UK roundup: PPF, NAPF, Aon Hewitt, bulk annuities
The Pension Protection Fund (PPF), the UK’s lifeboat fund, has set out its expectations for the next three years, suggesting it could reach £22bn (€27bn) in assets under management (AUM).
By 2017, the fund will have grown from its current size of £15.6bn and seen the number of members grow from 204,000 to 280,000.
The PPF said it saw 120 schemes transfer into the fund over the last financial year, which will be joined by 80 schemes this year, and 90 schemes each in the following two.
Its expenditure on fund management fees is expected to rise from £85.4m to £120.6m, in line with its growth in AUM.
It also confirmed it was on track to complete its funding mission of self-sufficiency, expected by 2030.
Elsewhere, research conducted by the National Association of Pension Funds (NAPF) showed the recent changes announced in the Budget to DC at-retirement options would lead to growth in second-pillar savings.
Some 28% of workers contacted by the lobby group said they were now more likely to start, or increase, saving in a pension scheme following the Budget.
This compared to 3% who said they were less likely to save, or stop entirely.
The research also highlighted potential issues for DC investment strategies, with a quarter (24%) saying they would take their entire pension in cash.
However, 58% said they preferred to receive a regular income, such as an annuity.
Some 19% agreed they would take the cash irrespective of whether they had other savings elsewhere, suggesting the number of pensioners choosing this route could be significantly higher than the government anticipates, the NAPF said.
And finally, the monthly bulk annuity market monitor, produced by Aon Hewitt, showed pricing for both buyouts and buy-ins were better than 12 months previous.
It also showed growth in assets would leave schemes in a much better position for a buyout than many trustees expected.
However, it also argued the Budget had had little impact on bulk annuity pricing, despite expectations individual annuity providers would shift business towards the bulk space, potentially leading to a competitive lowering of prices.
Authors of the report, Dominic Grimley and Paul Belok, said: “This will help to sustain competition in the bulk annuity market as demand from schemes rises.
“We do not expect bulk annuity pricing to react materially in the short term, as the market is already competitive.”