UK roundup: BlackRock creates head of LGPS role
BlackRock has appointed Gavin Lewis to lead its offering for the local government pension scheme (LGPS), a new role.
Lewis joined the asset manager at the beginning of the month from Vanguard, where he was most latterly head of UK institutional. At BlackRock, he will report to Sarah Melvin, head of UK.
Before joining Vanguard in 2016 Lewis was at UBS, and before that at Russell Investments. He is a member of The Diversity Project, which seeks to promote an inclusive culture in the investment profession.
Melvin said LGPS pension funds had “a unique set of investment requirements with distinct servicing needs”.
“Gavin’s experience is a perfect fit to enhance how we collaborate with our clients across these schemes, deliver solutions the meet their needs and serve their members,” she added.
There are 87 pension funds in the LGPS in England and Wales. According to recently released government statistics, the market value of the funds was £287.2bn (€333bn) at the end of March and the total membership was 5.9 million.
One of the biggest LGPS developments in recent years has been the asset pooling by the local authority pension schemes, with eight pools having been established.
DWP consults on levy increase
The UK government is planning to raise the rates of the general levy on occupational and personal pension schemes from April 2020.
The levy part-funds the activities of The Pensions Regulator, The Pensions Ombudsman and the Money and Pensions Service.
The levy rates were last increased in the 2008-09 fiscal year. They were then reduced by 13% in 2012-13, remaining at the same level for most pension schemes since then. A new, lower, levy rate for schemes with 500,000 members or more was introduced in 2017-18.
However, since 2018 the balance of the levy has been in deficit. There is now a cumulative deficit of more than £16m, estimated to reach £50m by 2020.
Expenditure has risen from around £40m during 2013-14 to over £60m by 2018-19, while revenue has remained more or less the same.
The government said the increase in costs had been caused by significant changes in the pensions industry and regulatory landscape, leading to increased activities by the levy-funded bodies.
The Department for Work and Pensions (DWP) has now launched a consultation on four different options for increasing the levy:
* A holding increase of 10% of 2019-20 rates on 1 April 2020, with further increases from April 2021, informed by a wider review of the levy;
* A phased increase in the levy over the three years from 1 April 2020;
* A phased increase over around 10 years commencing 1 April 2020;
* A phased increase over around 10 years commencing 1 April 2021.
The DWP is also proposing a one-off increase to the annual levy contribution paid by schemes with between two and 11 members, which have been unchanged since 2000. The consultation closes at mid-day on 15 November.
Equalise GMPs, minister urges
UK pensions minister Guy Opperman has warned pension schemes that they need to begin the process of correcting the gender inequalities linked to guaranteed minimum pensions (GMPs).
Noting that the government had published guidance on GMP equalisation six months ago, he said it was time for pension schemes to act.
Source: Chis McAndrew
“People need certainty and clarity when it comes to their retirement income,” said the minister. “Companies should be taking steps towards equalisation, such as correcting records and deciding upon a preferred methodology.”
Last month the Pensions Administration Standards Association (PASA) published guidance on methods pension schemes could use.
In October last year, the UK’s high court ruled that GMPs were in breach of gender discrimination laws as they were payable to men and women at different ages. As a result, pension funds have to recalculate benefits accrued between 1990 and 1997, which some are still paying.
According to a survey carried out by the Association of Consulting Actuaries over the summer – before PASA’s guidance, in other words – 64% of employers running defined benefit schemes said it would take more than two years to fully equalise pensions for the effect of unequal GMPs in their schemes.
‘Administrative complexity and time’ was ranked as the top of six challenges linked to GMP equalisation.
The survey drew 308 responses from employers of all sizes running more than 510 different schemes.
In January consultants XPS Group said the cost of implementing the GMP ruling for most schemes in its sample would be less than 1% of liabilities.
The concept of GMPs was introduced as a way of ensuring that DB scheme members were no worse off if their scheme decided to opt out of the state second pension, an earnings-related addition to the UK’s basic state pension that was scrapped in 2016. GMP is the minimum pension the DB schemes who contracted out had to provide for their members.