Professional Pensions has teamed up with Barnett Waddingham to launch a competition to find the most pragmatic approach to introducing Defined Ambition pension schemes to the market.
The competition is open to all trustees, scheme managers, employer representatives and professional independent trustees.
A prize of £7,500 will be awarded to the winning submission. Cash prizes will also be available for the seven other strongest entries.
Defined Ambition schemes are those which sit somewhere between DB and DC pension scheme, where the employer and employee share pension risk.
Entries will be judged by a panel of industry experts in two stages: an initial summary deadline of 31 January 2013, followed by a deadline for detailed submissions of 19 April 2013.
How to enter - initial submission
Submissions for the first round of judging should be no more than two sides of A4 or 800 words long - and should provide a summary outline of how, in your opinion, defined ambition pension schemes would be made appealing to its prospective members and attractive to sponsors.
The deadline for this initial submission is 31 January 2013.
The entry could be a bullet list of the benefits such a scheme might offer. Entrants will be imaginative and need not be constrained by current HMRC rules for regulated schemes.
Further to the Department for Work and Pensions' publication of Reinvigorating Pensions - a paper which sets out the government's desire to move workplace pensions towards risk-sharing structures - all entrants should ensure their entry idea displays the following characteristics.
- Consumer focus - the DA ideas should address consumer needs (members and employers).
- Sustainability - entry suggestions should be affordable to stakeholders (employers/pension providers/members) over the long term.
- Intergenerational fairness - any suggested scheme should not be biased to pensioners, but also take on board needs of future pensioners.
- Risk-sharing - DA ideas should incorporate genuine risk-sharing between stakeholders.
- Proportionate regulation - the proposed regulatory structure for the idea needs to be permissive to enable innovation in risk-sharing, while protecting member interests.
- Transparency - any DA solution will need to be transparent and have high governance standards.
Also, the ideas put forward should be materially different to those already put forward to the DWP. The suggestions already published by the DWP are:
DB-lite options
- Conditional indexation - In this model, future indexation is not guaranteed, but is conditional on the funding of the scheme which is targeted at full revaluation. When the scheme is fully funded, the benefits would be increased in line with the scheme's target index. When there is a funding deficit, the next year's indexation would be withheld if the employer chose not to meet the deficit by making additional contributions.
- Optional indexation - This goes further by removing the statutory requirement for indexation, allowing employers to offer schemes that provide a pension not indexed to inflation.
- Removing spouses' benefits - This would remove requirements for DB schemes to provide spouses' benefits.
- Conversion of benefits - In this model, the employer would promise a defined level of benefit for the member and at the point the member leaves the scheme, retires or dies the defined benefit is crystallised, and converted to a DC amount of equivalent value.
- Fluctuating Pensions - Building on the idea of having simplified/core DB schemes, this model would allow schemes to provide pensions that fluctuate in payment according to the financial status of the scheme.
- Linking scheme retirement age with changes to state pension age - In this model an employer providing DB-type provision would have the option to adjust their scheme retirement age in line with increases in state pension age. The increase in retirement age would apply both to future pension rights and those accrued from the date new legislation was introduced.
DC-plus options
- A money back guarantee funded by a levy on members' funds. This would share the investment risk between the individual member and the mutualised fund.
- A guarantee to cover retirement income in later years, funded by a levy on members' funds.
A guaranteed fixed-period return purchased on a member's behalf, incorporating risk sharing and guarantees.
Standardised income guarantee insurance.
Employer-funded ‘smoothing fund', where the employer would pay a percentage of ‘core' contributions into a central fund that is used to manage a targeted outcome at retirement, possibly via annual bonuses or final terminal bonus.
How to enter - second phase
Entries that are shortlisted into the second phase will then be asked to submit a response that is no longer than eight sides of A4 or 3,200 words in the form of a member's explanatory booklet to the scheme of their wishes on how the defined ambition pension schemes should work, including references to any legislative changes that would be necessary, and explaining how any obstacles would be overcome.
The deadline for this phase of the competition will be 19 April 2013.
The entrants judged by the panel of industry experts to have submitted the most interesting entries will be invited to participate in a panel debate at the 2013 Pensions Show on June 12th 2013.
Winning the award and prizes
The winner of the competition will be announced at the show and their success celebrated at a champagne reception that evening. The winning entry will be published in Professional Pensions and submitted to the Pensions Minister for consideration.
Entry into the awards is FREE and the winning entries will be judged solely on the basis of the written submissions.
Entries are encouraged from Pension Scheme Trustees, Pension Scheme Managers, Employer representatives (such as Finance and HR Directors), and professional Independent Trustees. Entries from professional advisers will not be accepted.
A prize of £7,500 will be awarded to the winning submission. Cash prizes will also be available for the seven other strongest entries.
We have tried to keep the entry process as straightforward as possible but should you encounter any difficulties please don't hesitate to contact us by email [email protected] or phone Robin Booth on 020 7316 9775.
Please send your entries by email to [email protected] including your contact details.
Timeline:
Initial Summary Deadline: 31 January 2013
Detailed Submission Deadline: 19 April 2013
