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UK roundup: NAPF, Now Pensions, NEST, Solvency II, Towers Watson

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  • UK roundup: NAPF, Now Pensions, NEST, Solvency II, Towers Watson

UK - The pensions industry has raised concerns that proposed auto-enrolment reforms may never be completed, according to the National Association of Pension Funds (NAPF).

Speaking to a parliamentary committee examining the introduction of soft compulsion, chief executive Joanne Segars appeared critical of Monday's announcement by pensions minister Steve Webb to postpone auto-enrolment for small and medium-sized enterprises (SMEs) by a year.

Segars told the work and pensions committee that the government would now have to be "very, very clear, very, very quickly" and detail what shape the announced delay would take.

She added that members of the industry had now begun wondering whether the reforms would "ever be completed".

The Department for Work & Pensions (DWP) has so far only indicated that revised staging dates would be released in 2012, with delays of 13 months expected for all SMEs employing fewer than 50 workers.

Asked about the scheduled 2017 review of both auto-enrolment contribution rates and the National Employment Savings Trust (NEST), Segars conceded that it was unclear whether the review would still take place on schedule.

"It would seem rather odd, to us at least, to review in 2017 before everyone is through auto-enrolment," she added.

Dame Anne Begg, chair of the select committee, earlier said she believed auto-enrolment would now not be complete until 2019 as a result of the revised staging dates.

As part of the review, the potential of transfers in and out of NEST would likely be addressed, with Segars stressing that the ban was about both protecting and insulating existing provisions, as well as safeguarding against the reduction of employer pension contributions.

She said the general issue of transfers should nonetheless be addressed, with a DWP consultation on the topic imminent.

Both Morten Nilsson, chief executive of ATP's UK vehicle Now Pensions, and Segars stressed the benefits of scale.

Nilsson indicated that both Denmark and the Netherlands had benefitted from this scale as a means of reducing costs, while Segars reiterated the NAPF's support for fewer and larger defined contribution schemes as a way of reducing the number of pot transfers needed.

However, Nilsson said he believed the removal of such transfer bans would have a more detrimental impact on NEST than it would on his own pension scheme.

Legal & General's head of pension strategy Adrian Boulding concurred, telling the committee he viewed the lifting of the transfer ban and contribution limit as potentially distracting for the government-backed fund, as it would "wander off" into other markets outside of its targeted core of low earners.

In other news, the UK government has said it is "gravely concerned" about proposals to introduce Solvency II for pension funds.

Speaking in the House of Commons earlier this week, pensions minister Steve Webb reiterated the coalition government's resistance to the application of Solvency II guidelines for occupational pension schemes, highlighting the cost increase any such regulation would incur.

Asked by an MP if the regulations did not form a "further EU assault" on the "hard-pressed" UK occupational pensions sector, Webb agreed with the assessment.

"We are gravely concerned about these proposals," he said. "The UK government does not accept the need for new solvency arrangements for defined benefit (DB) schemes based on Solvency II, which would have potentially serious effects for UK DB schemes.

"We are especially concerned about any proposals that would increase costs for employers at a time when we are looking to keep costs down, or that might affect the vital role pension funds play as investors in the UK. We will oppose these proposals."

The Liberal Democrat MP previously told a conference in Brussels that there was "no compelling evidence" to support Solvency II as appropriate for pension funds.

David Roberts, a consultant at Towers Watson, said it was reassuring for the government to issue such a strong public statement on the issue.

He noted that the government had been lobbying the European Commission, as the regulation offered "minimal" benefits to members, but posed "very significant" risks to market stability and future DB pension provision in the UK.

Roberts noted that the consultancy's own estimates predicted DB schemes would face a 50% increase in liabilities as a result of the solvency regulation currently under review as part of the re-examination of the IORP Directive by the European Insurance and Occupational Pensions Authority.

He added: "The Commission talks about impact dampeners such as sponsor covenant and access to pension compensation schemes - such as the PPF in the UK - yet it offers no clear plan for assessing these before formulating its proposals."

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