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UK roundup: TPR, People's Pension, PwC, Aon Hewitt

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The Pensions Regulator (TPR) has fined the trustees of four defined contribution master trust schemes for failing to publish documentation on time.

Two trustee boards were fined for failing to produce a chair’s statement on time. Under rules introduced in 2015, trustees of DC pensions must publish an annual statement within seven months of the end of the scheme’s reporting year.

It marks the first time TPR has used such powers, introduced in 2015.

Nicola Parish, executive director for frontline regulation at TPR, said the statements were “a basic requirement of good governance”.

MC Trustees, which oversees the Nurture Master Trust, was fined £2,000 (€2,330), the maximum TPR can levy.

In a statement, the regulator said the maximum penalty was imposed because MC Trustees was “a professional trustee, and there were no mitigating factors that would reduce the amount of the fine”.

Separately, the trustees of three Save and Prosper master trusts were fined £3,020 after also failing to publish a chair’s statement for each fund.

Parish concluded: “Trustees should be aware this type of breach will result in a fine, and we hope our latest report will act as a reminder to all trustees, professional or otherwise, to ensure they complete the chair’s statement fully and on time.”

The regulator has come under pressure in recent months to be more proactive in the wake of the collapse of UK high street chain BHS.

The company’s defined benefit pension scheme has a significant deficit, and TPR is attempting to secure contributions from the company’s previous owner, Sir Philip Green, in an attempt to reduce the impact of the scheme’s falling into the Pension Protection Fund.

Another master trust, The People’s Pension, today published research conducted by YouGov, which it said reported “strong support” among UK small businesses for auto-enrolment.

More than two-thirds (70%) of small and medium-sized enterprises (SMEs) that had implemented auto-enrolment said it was a good development for employees. Only 50% said it was a positive move for businesses.

More than one-third (37%) said they were paying in more than the statutory minimum 1% employer contribution.

Of the sample, 43% said they supported full compulsion, meaning employees cannot opt out of their pension fund.

In addition, a little over half of SMEs (51%) supported self-employed people coming into the scope of auto-enrolment. This is to be a focus of a forthcoming government review of the policy, announced late last year by Richard Harrington, the pensions minister.

Darren Philp, director of policy and market engagement at The People’s Pension, said: “The government’s 2017 review of auto-enrolment has the potential to build on its success so far. It is an opportunity to widen access to pensions and make sure more people benefit from saving for the long term.”

Meanwhile, PwC reported this morning that UK companies would have to pay £10bn a year to plug the collective defined benefit pension shortfall to close deficits within a decade.

PwC’s Skyval index of 6,000 DB funds showed a total deficit of £560bn at the end of 2016, £90bn higher than at the start of the year.

The index estimated that the aggregate deficit peaked at £710bn in August, having leapt by £80bn in one day on 24 June following the result of the UK’s referendum on European Union membership.

The Bank of England’s rate cut, and extension of quantitative easing at the start of August, saw deficits increase by £60bn in a week, PwC said.

Other estimates of the aggregate shortfall have varied, but all indicate that, collectively, UK DB pensions suffered during 2016.

Mercer estimated a £137bn total deficit across FTSE 350 companies’ pension funds at the end of the year, while JLT Employee Benefits put the total private sector DB deficit at £434bn.

Finally, the University of St Andrews Superannuation and Life Assurance Pension Scheme has appointed Aon Hewitt as fiduciary manager for its £90m portfolio.

Aon Hewitt’s responsibilities include manager selection and monitoring, asset allocation decisions and “complete operational oversight”, the consultancy firm said in a statement.

Ken Dalton, chair of the pension scheme’s trustee board, said: “We had worked hard in recent years to manage the risk in our investment strategy. With funding levels improved, we were concerned about volatility and the negative impact that could have on our funding position.”

Dalton added that the pension scheme should make “significant annual cost savings” through the arrangement.

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