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UK roundup: NEST, Stewardship Code, Barnett Waddingham, Pension Capital Strategies, Towers Watson

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  • UK roundup: NEST, Stewardship Code, Barnett Waddingham, Pension Capital Strategies, Towers Watson

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UK - The introduction of the National Employment Savings Trust (NEST) will reduce annual management costs across the industry, pensions minister Steve Webb has said.

Responding to questions by Labour MP Jon Cruddas on issues including the Stewardship Code, Webb said there was no reason for a pension saver to pay 1.5% management charges for a pension product.

"One thing we hope will happen as a result of introducing the NEST corporation into the market next year, and more fully in the coming years, is that it will have a downward impact on charges across the market," he said.

Webb argued that a similar reduction in management fees was seen when stakeholder pensions were first introduced in the UK.

NEST recently unveiled an annual management charge of 0.3%, as well as a 1.8% fee for all payments made into the scheme.

Cruddas earlier called for more transparency from pension funds at a time when scheme members were being left to shoulder more of the investment risk.

He argued that with the shift from defined benefit to defined contribution schemes, as well as the introduction of NEST, an increasing amount of people's future wealth would be tied up in the capital market.

"There is clearly a growing movement of people who want to know what is being done with their money - a movement that is being held back by a pervasive lack of transparency and a culture of hostility to the people whose money is at stake having the impertinence to ask questions," he said.

Cruddas said the Stewardship Code, introduced by the Financial Reporting Council earlier this year, was "far from perfect", but pointed in the right direction.

"Improvements in fund manager transparency will give savers the accountability and visibility they deserve only if pension funds play their part too," he added.

He also criticised the Pensions Regulator for so far failing to produce guidance on the implementation of the code.

Responding, Webb said the more that could be done to reduce the barriers people face in obtaining information on socially responsible investment from their schemes, the better.

"I do feel there is occasionally a need to remind those who manage our money that it is our money," he added.

Meanwhile, the UK Treasury is calling for responses to its consultation paper on the implications of granting individuals early access to their private pension savings.
 
The document sets out the available evidence on early access and asks whether it can provide an effective incentive for individuals to save more into a pension.
 
It also shows some of the different models for how early access could be offered and the potential benefits and risks of each, and seeks further evidence from interested parties.
 
The government asks for representations on the commutation rules that determine when individuals with small pension funds can take their savings as a lump sum, as well as evidence on the barriers to transferring smaller pension pots.

Consultancy Barnett Waddingham has already warned that it views most models being considered as too complex to administer efficiently.

Danny Wilding, partner at the company, said: "The only model that has legs is a loan model allowing individuals to borrow from their pension fund. 

"This could perhaps take the form of allowing loans for certain purposes to be secured against pension assets, with part of the pension fund allowed to be liquidated early to repay the lender if certain conditions are met."
 
Pension Capital Strategies (PCS) has said that with the worsening funding position of many pension schemes, there will be a growing interest in de-risking through pension buyouts.

The consultancy said that despite a slow third quarter, deals conducted in 2010 already outstripped those signed last year.

Tiziana Perrella, head of buy-out services at PCS, said: "Despite a slow third quarter, the healthy pipelines being reported by insurers represents evidence of sponsors' keenness to de-risk defined benefit schemes."

Perrella added that unless the economic situation worsened over the next 12 months, this time next year would see total buyouts exceed £10bn (€12bn).

Finally, Towers Watson has sold its forecasting business eValue to Financial Express.

Under the terms of the deal, the consultancy will continue to advertise eValue's services to clients, with management team Bruce Moss and Samantha Seaton retaining their positions.

Martin Pike, EMEA managing director for risk consulting and software, said: "The sale of eValue marks a natural step in the evolution of a long-standing working relationship with Financial Express and establishes a compelling solution for life and pensions companies and advisers."

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