KPMG Employers Club Pensions Consolidation · 2020. 9. 6. · Debt consolidation. Increased use of...

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Pensions consolidation

Employers’ Club

2 July 2019

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DDooccuummeenntt CCllaassssiiffiiccaattiioonn:: KKPPMMGG PPuubblliicc

With you today

Matthew CalveleyDirector

DC Pensions & Wider Savings

T: +44 (0)161 2464591

E: [email protected]

Tom SeecharanDirector

Head of the Pensions Risk Settlement team

T: +44 (0)207 6944954

E: [email protected]

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mailto:[email protected]

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Document Classification: KPMG Public

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Agenda

DC/workplace savings landscape

DC consolidation

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DB consolidation

DC/workplace savings landscape

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© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5


© 2019 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

0%

50%

100%2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Trust Contract 2016 2017

MT 5% 10%

Trust 46% 47%

5… 15% 21% 23% 20%9%

7%

24%

46%58% 69% 84%

2%

3%

4%

4% 4%5%

86%

58%

29%15% 7% 3%

0%

20%

40%

60%

80%

100%

Less than£10,000

£10,000 -£29,000

£30,000 -£49,000

£50,000 -£99,000

£100,000 -£249,000

£250,000and above

Annuities Dreawdown UFPLS Full cash withdrawals

Workplace

savings

Invest in DC

account

Lifetime ISA

Corporate ISA

General Investment

Account

Employer contribution

Debt

consolida

tion

Employee contributions

DC/workplace savings landscapeUK DC Market

Source: Pensions and Lifetime Savings Association (“PLSA”)

FCA retirement stats (Oct 15-Mar 18)

UK DC providers

Insurance

Companies

— Aegon

— Aviva

— Fidelity

— Standard Life

— Legal &

General

— Scottish

Widows

Employee Ben

Cons (Master Trust)

— Aon

— Capita

— Mercer

— Xafinity

— Willis

Towers

Watson

Others

— Now:

Pensions

— Nest

— SEI

— Salvus

— The

People’s

Pension

Note: The above does not represent an exhaustive list of providers in the market

Significant consolidation in the market with further expected post Authorisation

Integrated workplace savings

DC consolidation

DC Master Trust – vehicle of choice?DC delivery vehicles

100%

80%

60%

40%

20%

0%

05

06

07

08 9

0 10

11

12

13

14

15

16 7

1

20

20

20

20 0

2 20

20

20

20

20

20

20 0

2

Trust Contract

2016 2017

Master Trust 5% 10%

Own Trust 46% 47%

Source: Pensions and Lifetime Savings Association (“PLSA”)

DC providers

Insurance Companies

— Aegon

— Standard Life

— Fidelity

— Legal & General

— Aviva

Employee Ben Cons (Master Trust)

— Aon

— Capita

— Mercer

— Xafinity

— Willis Towers

Watson

Others

— Now: Pensions

— The People’s

Pension

— Nest

— Salvus

— SEI

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Note: The above does not represent an exhaustive list of

providers in the market

To provide some

context, Automatic

Enrolment has

increased the number

of members of DC

schemes to around

15 million. Almost

13.5 million of these

are in DC

Master Trusts.

Source: The Pensions Regulator

scheme return data 2018/19

Master Trust Authorisation

Authorised6

Exiting Applied

the and

market awaiting

44 response32

Source: TPR data and Professional Pensions analysis as at 28 May 2019

Authorised by The Pensions Regulator

LifeSight Crystal Bluesky USS

Legal & General

Submitted their application to The Pensions Regulator

Mercer Aegon Aon Standard Life

Fidelity TPT Capita Smart Pensions

Aviva SEI Nest Xafinity

Ensign Creative Auto Enrolment The People’s Pension

Note: The above does not represent an exhaustive list of providers that have applied for authorisation

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Key drivers for changeCompany cost and risk exposure

— Reduces cost in relation to the running of the Plan

— Reduced/removed management time/ administration/risk

— Avoids expected future ‘improvement’ spend – comms, investment, admin, governance requirements

— Ready made product for any new populations e.g. acquisitions

Trustee risk

— Removes requirement to complete the various mandatory tasks and reporting

— Governance and oversight responsibility passed on to professional independent Master Trust Trustee

— Opportunity to outsource and (potentially) improve communication channels

— Remain under the governance structure of trustees held accountable by The Pensions Regulator

Employee/Member experience

— Complete member journey to retirement and potentially in retirement. Same/similar charges to access

drawdown in scheme. All retirement flexibilities available to members

— New technology, modellers and apps. Digital capability for communications and interaction with the Plan

— Member education, at retirement support and engagement tools. Face to face and digital

— Access to wider savings vehicles – all savings in one view and modelled as one



DC consolidationMulti-scheme rationalisation

GPP MT

Stakeholder

Single

pension

scheme

CISA

LISA

GIA

Single, integrated, savings platform:

— Convergence of auto-enrolment/main scheme contribution structures

— Consistent/transparent charging structure ‘to and through’

— Clear engaging ‘employee journey’

— Uniform governance oversight and modern DC scheme fit-for-purpose for all

Evolving default investment strategies

0% 20% 40% 60% 80% 100%UK Equities International Equities EM EquitiesGovernment Bonds Corporate Bonds HY/EM BondsProperty Alternatives/Other Cash

Provider AProvider BProvider CProvider DProvider EProvider FProvider GProvider HProvider IProvider JProvider K

Increasing (improving) DC governance

Financial Conduct

Authority

Department for

Work & Pensions

The Pensions

Regulator

— Chair’s Statement

— Value for Member

— Transaction cost disclosures

— Automatic enrolment certification

— Automatic enrolment certification

— Default investment strategy

reviews

— Charge cap compliance

— Governance Committees

— ESG considerations, illiquid

assets, etc

Full choice and flexibility

At retirement

decision

Annuity option Cash and pension

Flexi-access

drawdown

New form of income

drawdown

Withdrawal

Partial withdrawals

Full withdrawal/

Triviality payment



Example digital capability – Currently availableProviders have invested significantly in their online member sites and financial education tools. Some examples of

the tools available in the market are below.

Aviva My MoneyAon – Supporting members throughout their

lifetimeStandard Life’s mobile app

Zurich’s ‘Picture This’ tool L&G video benefit statements LifeSight’s Ageometer (MT only)

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Example digital capability – Future developments

Links to

banking

apps

Relevant

member

segmentation

Digital

robo-advice

Augmented

reality

Debt

consolidation

Increased

use of

social

media

Increased

functionality

through apps

Developed

links to

wider

workplace

savings

Live Chat to

guidance

support and

admin

Additional

personalisation

in comms

Improved

real time MI

Stronger

security for

apps

Digital

drawdown

journeys

Lifetime ISA

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Summary: Possible end gameFuture-proofed DC/workplace savings

Digital

communications

and technology

to engage

employees

Professional

Independent

Master Trust

Trustee

Modern DC

scheme fit-for-

purpose for all

All supported

by member

education,

guidance and

advice

facilitated by

provider/

Master Trust

Modern DC

investment

strategy

Competitive

member

charges

including future

improvement

spend

Access to

retirement

flexibilities with

no additional

cost or

restrictions

Ongoing

employer led

governance &

oversight

Opportunity to

prepare for a

future

integrated

savings

platform

— Underpinned with

technology and

payroll integration

— Consistent

charging structure

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DB consolidation

Main things you need to know about “superfunds”

Lower cost but higher

risk exposure

— Reduces cost versus a

traditional buy-out due to lower

capital requirements and

greater regulatory flexibility (e.g.

over investment strategy)

— Cost expected to be similar to

pensioner buy-in for pensioners,

but up to 10% cheaper for

deferreds

Employee/Member

experience

— Expected to be “best of breed”

service to members, in line with

that offered by insurance

companies, which may be

significantly better and more

cost effective for many smaller

schemes

— In some models, members

could also benefit from a share

of any upside profit

Risk

considerations

— TPR’s “Gateway” guidance is

designed to insure that

schemes that can (or are likely

to be able to) afford an

insurance company buy-out at

some point, should still target

that

— Superfunds are therefore most

applicable where the covenant

is weaker. However, there must

still be some source of funding

available – either from the

Scheme itself being well funded,

or from an unconnected 3rd e.g.

a foreign sponsor or due to

M&A type activity

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Superfunds: An important milestone

Mar 18

White paper

issued by DWP

Q1 2019

TPR issues

guidance

Consultation

issued by DWP

Consultation

closed

Q2 2019

TPR begins

assessment/

pre-authorisation

of superfund

models

First clearance

application

submitted

Q3 2019 Q4 2019

DWP respond

to Consultation?

TPR concludes

authorisation of

Superfund models?

Q1 2020

TPR gives clearance

to first deals?

Q2 2020

onwards

Pension bill?

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Questions?

Thank you


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KPMG Employers Club Pensions Consolidation · 2020. 9. 6. · Debt consolidation. Increased use of...

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