UK roundup: Labour party reveals pension policies in manifesto
The UK’s main opposition party has pledged to maintain the ‘triple lock’ on the country’s state pension in its election manifesto, published this week.
The Labour party said it would guarantee to raise state pension payments by at least 2.5% a year for the duration of the next parliament, should it win the 8 June poll.
A government-commissioned report by John Cridland, former director general of the Confederation of British Industry, recommended in March that the triple lock be scrapped and the state pension age increased to 68.
The Pensions and Lifetime Savings Association, the UK’s trade body for pension funds, has backed a simplification of the state pension, while the ruling Conservative party has yet to formally decide its stance.
In addition, the Labour party – led by Jeremy Corbyn – pledged to amend the UK’s takeover code “to ensure every takeover proposal has a clear plan in place to protect workers and pensioners”.
While lacking in detail, it follows a pledge from prime minister Theresa May to give The Pensions Regulator powers to veto mergers or acquisitions if pension funds are not given sufficient protection.
The Labour party also vowed to “restore confidence in the workplace pension system and put people rather than profit at its centre”. The manifesto included a promise to “end rip-off hidden fees and charges”, and backed the idea of consolidation among pension funds.
Finally, the party said it would review a surplus-sharing arrangement with the UK’s mineworkers’ pension schemes. The government is entitled to take a share of any surplus from the schemes, an arrangement that has long angered mineworkers’ unions.
Tax rules lead companies to drop pension contributions
Some of the UK’s largest companies are cutting back on pension provision in favour of cash rewards due to new rules limiting the amount individuals can pay into their pensions every year.
Under rules introduced in April 2016, employees earning more than £150,000 (€177,000) will see their annual tax-free allowance for pension contributions tapered. In addition, the lifetime allowance – the maximum a person can save into their pension without paying tax – was reduced to £1m.
A survey from consultancy firm LCP found 90% of FTSE 100 companies had changed their policies due to the new rules. The vast majority (84%) had begun offering cash as an alternative to pension contributions to employees at risk of exceeding their annual or lifetime allowances.
In addition, LCP said one in five FTSE 100 companies offered all employees – not just the highest earners – cash as an alternative to pensions.
“This is consistent with our wider experience that the tax regime is hitting more employees than first thought,” said Alasdair Mayes, partner at LCP. “It’s no longer limited to the highest earners. What is clear is that changes to the tax system are having a significant impact on behaviour.
“Our survey shows just how sensitive pensions are to changes in the tax regime. Threats to change the tax treatment further will lead to a continued, and rapid, shift to flexible alternatives to pensions. This could have a significant impact on retirement incomes in the decades ahead.”
Tullett Prebon secures £270m buyout
Tullett Prebon, an investment broker, has sealed a £270m derisking deal with insurer Rothesay Life for its defined benefit pension scheme.
In a statement regarding the transaction, the insurer said the trustees had secured pricing for the deal against a basket of assets already owned by the Tullett Prebon Pension Scheme, “providing price certainty during execution and ease of premium payment once executed”.
Guy Freeman, co-head of business development at Rothesay Life, said: “Pricing for long-duration bulk annuities continues to be lower than trustee estimates in our experience. As a result we’re seeing increased appetite from corporate sponsors in full derisking and we’ll continue to focus on adding value in structuring and executing each transaction we work on.”
Andrew Baddeley, chief financial officer of TP ICAP, the scheme’s sponsor, said: “This transaction will provide additional security for members of the scheme and will also help to de-risk TP ICAP’s balance sheet.”