TUC member Trustee News Spring 2012

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In this issue you'll find the following features and articles:

• Does the fiduciary model need updating?
• Trustee toolkit refreshed
• Pay - high and low
• TPR DC principles
• Autoenrolment update
• Responsible Investment: NEST continues to lead by example
• TPR asks trustees to warn members on 'early release'
• Open Market Option and the annuities market
• New SMPI assumptions: Trustees need to consider the impact on DC members' expectations

Welcome to the spring edition of TUC member trustee news

With autoenrolment starting in October, the pensions landscape will change significantly later this year as millions of workers are expected to start pension saving for the first time. On the other side of the coin, Royal Dutch Shell's announcement in January that it is to close its final salary pension scheme to new staff from 2013 marked the end of an era: it was the last of the FTSE 100 companies to offer a final salary scheme to new entrants. Across the wider economy, last year's NAPF survey found that almost a quarter (23 per cent) of pension schemes are now shut to both new staff and to future accrual, up from just three per cent in 2008.

DC schemes have many disadvantages, apart from the obvious one of transferring risk almost entirely to the member. The retirement process is far more complex than it is for DB members, and a recent study (see page 4) has found that as a result members are forfeiting thousands of pounds of retirement income. Trustees and governance committee members need to ensure they understand the issues and do all they can to help members make appropriate choices. The Budget statement, to the relief of the industry, did not make further changes to the pensions tax (as opposed to the pensioners' tax) regime: in particular, no change was made to the current provisions for tax-free cash on retirement, and there were no major changes to the Annual Allowance. However, the decision to go ahead with reform of the state pension (and by implication the ending of DB contracting out) will impact on those schemes where DB accrual has continued. Further detail will be provided later this spring. Future increases in state pension age may also have implications for schemes where benefits are linked in any way to state pension benefits.

For members with small DC pension savings (including, for example, members who were moved from DB into a GPPP arrangement late in their working life) the new provision for funds of under £2,000 in a personal pension to be taken as cash will be a welcome improvement. This change is at least in part a result of unions raising with ministers the problems their members have encountered with 'stranded pots'.

Finally, please note opposite the seminar on executive pay - see you there!

Fiona Draper

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