UK roundup: European Court of Justice, Mercer, Essex, Hymans Robertson
UK - A recent ruling by the European Court of Justice (ECJ), which states annuities should not be priced based on the gender of the buyer, are likely to add an additional layer of complexity to buyouts for underfunded schemes, Mercer has said.
Stuart Faloon, UK head of bulk annuity broking, said funded pension schemes would still be able to dictate benefit payments based on scheme rules and "not depend on the price of the contract purchased".
However, he said a scheme in the process of winding up may be bound by the ECJ ruling to buy annuities using unisex rates.
Faloon added: "Once a buy-in or buyout policy has been purchased and a beneficiary wishes to exercise a benefit option, such as converting part of their pension for a cash lump sum at retirement, the insurer's conversion terms will need to reference a unisex basis [towards the end of 2012, when the ruling takes force].
"To the extent that benefit conversion terms affect the pricing of buyout at the outset, this will impact on the overall price. However, the size of this impact is expected to of be second order."
Meanwhile, the £3bn (€3.4bn) Essex County Council pension fund has renewed Hymans Robertson as scheme investment consultants.
The consultancy has held the position for close to a decade.
In its role, Hymans Robertson will continue to advise on matters of investment strategy and asset allocation and benchmark design and selection. It will also appoint external managers and monitor them.
The council did not respond to questions about the length of the £1m contract at time of publication.
Finally, Alexander Forbes has launched its own pension index in an effort to chart the performance of defined contribution schemes over the last decade.
The consultancy estimated the average UK private sector worker has lost £10,000 a year on average as a result of low gilt yields and high annuity prices.
It calculated that someone who would have been able to gain retirement income of two-thirds of his final salary at 30 by paying 12% contributions could now expect to draw 45% of his final earnings.