Blake Lapthorn's London Pensions conference 19 March 2014

LONDON PENSIONS
CONFERENCE
19 March 2014
The State of Pensions
Adrian Lamb, Legal Director, Pensions and Head of
Trusteeship Services
adrian.lamb@bllaw.co.uk
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London Pensions Conference 2014
 Health & safety and
housekeeping!
 Feedback forms
 Ask questions
throughout
 Participate
 Challenge
 Enjoy

 9.30 am Introduction - The state of pensions
Adrian Lamb, Blake Lapthorn
 10.00 am The future is DC – but can we do better collectively?
Kevin Wesbroom
 10.30 am Good governance – making a difference
John Hamilton, Blake Lapthorn
 11.00 am COFFEE BREAK
Agenda and timetable

 11.20 am Pensions law – latest developments and evolving
principles
Nicola Walker, Blake Lapthorn
 11.50 pm Fiduciary management for both DB and DC worlds
Ed Tomlinson, SEI
 12.25 pm 2020 (and 2050) vision – Looking ahead – opportunities,
challenges and pitfalls
Adrian Lamb, Blake Lapthorn
 12.45 pm Questions and open forum
 1.00 pm LUNCH!

Pensions-underdog.co.uk
Why am I here today?
For:
 Trustees
 Employers
 Employees
 Actuaries?
 Administrators?
 Auditors?
 Lawyers?

London Pensions
Conference 2014

 UK Fund deficits up/down/up/down….?
 Emerging economies volatility
 Volatile asset values – where to get some value?
 Auto enrolment – more work but for whose/what benefit?
 What chance have employees got to understand all that is going on
– new arrangements; DA, DB and DC; investment choices; AMCs,
AMDs, etc.
 Continued (and increasing?) pressure on covenants
 Life expectancy???
 Retirement – what will this look like in the future (or now)?
 Outlook for the economy, gilt yields, etc., etc????
Just when you thought things
couldn’t get any worse!

Previous questions
 Is there such a thing as a risk free investment?
 Can I ever know what our liabilities really are?
 Data, what data?
 Can I get smarter with my/our investment strategy?
 What does it take to make DC adequate?
 What is adequate?
 Is auto enrolment just a precursor to more tax?
 Will it work?
 Can it work?
 What do we need to do?
 Can I do anything about this?

Your Starter for 10
 DB?
 DC?
 DA?
 AE?
 CARE?
 CDC?
 CB?
 AMC?
 AMD?
 MEGO?

Current questions
 Can DC deliver - for employers and
employees?
 What are my liabilities exactly? Or what measure
is the most realistic?
 Am I/are we doing the best that I/we can?
 Where can I achieve the most in the time
available?
 Can I make auto enrolment into a positive rather
than just a headache?
 How can I improve understanding?
 The law is evolving – am I up to date with it all?
 What is the “big picture” here?

 Increasing market share
 Different definitions
 Why is it growing?
 OK for DB but DC?
 Consultancies have
dominated so far but ….
FM market grows 20% in
a year but consultants
lose market share
Pensions Insight – 19 November 2013

London Pensions Conference 2014 – Public
sector pension reforms

The make up of your pension
 Now – BSP = S2P or c-out ops + GPP/AVC, etc.
 The (short term) future – FRSP + AE (OPS/GPP) + ?
 More annuities?
 Less flexibility?
 Less adequacy?
 Later retirement?

– the themes
 The future shape of pensions, and the impact of the
past and present
 The emphasis on governance
 Learning lessons from the law
 Making better use of the assets for better outcomes
 Thinking ahead and looking up

The State of Pensions
Adrian Lamb, Legal Director,
Pensions and Head of Trusteeship Services

Blake Lapthorn Pension Conference 2014
The Future is DC
But can we do better
Collectively?
Kevin Wesbroom
Senior Partner, Aon Hewitt
kevin.wesbroom@aonhewitt.com
020 7086 9350

I have an Ambition ….
or

Increase the amount people receive for their
savings
Enable innovation and new products … to give
people more certainty … and encourage more risk-
sharing
Increase transparency and build trust, confidence
and engagement
Ensure the sustainability and stability of the
UK pension system
Increase the amount people are saving in pensions
Reinvigoration objectives
23
Better pension outcomesBetter pension outcomes

Reinvigoration Workstrands
 DB Lite
– We have: CARE, cash balance, longevity adjustment.
– Why no traction? Need new approaches (before 2016!)
 DC Plus
– We have: With profits, deferred annuities, targeted or managed DC
– Why no traction? Need new approaches
 CDC and Scale
– Think Dutch/Danish “If Carlsberg/Heineken made a pensions
systems …”

DB Lite – the Runners and Riders
ConditionalConditional
IndexationIndexation
OptionalOptional
IndexationIndexation
Core DBCore DB
FlFluctuating Pensiouctuating Pensionsns
Flexi AgeFlexi Age
DBDB
ConversionConversion
DB to DCDB to DC
NPA tied toNPA tied to
SPASPA

DC Plus – the Runners and Riders
Money BackMoney Back
GuaranteeGuarantee
GuaranteedGuaranteed
ReturnReturn
SmoothingSmoothing
FundFund
Advanced AgeAdvanced Age
GuaranteeGuarantee
IncomeIncome
GuaranteeGuarantee

Reinvigoration Outcomes?
 DB Lite
– Just scrap indexation going forward?
 DC Plus
– Not a place for government?
– Guarantees are expensive!
 Collective DC
– Two variations to be introduced
– CDC with guarantees
• Dutch model – premium split 2/3 to buy deferred annuity 1/3 to growth assets
and capital. Slow steady build up of benefits that are guaranteed once
awarded. Guarantees are expensive!
– CDC without guarantees
– And DC defined along the way!

Collective DC (CDC) plans
(the ones without guarantees)
 The employer pays a fixed contribution rate
– In our view employers will not tolerate pension risk
 No individual accounts
– Investment done by independent trustees, with professional advice
 The member gets a DB-like Target pension
– Pension paid from the plan, not annuity purchase
– Revaluation and indexation to preserve real value
– Expected benefit level facilitates retirement planning
 We “square the circle” because the Target Pension is not guaranteed
– Indexation and revaluation is not guaranteed
– Even the basic pension is not guaranteed in extremis
– Benefits adjusted to ensure cost stays constant
– Plan would have strict rules on how to get back into balance – benefit
adjustments or bonus additions
28

Does it work?
Aon Hewitt Modelling - Historic outcomes
0%
10%
20%
30%
40%
50%
60%
70%
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Retirement year
Percentage of final pay
DC Gilt
[Median = 14%]
DC Lifestyle
[Median = 21%]
DC Equity
[Median = 27%]
CDC (average in retirement)
[Median = 28%]

Does it work?
Aon Hewitt Modelling - Projected outcomes

More helpful for planning?
0%
10%
20%
30%
40%
50%
60%
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
Age
Projectedincomereplacementratioatage65
DC Lifestyle CDC

CDC Issues
 Bigger pensions
 More stability
 Pensions not
accounts
 No annuity purchase
 No member
investment
 Lower charges
 Better returns?
 DB in waiting
 “Soft” guarantees
 Benefit cuts
 Cross –subsidies
 Complexity
 Lack of choice
 The need for scale
 Run off schemes
THETHE
BADBAD
 With Profits
 Been Here Before?
 Risk Sharing?
THETHE
GOODGOOD
THETHE
UGLYUGLY

Dealing with the Big Ones …
Look at likelihood and severity
Public tolerance – within limits
Cuts in Benefits
Public disclosure of all finances
CDC Website
It’s just with profits - complexity
Regular focused communication
Raised public awareness
Communicating the uncertain future
Soft Guarantees – communicating with
members
Explicit legislative reference
Big Red Button in deed
Employer Concerns of Regulatory
Creep
ResolutionIssue

Historic modelling - bonuses added
-10%
-5%
0%
5%
10%
15%
20%
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011
Year
Percentage
-10%
-5%
0%
5%
10%
15%
20%

Making it Happen
 Legislation
 Political consensus
 More public awareness raising
 Large, unionised employers?
 Employers willing to go first?
 Ready made solutions – provider led master trusts

Are we alone?
www.aonhewitt.co.uk/collectivedc www.targetbenefits.ca

The Canadian Vision
 Retirement is still a novel concept for humankind and it continues to evolve.
We have reached a critical point in planning retirement schemes where, in
much of the world, individuals can end up receiving a pension for significantly
longer than they contributed towards it. This was not the case when existing
DB pension plans were originally designed and adopted.
 The traditional DB plan has been a 50-year experiment that we have finally
begun to understand, while the traditional DC plan is a 30-year experiment
that has yet to fully mature and from which we continue to learn
 We define a sustainable pension plansustainable pension plan as one that can consistently deliver,
through both favourable and adverse circumstances, an appropriate range
of benefits within an acceptable range of costs over the long-term. A
sustainable approach to pensions will allow a pension plan to adjust both
costs and benefits in response to actual experience, with the key objective
that adjustments be infrequent and low in magnitude

All we are saying …..
le mieux est l'ennemi du bien (Voltaire)
CDCCDC

DC Governance – the dawn of a
new era or tell me something new?!
John Hamilton
Partner
john.hamilton@bllaw.co.uk

DC Governance under scrutiny
 Pension Regulator – Codes of Practice Number 13 (in
force July 2013) and Number 15 (in force September
2013)
 OFT Defined contribution workplace market study –
September 2013
 DWP Consultation Better Workplace Saving – a
consultation on charging – October 2013

The current pension landscape
2.7 m840,000960,000118,0001.4 mTotal active
memberships
Unknown1.6 m5 m851,0007.8 mTotal
memberships
1,80028,62053050880Open
Schemes
2,02037,6901,0503305,530Schemes
DC
(workplace
contract)
DC (trust)Hybrid –
dual
section
Hybrid –
mixed
benefit
DBPrivate
sector
schemes
Source: The Pension Regulator’s presentation of
scheme return data 2013-2014

Key findings in the Regulator’s 2013-
2014 review of scheme return data
 £30 billion in assets in DC trust-based schemes with 12 or
more members (excluding hybrid schemes with DC
members).
 DC memberships now account for 30% of workplace
pensions memberships (up from 27% last year).
 33% of active DC members in trust-based schemes and
67% in contract-based schemes.
 The number of trust-based schemes has reduced by 2%.
 The number of DC trust-based memberships has
increased by 15% over the last year.
 The number of DC master trust schemes with 12 or more
members has increased by 11%, and membership of such
schemes has increased by 22%.

Triggers of DC governance focus
 Continued DB closure and replacement by DC
 Automatic enrolment - an additional 6-9 million
people in DC schemes by 2018
 Abolition of short service refunds from DC
occupational pension schemes and “pot follows
member”
 Increased focus on investor protection – e.g.
pensions liberation
 Government desire to ease the burden on the welfare
state

The four key ingredients of DC
governance
 Effective management and oversight
 Good administration and communication with
members
 Effective design and execution of investment strategy
 Value for money

Advantages of good DC governance
from the employer’s perspective
 Enhanced reputation as an employer of choice
 Effective tool in workforce management
 Litigation protection
 Cost, efficiency and control

The barriers to good DC governance
 Weakness on the buyer side of the market
 Complexity of the product
 Lack of knowledge from key counterparties –
employers, trustees, members
 Conflicts of interest
 Lack of transparency and complexity of charging

tPR’s powers - DC trust based
schemes
 Regulator’s objectives
– Protect the benefits of members
– Maximise compliance with Pensions Act 2008
 Range of options for dealing with trust based schemes:
– Issue notices and orders
– Recover unpaid contributions
– Impose fines where it finds a breach
– Prohibit trustees from acting

Key risk areas identified by tPR:
 Trust based DC governance:
– Trustee knowledge and understanding
– Internal controls
– Fitness and propriety of Trustee board
– Conflict management
– Poor investment governance and decision making
– Poor administration practice

TPR - steps towards a more robust
system of Governance
 DC regulatory guidance: Governance and
administration of occupational defined contribution
trust-based pension schemes (January 2013)
 Code of Practice Number 5
 Code of Practice Number 13
 DC Strategy document
 DC compliance and enforcement policy

Code of Practice Number 5 - in force
September 2013
 Prepare and maintain a payment schedule
 Check receipt of contributions by deadline
 Resolve and, if necessary, report late payments to
the Regulator
 Reasonable periods for reporting
 Annual statement to member of total contributions

Code of Practice Number 5 – in force
September 2013
 Risk based approach to check contribution amounts
 Procedure for requesting payment information from
the employer (e.g. pensionable earnings) to enable
checking of amounts.
 Report non-provision of payment information.
 Information to members so that they can check
contributions – regularly updated online access is
best practice.

Key areas in Code of Practice 13
 Trustee knowledge and understanding
– Know your scheme
– Regularly review skills to demonstrate TKU
 Internal controls appropriate to a DC scheme
– Accurate member data, evaluate regularly
– Support employer in understanding responsibilities and processes
– Accurate and prompt transactions
– Monitor and report contributions
– Robust administration system
 Investment
 Governance of conflicts of interest and
advisers/service providers

What DC Trustees need to be doing
 Read Codes and Guidance
 Arrange training/demonstrations
 Review scheme and current processes against
quality features
 Come up with a governance Action Plan
 Prepare a governance statement
 Assistance from the Regulator?

Key recommendations of the OFT
 Government intervention to introduce minimum
governance standards
 Independent Governance Committees
 Closer regulation of master trusts – demonstrate value for
money to TPR
 Commonly defined single charge
 Tackle consumer detriment from legacy schemes
 More active role for tPR for small trust based schemes

DWP Consultation on charging
 A cap on pension charges:
– Option 1: A charge of 1% of funds under management
– Option 2: A lower charge of 0.75%
– Option 3: A two-tier ‘comply or explain cap
 Ban on active member discounts (AMDs)
 Ban on consultancy charges to all qualifying DC schemes
 Ban on adviser commissions set up prior to the Retail
Distribution Review
 Now likely to be a delay for ‘at least’ a year – April 2015?

Dawn of a new age for DC
governance???
 Reflects good practice
– employers and trustees should already be doing to
manage risk
 OFT’s recommendations will have significant impact
on DC providers
 For employers and trust based trustees - the
emergence of a value for money principle
 Will this lay the seed for future legal claims against
trustees and employers?

Employers actions to manage risk
 Contract based DC - consider establishing a
governance committee
 Review current and legacy arrangements – both
investment and administration
 Trust based DC:
– do your trustees have the resources to do the job?
– consider the appointment of an independent
trustee
– is another alternative the best option going
forward?

Any questions?

Refreshments
10 minutes

Pensions law – as interpreted
by the Court
Nicola Walker
Associate
nicola.walker@bllaw.co.uk

Exercise of Trustee/Employer duties and discretions
 IBM: "Imperial" duties of good faith do not compel
employer to agree to unreduced deferred pensions
 " Hastings-Bass " or the equitable remedy of mistake

Construction of Scheme Rules
 Construction of pension increase rule Employer
 Deed of adherence also be construed as deed of
amendment? Members
 The role of the "reasonable reader" in the
construction of pension scheme amendments
Employer
 Passage of time and lack of evidence
not fatal to the exercise of trustee
discretion Employer

Application of European law and decisions of ECJ
 Partner's mandatory retirement at 65
was proportionate means of achieving
legitimate aims
 Age-related DC pension contributions
can be objectively justified
 VAT or no VAT

The Pensions Regulator
 Financial Support Directions: Court of Appeal
 confirms trustees are "directly affected persons"
 Supreme Court confirms no "super-priority" for FSDs
 Pension liberation schemes are occupational pension
schemes

Procedural
 "unprincipled" to go behind actuary's section 75
certification
 Employer’s court application to
pre-empt Ombudsman claim is
not an abuse of process
 Pensions Ombudsman can’t assume jurisdiction to set
aside third-party funded compromise

 Desmond: Northern Irish High Court refuses permission
for judicial review

Legal Principles
 Duties and discretions – Court will not enlarge employer
duties and discretionary remedies will not always be
granted
 Construction – wider practical considerations
 Age discrimination tempered by common sense, but VAT
is not?
 Pensions Regulator – open door but limited value?
 Procedure – Fairness and justice prevails of course!

Future trends?
 Court will be more practical and purposive in its
construction powers
 The Hastings-Bass doctrine will not allow Trustees to easily
back track on the exercise of their powers
 Pensions Regulator will continue to test the scope of its
powers
 Ombudsman will continue to stray beyond his powers
 Pension litigators will put clients in a position of power!

1FooterFor Professional Client Use Only – Not for Distribution to Retail Clients © 2013 SEI
Fiduciary Management........
What it is and who it is for?
Ed Tomlinson, Regional Director, SEI Institutional Group
The state of Pensions
conference 2014

2FooterFor Professional Client Use Only – Not for Distribution to Retail Clients
Agenda
• Developments in pension governance regarding investments
• Fiduciary Management for DB schemes
• Master Trust: Can DB experiences improve outcomes for DC trusts

SEI – Key numbers
1968
300
50
Investing in
over
100
managers
465
£135bn
Founded
Investment
Experts
European
Institutional
clients
Institutional
clients worldwide
Assets Under
Management
As at 30 September 2013

The past decade – a perfect storm for pension schemes
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
200
400
600
800
1,000
1,200
1,400
Giltyield
MSCIWorldIndex(GBP)
MSCI
10 YEAR GILTS
Source: Bloomberg
For most pension
arrangements equities are
used to generate returns
Long gilt yields mainly
determine the ‘price’ of the
liability for both DB and DC

Governance evolutions
• Emergence of Independent Trustees
• Formation of Investment Committees
• Outsourced Investment governance models including:
• DB  Fiduciary Management
• DC  Master Trust

Acceptance of Fiduciary Management in the UK
The market has continued to grow at a remarkable
pace, at over 20% every year since 2007.

Defining Fiduciary Management
This diagram represents services incorporated within SEI’s Fiduciary Management offering. All services shown may not be offered by other Fiduciary Managers
Trustee Board
Actuary Fiduciary Manager
Investment Advice + Implementation + Monitoring
Liability
information
Asset Allocation and
Risk Management
Investment
Implementation
Client Service &
Reporting
‘The mandate objective is typically to meet a funding level/liability target
within a prescribed timeframe.’ – KPMG, November 2013

Trustees decide where their time is best allocated
Strategic
Decisions
Implement Flight plan
Manager Search and
Selection
Manager oversight
Performance
Evaluation /
Rebalancing

Allocation Change: UK fixed income diversification
Allocation Change: De-risked allocation
Approximate
funding
level
differential:
16%
Allocation Change: Add Global fixed income
Allocation Change: Reduce Index Linked, Increase
High Yield Corporate and Emerging Market Debt
Client case study
Actual & Simulated Performance
Currency: GBP Gross of fees and charges. The Legacy Strategy represent simulated performance designed to replicate the Client’s strategy prior to SEI. Does not reflect actual
performance of predecessor investments nor any allocation changes that might have been advised. Past performance is not a Guarantee of Future Performance. As of 30/06/2012..
Implemented: Diversified strategic allocation
Fiduciary Management Legacy strategy

The benefits of Fiduciary Management for trustees
FundingLevel
Proactive
Cost
Lower investment manager fees may enable a budget for Fiduciary
Management. The solution might be cheaper overall.
Governance
Control
Accountability

SEI Trustees responsible for the bespoke DC solution
SEI DC Solution leverages governance commonly used for
DB schemes to improve member outcomes.
Employer
Employer (& current Trustees)
decide solution for the section
Administration
Communication
& Education
Investment
Manager selection
Investment menu
& Default Strategy
Sub-section(s) within
SEI Master Trust
Regular
Reporting

Reasons why sponsors select a DC Master Trust
• Paternal nature - accepts that members need help
• No desire to internalise the pension governance burden
• Solution for deferred members - alternative to Buy-out
• Reduce ongoing costs without compromising quality

About SEI’s Institutional Group
SEI’s Institutional Group is one of the first and largest global providers of outsourced
fiduciary management investment services. The company began offering these services in
1992 and today acts as a fiduciary manager to more than 450 retirements, non-profit and
healthcare clients in seven different countries. Through a flexible model designed to help
our clients achieve financial goals, we provide asset allocation advice and modelling,
investment management, risk monitoring and stress testing, active liability-focused
investing and integrated goals-based reporting.
About SEI
SEI (NASDAQ:SEIC) is a leading global provider of investment processing, fund
processing, and investment management business outsourcing solutions that help
corporations, financial institutions, financial advisors, and ultra-high-net-worth families
create and manage wealth. As of June 30, 2013, through its subsidiaries and partnerships
in which the company has a significant interest, SEI manages or administers $507 billion in
mutual fund and pooled or separately managed assets, including $204 billion in assets
under management and $303 billion in client assets under administration.
For more information visit: http://www.seic.com/enUK/institutional-investors.htm.

Important information
This document and its contents are directed only at persons who have been classified by SEI Investments (Europe) Limited as a Professional
Client, or an Eligible Counterparty, for the purposes of the FCA New Conduct of Business Sourcebook.
This information is issued by SEI Investments (Europe) Limited, 4th Floor, Time & Life Building 1 Bruton Street, London W1J 6TL, which is
authorised and regulated by the Financial Services Authority.
No offer of any security is made hereby. Recipients of this information who intend to apply for shares in any SEI Fund are reminded that any such
application may be made solely on the basis of the information contained in the Prospectus.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events,
or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or
any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.
The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested. If the
investment is withdrawn in the early years, it may not return the full amount invested. In addition to the normal risks associated with equity
investing, international investments may involve risk of capital loss from unfavourable fluctuation in currency values, from differences in generally
accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies
typically exhibit higher volatility. Products of companies in which technology funds invest may be subject to severe competition and rapid
obsolescence.
Whilst considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given
as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action
taken on the basis of this information.
Past performance is not a guarantee of future performance.
Investment in the range of SEI's Funds is intended as a long-term investment.
SEI sources data directly from the following vendors: Factset, MSCI Barra, Russell, TOPIX, FTSE, Barclays Capital and BofA Merrill Lynch. Where
appropriate, returns in base currencies are converted to the relevant currency using WM Reuters 4pm Spot rates.

Important Information on Case Study
Fiduciary Management Case Study
Performance of the SEI Strategy represents an actual client track record, representing an asset allocation implemented through our
UCITS Funds with the inclusion of investment strategies as a result of our enhanced advice.
The performance illustrated is reflective of the time period from the client’s first investment with SEI and assumes investment at the
beginning of the period indicated and reflects changes in allocations (as applicable).
SEI treats every client individually, therefore these results may not reflect the impact material economic and market factors, within the
timescale stated, may have had on SEI's decision making if a different client mandate was being managed. Past performance is not
indicative of future performance.
The Legacy Strategy is designed to replicate the client’s portfolio prior to transitioning to SEI. It was created using the client’s prior
asset class allocation matched to the closest SEI Fund based on asset type. This does not reflect the actual performance that would
have resulted had the client stayed in their original investments and does not incorporate any adjustments to allocations or
recommendations that may have been made to the client’s portfolio had they remained with their previous provider.
The legacy portfolio / strategy was weighted in the following manner: 12.85% SEI UK Equity Strategy (X% SEI Quantitative UK Equity
Fund and X% SEI Fundamental UK Equity Fund), 2.93% SEI US Large Companies Fund, 2.64% SEI European (ex-UK) Equity Fund,
1.88% SEI Japan Equity Fund, 2.60% SEI Pacific Basin (ex-Japan) Equity Fund, 0.45% SEI Emerging Markets Equity Fund, 1.19%
SEI Global Developed Markets Equity Fund, 45.47% SEI UK Credit Fixed Income Fund, 14.21% SEI UK Index Linked Fixed Interest
Fund, 4% SEI Global Government Fixed Income Fund, 9.54% SEI UK Property Fund, 2.24% SEI Offshore Opportunity Fund II.
Allowance has been made for deficit repair contribution inflow and benefits payment outflow from the portfolio.
Liability projections and inflation assumptions used with each Strategy are identical.
Master trust Case Study
Projections carried out using SEI’s capital market assumptions and returns (before fees) achieved by funds in the SEI Master Trust
over 1 and 3 years to 30 September 2013. Projected membership assumes a salary of £25,000, price and salary inflation of 2.5% pa,
a total contribution rate of 5% and a normal retirement age of 65. Annuity change based on the change in the FTSE Over 15 year gilt
yield over 1 year to 30 September 2013.
This information is for illustrative purposes only.

Looking ahead to 2020 and 2050
Adrian Lamb, Legal Director, Pensions and
Head of Trusteeship Services

How full (or empty) is my glass?

A =
 Abandonment
 Assets?
 Auto enrolment?
 Ageing population – and workforce
 Aches and pains!
 Ambition – defined or otherwise?
 Active engagement
 Annual management charges
 Actuaries
 Attitude

 “One Fiscal cliff delayed – but not avoided
 What is normal?
 “Zombie companies and individuals”
 “Extend and pretend”
 More for less (or at least no more)
 Eurozone stagnation risk
 Debt is not coming down
 QE tapering/ emerging economies
 BRIC - CIVETS – MINTS – SMARTIES - PIIGS
- the economic backdrop

Many children “slower runners than their
parents were”
Average
household debt
doubled in last
decade - £54k
per household
and now stands
at a total of
£1.43 TRN

 More bad news if valuation 1st half 2013
 Auto enrolment to cope with on top of everything else
 Total costs on the rise – where can I make savings?
 Resource shortage so can I stay on top of it all?
 Can I be confident that I know the true position?
 Do I have time to look ahead? Do I have time not to?
An Employer’s perspective – a look
back at the last 12 months

 More - or at least the same - for less – adviser fees
 Focus on value (or cost)?
 Continued trend towards fiduciary management (or FM
lite)
 Still a wall of money waiting for Buy ins/outs
 Data and benefit audits
 TPR expectations and pressure on governance
 Even less time = even more focus
Trustee’s perspective – a look
back at the last 12 months

Trustees’ circle of interdependencies
Employer
covenant Funding
Investment

Predictions for 2020
 Private sector DC world –
adequacy a real issue
 Public sector still DB
 Debt and deficit + legacy DB – still
with us
 AE contributions start to rise
 State pension age increases
accelerated
 England still haven’t won the
World Cup

Predictions for 2050
 State pension is safety
net, not entitlement for
some/all
 DC evolves to CDC/other
models
 Public sector pensions
rumble on
 Debt and deficit + legacy
DB – still with us
 AE contributions at
minimum 15% combined
 State pension age at 75
and rising
 England current holders
of Football and Rugby
World cups and the
Ashes and Europe has
won the Ryder Cup 15
times in a row

Reasons to be cheerful?
•Recovery is taking hold – BOE
•Latest growth figures encouraging
•Car production and sales are up - SMMT
•Factory orders strongest since 1985 - CBI
•House prices are on the up in most areas?
•2013 - 7th warmest year since 1850?

Things to take away from today
 Liabilities - follow the rules but check your data
 Manage/mitigate all of your risks
 Good governance is essential and worthwhile –
 Most DB schemes headed for either buy out or PPF
– but is there an alternative?
 Master trusts/aggregated schemes?
 Other efficiencies are also available
 K.I.S.S.

Things to take away from today
IMPROVING DC OUTCOMES
 Good choice of funds, including default fund
 Salary sacrifice
 Annual management charges
 Save more tomorrow?
 Governance matters just as much here and with
increasing focus from regulators and government
 Master trusts/aggregation
It’s in everybody’s interests that it is made to work

Employer checklist
 Employment costs likely to rise
 AE is not just compliance – engagement may pay
dividends
 Scrapping DRA adds others pressures but creates
opportunities – can you get more value for the
spend?
 Contracting out is going – think about it soon
 More governance needed for all DC
 Good governance pays off in the end

Trustees’ checklist
 Manage the assets effectively
 Monitor the covenant effectively and proportionately
 Manage your costs – savings in time and money are
possible
 Monitor your time, your governance and your
performance
 Make sure you know your liabilities
 Be prepared for any opportunities
 Good governance pays off in the end

Looking ahead to 2020 and 2050
Adrian Lamb, Legal Director, Pensions and Head of
Trusteeship Services

Blake Lapthorn's London Pensions conference 19 March 2014

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