OPDU Report 24 - May 2008

Bulletin Board
Some key issues for trustees

In case you missed any of them, here are some of the key issues in the pension’s world at the moment.
 
Conflicts of Interest
The Pension Regulator’s (tPR) draft guidance suggesting a conflicts policy for trustee boards to adopt.
See Should the Finance Director be a Pension Trustee?
 
Shared Risk
It may have missed the Pensions Bill but the debate on conditional indexation and associated issues continues.
See Improved Risk Sharing: looking for better answers to DB’s faulty design? and Towards a new beginning?
 
Personal Accounts
Consultation has commenced on the proposed charging structure with Personal Accounts due to be intro-duced in 2012.
See Reflections on Pensions Policy 

Governance
Updated guidance for trustees from tPR and guidance on voluntary employer engagement in contract based schemes (such as personal pensions).
 
Accounting for Pensions
Changes under IAS 19 (introduced as IFRIC 14) may require a higher liability to be recognised on the company’s balance sheet. In addition, there is a discussion paper from the International Accounting Standards Board that proposes abolishing the smoothing of pension costs. And finally, a consultation document from the Accounting Standards Board suggests using the yield on gilts for calculating FRS17 liabilities, using actual rather than expected investment returns, but ignoring future assumed salary increases greater than price inflation.

Transfer Values
Under legislation which comes into effect in October 2008, trustees will be expected to take on responsibility for setting a scheme’s transfer values. Meanwhile, the debate on the use of enhanced transfer values as an alternative to scheme benefits continues.
 
Clearance
New guidance from tPR suggests seeking clearance for all events that are materially detrimental to the ability of the scheme to meet its pension liabilities.
 
New Powers for tPR
A consultation document from the Department for Work and Pensions proposes changes to tPR’s powers with retrospective effect. With the powers due to come into effect later in the year, tPR has moved to clarify its approach in the intervening period with the intention of minimising the impact on normal business activities.
 
Buy Outs (including partial buyouts)
Buoyant new business figures reported by leading insurance companies in the buy out market as companies and trustees look to de-risk their pension schemes. Innovation continues in relation to mortality risk.
 
Internal Disputes
From 6 April 2008, trustees have been able to simplify their internal dispute resolution procedure from a two stage process to a one stage process.
 
Not Forgetting
A new employer debt regime, updating Myners’ principles, Pension Protection Fund levies and scheme investment strategy...
Plenty to keep us all occupied....