, Technical Consultant, Cartwright Group
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Barbara Cole comments on an observation from Wilkins Micawber, a fictional character from Charles Dickens's 1850 novel, David Copperfield - as true today as in Dickensian times.

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds [n]ought and six, result misery.

There is a challenge ahead for UK pension schemes wishing to help their members achieve substantial happiness in retirement. Pensions can, of course, help to avoid “misery” in retirement. However, in a DC world, this is usually only the case if the contributions paid during membership are sufficient and if all investments are carefully managed and pension or cash is drawn wisely.
So, how can pension scheme trustees help?
The first port of call would be to make savings as efficient as possible by reviewing charges. Generally speaking, AVC charges are not subject to the charge cap, so the trustee’s review of the charges is very worthwhile. Old AVC arrangements may well have penal charges. Also, unless there is a good reason for staying with the provider, a change or addition to the investment range for new contributions is likely to be worthwhile - as is consideration of a transfer to a specialist AVC vehicle or even a SIPP.
Secondly, of course, there is the need for pension scheme trustees to educate themselves and scheme members with the most up-to-the minute information on pensions.
The Pension Regulator’s Code of Practice requires trustees to have the appropriate knowledge and understanding to enable them to carry out their role. The code applies to all DC arrangements, including AVCs - even if they are within a DB scheme.

Trustees are required to monitor the appropriateness of investment strategies and fund choices for their membership. They should be in close contact with their investment managers to enable them to evaluate the market, as well as carefully consider reasons for short term fluctuations in performance. Better returns should produce better benefits.
In the world of post-pension freedoms, trustees should also be prepared for members deciding to take cash benefits from AVCs (and, for that matter, other small pots).

Of course, it’s not only trustees who need to up to date on pensions. It has been two decades since Tony Blair’s “education” speech. By now, those in secondary school at that time should have received sufficient education on finance to save them from financial misery. Sadly, this is not the case.
So it remains true that employees still need to be educated about their legitimate options. They need to know where AVC arrangements are still open and be able to make appropriate investment choices. They must also know where AVC arrangements are closed and what alternatives are available for boosting their pension. It is so important for them to understand that there is the possibility of using their AVC to provide cash at age 55 or later.

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29th June 2015

CARTWRIGHTS STRENGTHENS ACTUARIAL TEAM TO SUPPORT STRONG BUSINESS GROWTH

Alan Swallow has joined actuarial and pensions firm, Cartwright Group as Senior Actuary. His appointment reflects Cartwrights strong growth and the positive outlook it sees in the market, particularly from small to medium-sized schemes.

A former Senior Actuary at Capita, he qualified 17 years ago and will report to Robert Sweet, Director of Cartwright Group and its Actuarial business. He will be based at the firm’s Farnborough office.

Alan was pivotal to growing SBJ’s employee benefits proposition in the Midlands, which was latterly subsumed into Capita Employee Benefits. He chaired their Economic Assumptions Group and has been involved with the profession, chairing a number of pension seminars for actuaries in his time there. He brings a wealth of experience in providing integrated investment, funding and risk management solutions to clients, who are adapting to the ever-changing financial and governance climate.

Robert Sweet commented: “Alan complements the existing team and will provide valuable insight and new ideas, whilst enabling us to meet the growing demand we are seeing, particularly from new clients seeking proactive, responsive and personal service.

Says Alan Swallow: “I am delighted to be joining Cartwrights. I have been very impressed by their strong client-focused approach and dedication to meeting clients’ needs. I hope to make a difference by bringing fresh market perspective and helping the firm to expand.”

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2nd March 2015

CARTWRIGHT GROUP SHORTLISTED IN TWO CATEGORIES FOR THE PROFESSIONAL PENSIONS UK PENSIONS AWARDS 2015

We are delighted to announce that Cartwright Group has been shortlisted in two categories for the Professional Pensions UK Pension Awards 2015. The categories in which we have been shortlisted are 'Pensions Consultancy of the Year' and 'Third Party Pensions Administrator of the Year'

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4th Febuary 2015

LOW GILT YIELDS LIKELY TO BOOST PENSION TRANSFER ACTIVITY SIGNIFICANTLY SAYS CARTWRIGHT

With long term gilt yields at recent all-time lows, a hike in scheme members taking transfers from DB Schemes in order to take advantage of the new freedoms from April 2015 is expected, according to actuarial firm Cartwright.

Robert Sweet, Director of Actuarial Services at Cartwright says: “scheme members may consider that it is now a particularly good time to weigh up whether a transfer is a sensible option for them, given that the low yield environment can potentially significantly increase the transfer value they have been offered.”

Each 0.1% drop in the 15 year gilt yield will add around 3% on a typical transfer value for a 50 year old. An individual with a deferred pension of £7,000 per annum payable at age 60 might currently expect a transfer value in excess of £160,000 and will have seen an increase in his transfer value of more than 40% in the last 12 months, during which time 15 year gilt yields have fallen from 3.2% p.a. to 1.8% p.a..

However, Robert Sweet cautions that trustees need to:

• determine whether the assets of their schemes are sufficient to cover higher transfer values
• decide whether they might need to be scaled back to reflect any potential shortfall, and
• ensure that communication with members ahead of April is properly thought through.

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9th December 2014

CARTWRIGHT GROUP SHORTLISTED IN TWO CATEGORIES FOR PENSIONS AGE AWARDS 2015

We are delighted to announce that Cartwright Group has been shortlisted in two categories for the Pensions age Awards 2015. The categories in which we have been shortlisted are 'Pensions Consultancy of the Year' and 'Pensions Administrator of the Year'

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3rd November 2014

STATE-OF-THE-ART ASSET LIABLITY MANAGEMENT CAPABLITY PUTS CARTWRGHT GROUP AHEAD OF THE CURVE

Specialist actuarial, pensions and benefit consultancy firm, Cartwright Group, has signed an agreement to license the Asset Liability Management (ALM) software tool developed by Ortec Finance, a leading global provider of technology solutions and services to the pensions industry.

The move further strengthens Cartwright Group’s investment consulting proposition, and is central to its long term growth strategy.

Key to working with Ortec Finance was the pedigree of its ALM solution, according to Ashlin Noonan, Investment Consultant at Cartwright Group.

“It’s a top of the range system, and means our clients, from the largest to the smallest, get best in class” explains Ms. Noonan.

Commenting on the benefits to Cartwright Group’s clients, Maurits van Joolingen, Client Services Manager at Ortec Finance says.

“Our ALM solution has been developed with pension schemes in mind from the outset. So it is completely focused on those specific goals and objectives, including meeting current integrated risk management requirements.”

Van Joolingen explains that the starting point for Ortec Finance’s ALM tool is to analyse a scheme’s exposure to risk. It then looks at how those risks can be managed in the most efficient way.

“It gives the ability to test the robustness of decisions across the whole risk spectrum of investment scenarios so that the most appropriate policy can be set,” adds van Joolingen.

As well as high-quality economic scenarios based on more than 400 variables, including all major regions in the world, the Ortec Finance ALM system provides consistent modelling of assets and liabilities, including the simulation of future consequences in terms of relevant objectives and risk factors.

Such focused capabilities will allow Cartwright to help clients address the requirements of the Pensions Regulator’s new Code of Practice for Defined Benefit (DB) schemes, which places increased importance on integrated risk management when developing a scheme funding solution, says Ms. Noonan.

“Clients are now sitting up and taking notice of the new code and asking themselves whether they are compliant and could they be doing more to ensure they are. So increasingly, they need a firm that can provide the full range of investment consultancy services and the level of expertise to match.

“The new ALM solution gives us more detailed modelling capacity to analyse current investment positions as well as the level of risk the client is carrying. This allows us draw up a strategy to get the right balance between reducing the level of risk and the investment return the client needs to achieve in order to fulfill pension scheme obligations,” she adds.

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1st October 2014

CARTWRIGHT GROUP ADOPTS PROCENTIA ADMIN SYSTEM

New administration system at heart of Cartwright Group’s growth strategy

Actuaries and consultants, Cartwright Group, has selected Procentia’s Intellipen platform as its new pension administration system. The decision to go with pension software provider Procentia over other platforms came down to quality and flexibility, according to Tony Thornton, Director of Pensions Administration at Cartwright Group.

“As a pensions administration provider we live by the accuracy, speed and quality of service we deliver to our clients. We want to build on our current high standards and Procentia’s Intellipen platform allows us to do that. At the same time, the new platform is flexible enough to accommodate our future administration requirements brought about by changes to the pension landscape,” he explains.

Commenting on the appointment, Procentia’s CEO, Steven Donkin said: “We are delighted that Cartwright Group has chosen Intellipen as its new platform. I firmly believe we have a role to play in underpinning their growth plans with a strong and robust pension administration platform that has the capacity to grow alongside them.”

Procentia’s Intellipen platform is a modern browser-based platform which has a suite of tools enabling full integration across accounting and payroll service modules. It also provides for administrator view access and has an interactive member portal.

These enhancements will enable Cartwright’s clients to access real-time membership and financial information in relation to their pension arrangements, allowing for regular and ongoing monitoring through a simple, intuitive yet powerful online portal.

Following the appointment, Cartwright will migrate all existing clients onto the system. There are advanced project management plans in place and the migration will occur in a phased manner to minimise disruption.

We see this as an important and exciting development for our business, which will enable us to build on our existing high quality service and attract further clients, explains Mark Williams, Cartwright Group’s newly appointed Commercial Director.

Cartwright Group is building its presence and service proposition having acquired the trust-based pensions business of Gallagher Benefits Consulting in 2013. It has also made recent senior appointments as part of its growth strategy. .

The firm provides a range of services to over 200 defined benefit (DB) and defined contribution (DC) schemes.

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30th September 2014

CARTWRIGHT GROUP EXPANDS WITH TWO SENIOR APPOINTMENTS

Cartwright Group has announced the appointment of Mark Williams as Commercial Director and Ashlin Noonan as Investment Consultant. These are two pivotal appointments for the firm which is strengthening its presence in the pension actuarial, consultancy and administration market.

Mark joins Cartwright Group from Capita Employee Benefits and in this newly created role he will be responsible for all areas of business development and marketing including the Group’s strategy for growth.
Ashlin is a qualified actuary with over 12 years of investment consulting and pensions experience. She has previously worked with Novare Actuaries and Consultants in Cape Town as Head of Asset Liability Modelling and Strategy Formulation; at Watson Wyatt where she was Investment Consultant, and at KPMG as Actuarial Analyst. Ashlin will develop Cartwright Group’s expanding range of bespoke investment consultancy services with particular focus on integrated risk management for existing and new clients.
Commenting on the latest appointments, Cartwright Group Chairman and Managing Director, Ian Cartwright said:
“Ashlin and Mark will inject added knowledge and momentum to the delivery of specialist guidance and services to our existing and prospective clients. Our clients will benefit from the latest thinking to help them plan and manage their funding and investment strategies.
“As schemes continue to shrink or close it has never before been as important as it is now for the trustees and sponsors, particularly of small to medium sized schemes, to be able to access expert, cost-effective advice.”

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