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Barnett Waddingham comments on David Norgrove's speech at NAPF Annual Trustee Conference

Nick Griggs, Partner at Barnett Waddingham comments on David Norgrove’s speech at today’s NAPF Annual Trustee Conference:

“Overall Barnett Waddingham has been supportive of Norgrove’s stewardship of the Regulator over the last six years and the framework that has been established. Some have criticised the Regulator for being too soft.  In many cases this seems unfair given the powers that it has available and the legal framework within which it has to operate. We have recently seen the Regulator exercise its powers more strongly which is encouraging. It also appears that the Regulator has been working hard behind the scenes to ensure a satisfactory outcome for all parties; given that confidentiality is a requirement. 

On Scheme Funding:

"The linking of technical provisions to the strength of the employer covenant has been a new concept for trustees. Many are still struggling to apply these principles in practical way.  The Scheme Funding regime has generally raised the bar in terms of the level of funding trustees should be aiming to achieve.  While there are always instances where a set of trustees or the Employer are not happy with the approach being taken by the Regulator the framework it has established seems to working reasonably well.  The approach is being applied consistently whilst retaining enough flexibility to cope with the difficult economic conditions we have seen over the last few years.” 

On ETVs:

"Given the examples of inappropriately run ETV exercises given by the Regulator I think it is right to issue guidance for those involved in enhanced transfer value exercises.  I also have no problem with the trustees starting from the position that these exercises are not in the members’ best interests. However, I think that when an exercise is to be run properly the trustee should not stand in the way.  To some extent the Regulator has acknowledged this and gives examples of when an exercise might be in the members’ best interests. However, I think that the range of circumstances when it may be appropriate for a member to accept an enhanced transfer is wider than those listed and see no problem with these exercises if members are able to freely make an informed decision.”

On Defined Contribution:

“The Regulator is right to emphasise the need for robust governance of DC schemes, whether they be trust-based or contract-based. Most members of DC schemes still do not fully recognise the risks that they are taking and the need to provide adequately for the potential of an extended period of 'retirement'.  The introduction of auto-enrolment will not necessarily change this unless higher minimum contribution levels are imposed. 

"In the future retirement will look different for many people with income being derived from a number of sources to supplement under-provision from workplace pension provision and a probable reduction in income from the State, other than those deemed to be in poverty.” 

Malcolm Mclean, consultant, Barnett Waddingham adds his comments:

“I understand the Regulator’s concern about Enhanced Transfer Exercises. In many cases it might not be in the member’s long term interests to accept such a transfer and it was important that the situation was properly explained to them and if possible they were  given access to independent financial advice. There should certainly be no coercion placed on members to proceed in any particular direction. There would, however, clearly be situations where a member could benefit by accepting an enhanced transfer, for example where an individual had a limited life expectation and wished to access his/her pension benefits before the scheme’s normal pension age or where a person had a large pension entitlement and wished to protect it against the possibility of company insolvency and the imposition of a cap by the PPF. For those reasons and in the interests of maintaining flexibility for m embers he would be opposed to any suggestion of a ban on such exercises and/or any serious curtailment of an employer’s right to offer them”.  

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