UK Round-up: Regulator Warns Trustees Over Chairperson Statements

UK pension trustees have been warned they must produce an annual chairperson’s statement that complies with the law or risk a fine from the Pensions Regulator.

The warning comes after penalties issued by the regulator were upheld in court, when trustees in two separate cases appealed their fines. The penalties had been originally issued by the regulator because of an absence of necessary information in both schemes’ annual statements.

“Annual chair’s statements are an essential way to show pension savers that their scheme is being properly governed and will deliver the retirement benefits they are promised,” explained Nicola Parish, executive director for frontline regulation at the Pensions Regulator.

“That’s why it is the law for trustees to produce chair’s statements and make sure they contain all of the necessary information.”

The cases related to the 2015/16 chairperson’s statement of autoenrolment.co.uk, a master trust sponsored by Smart Pension, and the 2016/17 chairperson’s statement from the Moore Stephens Master Trust.

EC2, the trustee of autoenrolment.co.uk, was told that the £2,000 (€2,313) fine from the regulator would be upheld while the trustees of the Moore Stephens Master Trust had their fine reduced from £2,000 to £500.

In the case brought by EC2, the judge said the requirements stated schemes should not simply prepare an annual governance statement, but “prepare a statement containing a considerable amount of clearly specified and detailed information”.

Parish said that the regulator was pleased with the outcome, which recognised that a mandatory penalty should apply to chairpersons’ statements when they were not compliant.

“As these cases clearly demonstrate, we are prepared to defend our penalties in court,” she said. “We continue to expect high standards of trustees and will take action when chair’s statements are not compliant with the law.”

UK pensioners increasingly reliant on state benefits

The number of UK pensioners surviving solely on state benefits has risen to its highest level since 1995/96, according to statistics from pension administration group Equiniti.

An analysis of data from the UK’s Office of National Statistics found that 17% of pensioners in 2017/2018 had no other income to boost the cash they receive from the state.

The number of pensioners with no supplementary income was up 14% on the previous tax year, according to the analysis.

“It is worrying that one in five UK pensioners seems to be entering retirement with no personal savings or investments leaving them to rely solely on the income the state is able to provide,” said Chris Connelly, propositions and solutions director at Equiniti’s pensions business, in a statement.

“These figures underline how important it is that people continue to learn about the importance of a later life income.”

The research also found that single pensioners are more likely to be reliant on state benefits, with 25% having no additional income to supplement the money they receive from the government.

State benefits for UK retirees over the past decade have been slowly increasing, according to Equiniti’s analysis, with the average weekly payment now totalling £229 a week. This equates to 43% of the average pensioner’s income. Occupational pension income had fallen slightly during this time, from £160 to £148 per week. It now accounted for 28% of the average pensioner’s income.

Brexit stimulates UK pension risk transfer market

Prudential Retirement closed $2.6bn (€2.3bn) in longevity reinsurance agreements in the first quarter of 2019, it revealed today.

It said this was partly driven by UK pension schemes seeking to close deals ahead of the original Brexit deadline of 29 March, referring to an “unprecedented start” to this year’s UK pension risk transfer market

The retirement division of Prudential Financial said it had assumed the longevity risks for around 16,000 pensioners in the first three months of the year.

Amy Kessler, head of longevity reinsurance at Prudential Financial, said pension schemes that were sufficiently well-funded were able to reduce risks and lock in gains.

“With funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace,” she said in a statement.

“Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios.”

The company said it envisaged that the extension to the Brexit deadline to 31 October would encourage other pension schemes to follow suit, as schemes that have not yet transacted will want to use the “unexpected window”. 

Separately, Legal & General Group has agreed its first pension risk transfer transaction in Canada.

The transaction was worth more than C$200m (€132m) and was written through a strategic partnership between Canadian life insurer Brookfield Annuity Company and Legal & General Reinsurance.

Nigel Wilson, chief executive officer of L&G, said the pension risk transfer market was growing strongly in Canada.

“The transaction provides further evidence of our appetite and capability to grow our pension risk transfer business internationally,” he added.

The London-based insurance group has written £2.5bn of international pension risk transfers since its first such deal in 2015.