Blake Lapthorn solicitors' Pensions team held a conference during November 2009 on regaining control of your pensions scheme, taking a look at some of today's challenges and tomorrow's issues.

1. Southern Pensions Conference
Regaining control of your pension scheme
A fresh look at today's challenges and some of tomorrow's
issues
Adrian Lamb
Consultant, Pensions team

2. The perfect storm
Falling asset values
Increasing liabilities
Weakening covenants
© Blake Lapthorn 2009

3. Too big too fail…
…the year (or more) of living dangerously
© Blake Lapthorn 2009

4. First some questions
Cost or value for money?
Can you improve investment performance - risk v return?
Has the company's attitude towards the scheme
changed?
Can trustees improve their effectiveness?
How can employers engage constructively in the scheme,
and how can trustees encourage this to happen?
Are the demands and expectations on trustees too great?
Can you make better use of information you receive and
advisers, managers and administrators that you deal with
Can you improve communications with all stakeholders?
What else can be done to improve “member experience”?
© Blake Lapthorn 2009

5. R =
Recession
(Any signs of a) Recovery?
(Longer) Recovery Plans
Regulator and regulation
Risk
Reward
(Postponed) Retirement
(Finite) Resources
Realism
© Blake Lapthorn 2009

6. The Trustee’s job is still the same
Decide the
investment strategy
and invest
accordingly
Decide and Pay the right
collect the right amount of money
amount of money at to the right person
the right time at the right time
© Blake Lapthorn 2009

7. Many of the risks are still the same
Sponsor
Sponsor Credit
Willingness risk
ability risk Spread risk
Interest rate Catastrophe
Mortality risk Risk risk
“Growth Liquidity
Inflation risk assets” risk risk
Sponsor Legislative Operational
Relationship risk risk risk
© Blake Lapthorn 2009

8. But some things are very different!
© Blake Lapthorn 2009

9. What has changed?
Surpluses to deficits
Few schemes open to new members - most closing
completely
Greater trustee responsibilities
Greater demands on time for trustees
Statutory requirements for levels of knowledge and
understanding and monitoring of funding AND employer
covenant
Increasing complexity - investment, longevity, legislation
Change of corporate attitude to schemes
Loss of confidence and trust in savings, including pensions
MORE FOCUS ON ‘THE END GAME’
© Blake Lapthorn 2009

10. Employer Covenant
© Blake Lapthorn 2009

11. Areas of responsibility
Trustee Group
Overall Governance
Advisers
2-4 meetings p.a.
Assets
How? Liabilities Operational
Who with? Powers? Administration
Who decides? Employer input Audit
Managers and or control Communication
Custodians
© Blake Lapthorn 2009

12. Current governance/operational model?
Monitoring/reviews at meetings - reports,
presentations
Long term strategies
Day to day management by mix of advisers, pensions
manager, other company officers
Is this still the right way? – 80/20 v 20/80?
© Blake Lapthorn 2009

13. How things have changed
SIMPLE COMPLEX
Equities or bonds? Equities, bonds, hedge funds,
Triennial valuations commodities, hedging, swaps,
Annual administration review fund of funds, manager of
managers etc
Limited communication
Annual funding reviews (at
Surpluses or at least no least)
deficits?
Regular covenant reviews
Most of workforce covered
by schemes Closer monitoring generally
No end in sight Deficits growing
Need to understand longevity
Two tier workforce
© Blake Lapthorn 2009

14. Conflicts of interest and duty - some ground rules
Trustee duty
To disclose relevant information acquired whether as a
trustee or in another capacity
Company officer duty
– to keep information confidential
– to act in Company’s interests
General principle
A trustee (fiduciary) should not put himself in a position
where his duty conflicts with his personal interests or
where a duty he owes to one party conflicts with a duty he
owes to another party without informed consent from
Parties (or if allowed by rules, articles, etc.)
© Blake Lapthorn 2009

15. Prudence with a purpose
© Blake Lapthorn 2009

16. Key issues
Funding (finite/limited resources - limited room for
manoeuvre)
Contingent Assets – guarantees, charge over assets,
etc
Managing Conflicts
Employer Covenant
Operational Management
Investment
Improving Communication
Looking forward
© Blake Lapthorn 2009

17. Understanding the Employer
Covenant – what you really need
(and what you probably don’t)
Guy Jackson

18. Topics
1. What is the employer covenant?
2. Why do it?
3. Some encouragement
4. Current trends
5. Covenant assessment methods
6. A winning approach

19. Background - What is it?
“Employer’s financial position and prospects as well as his
willingness to continue to fund the Scheme’s benefits” (1)
(1) TPR Code of practice 03: Funding defined benefits

20. Covenant Reviews - Why do it?
1. To satisfy The Pensions Regulator
- Monitoring the employer covenant is not a legal obligation – good
governance?
- TPR expects trustees to make their own assessment
- Code of Practice No. 3 “Funding Defined Benefits”
- “It is intended for the trustees to form an objective assessment of the
employer’s financial position and prospects as well as his willingness
to continue to fund the scheme’s benefits (the employer’s covenant).
This will inform decisions on both the technical provisions and any
recovery plan needed”
- TPR (if involved) will look for evidence of assessment; increasingly
interested in how trustees reach their conclusion on covenant
strength and what independent advice has been taken

21. Covenant Reviews - Why do it?
2. Scheme Specific Funding Review
- Testing the employer’s financial durability and its ability and
willingness to meet its financial commitments to the Scheme
including negotiation of a suitable recovery plan
3. A one-off corporate transaction or event
- Likely to have a significant impact on the strength of the covenant
offered to the Scheme
4. Reducing the risk
- That trustees face in terms of personal liability for a fund’s shortfall
in the event the sponsoring employer fails

22. Some Encouragement
“Trustees should aim to correct any shortfall as quickly as the
Employer can reasonably afford. We intend to distinguish between
those Schemes where rapid elimination of the shortfall would have a
serious impact on the Employer’s viability and those where
Employers could afford to pay off the shortfall more quickly.”(1)
“…best means of delivering Scheme members’ benefits is for the
Scheme to have the continued support from a viable employer.” (2)
(1) TPR May 2006
(2) TPR October 2006

23. Some More Encouragement
“Assessment of the employer covenant is key to setting and
reconsidering technical provisions.”(1)
“A regular, structured and open dialogue with the employer is an
essential characteristic of a well governed scheme. It is important
that the trustees have an understanding and appreciation of the
financial position of the sponsor. The extent to which trustees or
managers are able to do this will depend on their own skills and
the willingness of the employer to engage in open dialogue with
them. Regular reviews of the sponsoring employer's covenant and
a suitable make-up of the trustee board may help to provide the
environment for adequate control in this area.”(2)
(1) The Pensions Regulator, Scheme Funding Workshops, Key Messages
(2) The Pensions Regulator, Regulatory Guidance, Internal Controls

24. Some Final Encouragement...
“Trustees of schemes with shortfalls need to prepare a recovery
plan to show how the shortfall is to be eliminated. The regulator's
code of practice 7 indicates that 'Trustees should aim for any
shortfall to be eliminated as quickly as the employer can
reasonably afford. What is possible and reasonable, however, will
depend on the trustees' assessment of the employer's
covenant.”(1)
“Trustees, like any other creditor, will need to consider the
employer's covenant, and its ability to pay. It's clearly in the
employer's interest to co-operate fully because if the trustees
don't understand the employer's ability to pay, they may be unable
to agree a perfectly reasonable recovery plan.(2)”
(1) The Pensions Regulator, Regulatory Guidance, Codes and guidance, The Regulator’s Statement May 2006
(2) The Pensions Regulator, Press Releases, Pensions Regulator Chairman addresses annual NAPF Conference

25. Current Trends
Overall, what are the BIG questions we are seeing at the moment:
- How much can the sponsor afford to pay and over what period?
- What if the sponsor fails as a going concern?
- How likely is the sponsor to fail?
- What options are available to the Trustees to mitigate any risks
faced by the Scheme?
But also watch out for....
- Need to look beyond the PEs? – link with the parent/rest of the
group. Impact of intra-group trading, debts, dividends,
management charges etc on PEs?
- Actions by the Employer which could require mitigation and/or
clearance from TPR – e.g. restructuring, transactions, giving
security
- How solid is existing security held by the Scheme?

26. Current Trends
Leading to...
- Increase in trustees seeking independent advice – a move away from
“in-house”? A need for objectivity and to reduce trustee risk? Alleviate
conflicts? Someone to ask the difficult questions?
- More frequent monitoring for those having previously taken
independent advice. Seek information from the employer on a regular
basis
- Focus on revised forecasts, cash headroom, banking covenants
- Trustees needing CURRENT information to make informed decisions
on employer profitability, free cash (reasonable affordability) and
employer solvency/viability. A desktop review of historic filed
information is redundant and dangerous!
- Requests for
• revision to recovery plans – back end loading
• additional security/guarantees/contingent assets
• additional participating employer (s)

27. Covenant Assessment Methods
DIY
- Strong Employer/Strong Scheme
- Expertise
- Time
- Liability
- Conflicts - ability to negotiate and challenge
Outsourced options
- Model/Ratings based approach
- Independent business review (“IBR”) approach
- Invasive v non-invasive
- Commercially useful
- No preconceptions
- Price sensitivity v Trustee/scheme protection

28. A Winning Approach...
We ensure we understand the background first
What do the Trustees and their advisors want – listen to Trustees’ needs and
discuss; bespoke service not a “one size fits all” approach
Scope is determined by RISK; trustees can use collective knowledge of sponsor
and sector to make an initial risk assessment to determine how much work is
needed to ensure they have met their responsibilities
R reasons for the assessment (circumstances triggering the
review/general level of trustee concern)
I information availability – how easy is it to get information outside the
public domain?
- what is publicly available?
- what information has the FD shared?
S scheme position - how well funded/ratio of deficit to sponsor’s net
assets/profitability/cash generation)
K knowledge of employer’s business and sector
- do the trustees have the skills themselves?

29. A Winning Approach...
Components of the Covenant (adding up to the “covenant factors”)
Sponsoring Employer(s)
The Scheme
Profitability/free cash flow
Gross assets/liabilities
Balance sheet strength (+EOS?)
Funding gap
Contingent asset capacity
Status
Business/financial risks Trustees
Attitude
Group
As sponsoring employer
Inter group trading
Outside the box: Dependence on sponsor
Non-sponsor guarantees Market sentiment
FSDs/CNs (TPR) Ratings etc

30. A Winning Approach...
View on Interpretation
Covenant
Strong Covenant factors viewed as good, with no major weak areas identified
Risk of failure to honour scheme liabilities currently viewed as low
Positive Covenant factors viewed as positive/favourable; no major weaknesses identified
Risk of employer default considered on the lower side
Moderate Covenant factors viewed as mixed
Potential for employer default though probably not high risk nor near term
Negative Negative covenant factors outweigh positives; some significant weaknesses identified
Need for improvement/change/restructuring if employer to avoid default
Weak Covenant factors display major signs of weakness/distress
Employer default a strong possibilty and in worst cases insolvency
In all cases Where does covenant strength actually sit? Participating employers v group.
What is the trend in the covenant? Is it strengthening or weakening?

31. A Winning Approach...
View on Impact of Covenant Rating On:
Covenant Recovery Contingent Monitoring Other trustee
Funding target
period assets activity actions
Strong
Positive
Moderate
Negative
Weak

32. Our CAS Credentials
Covenant Assessment Services
- Operating in the covenant review market following involvement in 2002 in the Bradstock compromise
- Work mainly, but not exclusively, for trustees
- Current assignment rate:
• 60 + per annum (nationally)
- Wide ranging experience:
• PLC to small employer
• Single employer to multi-employer schemes
• Schemes from £10m to £1.5bn assets
• Frequent contact with Regulator and PPF
- Group comprises specialist partners, directors and senior managers supported by qualified analysts
- Winner of Sponsor Covenant Assessment Provider of the Year at the UK Pensions Awards 2009
- Winner of Covenant Review Provider at the Pension and Investment Provider Awards 2009

33. Improving scheme operation
Bill Hymas

34. It is not easy being a trustee, but I am
doing my best - although no one
seems to notice.

35. Drivers for governance?

36. But what is governance?

37. Wikipedia definition
Governance relates to decisions that define expectations,
grant power, or verify performance. It consists either of a
separate process or of a specific part of management or
leadership processes. Sometimes people set up a
government to administer these processes and systems.
In the case of a business or of a non-profit organisation,
governance relates to consistent management, cohesive
policies, processes and decision-rights for a given area of
responsibility. For example, managing at a corporate level
might involve evolving policies on privacy, on internal
investment, and on the use of data.

38. Elements of governance
Board effectiveness
Assessment of advisors
Relationship with the employer
Risk management and controls
Compliance with legislation
Communication strategy

39. How is it measured?

40. © 2009 Baker Tilly UK Group LLP, all rights reserved
Baker Tilly Tax and Advisory Services LLP, Baker Tilly UK Audit LLP, Baker Tilly Corporate Finance LLP, Baker Tilly
Restructuring and Recovery LLP and Baker Tilly Tax and Accounting Limited are not authorised under the Financial Services and
Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment services because we are
members of the Institute of Chartered Accountants in England and Wales. We can provide these investment services if they are
an incidental part of the professional services we have been engaged to provide.
Baker Tilly & Co Limited is authorised and regulated by the Financial Services Authority to conduct a range of investment
business activities.

41. November 2009
Investment – can you be
more effective and efficient?
David Willers
Mercer Limited is authorised and regulated by the Financial Services Authority
Registered in England No. 984275 Registered Office: 1 Tower Place West, Tower Place,
London EC3R 5BU

42. Global Stock Market Performance
Mercer 42

43. Opportunity Knocks
January 2009 February 2009 May 2009 End 2009
Global Credit Convertible Bonds Recovery Property Secondary Private Equity
More diversified Forced selling by UK market has Attractive but also
universe hedge funds been hit hardest practical issues
Buy and hold Capital protection Focus on funds Secondary funds
approach of bonds with no baggage address many of
the practical
Focus on short Participate in Look to buy high issues
dated bonds equity upside at yielding properties
no cost from forced sellers Previously
performed well at
bottom of cycle
Mercer 43

44. Agenda
Convertible Bonds
Recovery Property
Secondary Private Equity
Governance Issues
Mercer 44

45. Convertible Bonds

46. Convertible Bonds
What are they?
Corporate bonds that provide the option to convert into a company’s
underlying shares at a given conversion price.
Scenario Convertible Bond Behaviour
Share price falls Bond-like
Modest increase in
Bond-like
share price
Strong growth in share
Equity-like
price
Usually expect to pay a premium over bond price for a convertible
bond
Mercer 46

47. What Was the Opportunity?
Forced selling by hedge funds caused a collapse in convertible
bond prices.
At one stage, more than 50% of convertible bonds were priced
more cheaply than the equivalent bond.
In these cases, convertible bond holders were being paid to take
on the option of converting to an equity rather than paying for it.
Pretty good when the option always has a value of zero or better
for the holder!
Mercer 47

48. How to Access the Opportunity
Pooled fund with a specialist manager
Long only investing with no leverage.
Benchmark agnostic and should be viewed as an absolute return
opportunity.
Short maturity (investment horizon of 3-7 years).
Globally diversified (and currency hedged).
Buy and maintain with a light touch active management and
therefore lower active management fees.
Limited interest rate sensitivity because of short maturity and so
less vulnerable to inflation risk.
Mercer 48

49. UK Property

50. What is the Opportunity?
14.0
12.0
10.0
8.0
Yield (%)
6.0
4.0
2.0
0.0
Sep 89 Sep 91 Sep 93 Sep 95 Sep 97 Sep 99 Sep 01 Sep 03 Sep 05 Sep 07 Sep 09
Property Income Yield
Source: Investment Property Databank FT 5-15 Gilt Yield until 30/11/1996, FTA Gilt Yield thereafter
Mercer 50

51. How Would We Access the Opportunity?
UK Recovery Funds
New funds with no baggage
Closed ended funds with limited fund-raising window
5 year life
Target an absolute return of 12-20% p.a.
Fees include a performance related element
Aiming to be concentrated in most attractive areas
Mercer 51

52. Secondary Private Equity

53. Private Equity: What is it?
Value Manager
incentivise
d to
maximise
long term
value
Years
0 12
Mercer 53

54. Private Equity: The Current Opportunity
Value
Additional
return for
providing
liquidity
Years
0 12
Median bid in first half of 2009 was 36% of NAV
Mercer 54

55. How Would We Access the Opportunity?
Access through a fund of funds manager who will perform due
diligence on potential investments.
Use a closed ended fund with specified maturity and an absolute
return objective.
Be wary of Fund of Fund managers looking to raise very large
funds.
Use a specialised, recognised and experience secondary team
with a strong private equity background and track record across
market cycles.
Pay attention to practicalities and your need for liquidity.
Mercer 55

56. Governance Issues

57. Challenges Involved
Too small Governance
Too risky Transparency
Expensive Market Conditions
These can be overcome
Mercer 57

58. Dealing With Complexity
1. Build in-house resources
2. Introduce or strengthen investment committee
3. Look for an ‘off the shelf’ product
4. Delegate some decision making to investment consultant
Mercer 58

59. Example of a ‘Diversified Beta’ Fund
Strategy Target Portfolio Weight (%)
Initial Range
Infrastructure 20 10 – 35
Global Real Estate 15 10 – 35
Private Equity 20 10 – 35
Timber, Forestry and Agricultural Land 10 5 – 15
Opportunistic: Commodities/ Credit 25 0 – 30
Emerging: Clean Technology 10 0 – 20
TOTAL 100
Mercer 59

60. Implemented Consulting
Board of Directors
Executives
Department Head Department Head Department Head Department Head Department Head
Mercer 60

61. Delivering against your objectives
Strategy
Using a diversified beta fund transfers some strategic decision
making on growth assets to fund manager.
Implemented consulting can transfer decision making for matching
portfolio as well.
Implementation
Using a diversified beta fund transfers implementation responsibility
for part of growth portfolio to fund manager.
Implemented consulting can transfer implementation responsibility for
matching portfolio as well.
On-going
Both options also transfer some manager monitoring responsibility
away from trustees.
Mercer 61

62. Capturing Funding Improvements
Funding level (%)
100%
95%
85%
80%
75%
70%
Starting point End goal
Time
Actual funding level Downside protection level Step up in the downside protection level
Real world volatility will require a disciplined risk management
process
Mercer 62

63. Summary
The time is right for considering alternative investments.
Convertible bonds have rallied significantly and are now less
attractive from an opportunistic viewpoint.
Income yield on UK property is attractive on historic measures.
Secondary private equity investment funds are available at a
significant discounts.
The way you access opportunities is very important.
Diversified growth funds and implemented consulting offer routes
to increased complexity without increased governance.
Mercer 63

64. Risk Warnings
This document contains confidential and proprietary information of Mercer
and is intended for the exclusive use of the parties to whom it was
provided by Mercer. Its content may not be modified, sold or otherwise
provided, in whole or in part, to any other person or entity, without Mercer’s
written permission.
The findings, ratings and/or opinions expressed in this document are the
intellectual property of Mercer Ltd and are subject to change without
notice. They are not intended to convey any guarantees as to the future
performance of the investment products, asset classes or capital markets
discussed. Past performance does not guarantee future results.
This document does not contain specific investment advice. No
.
investment decision should be made based on this information without first
obtaining appropriate professional advice and considering your
circumstances.
Information contained herein has been obtained from a range of third party
sources. While the information is believed to be reliable, Mercer has not
sought to verify it. As such, Mercer makes no representations or
warranties as to the accuracy of the information presented and takes no
responsibility or liability, (including for indirect, consequential or incidental
damages), for any error, omission or inaccuracy in this document.
© 2009 Mercer Ltd. All rights reserved.
Mercer 64

65. Mercer Limited is authorised and regulated by the Financial Services Authority
Registered in England No. 984275 Registered Office: 1 Tower Place West, Tower Place,
London EC3R 5BU

66. The Second Biggest Lie
in Pensions...
…COMMUNICATION
IS A WASTE OF TIME
12 November 2009
Kevin Shilling
Mercer 66

67. Mercer 67

68. Mercer 68

69. The right question...
How much do you know about your pension benefits?
Mercer 69

70. The right question...
How much do you know about your pension benefits?
How do you plan to live when you retire?
Mercer 70

71. Communication
Cycle of activity
Commitment to communicate
Member engagement
Confidence
Mercer 71

72. Communication Plan
Review
• New tools
Timescales and costs
Objectives
• Regularly reinforce
Obstacles • Workbook
-Best practice
Mercer 72

73. Communication Plan
MESSAGE METHOD VALUE PERSONAL LIFE !
Mercer 73

74. Effective communication
MESSAGE METHOD VALUES PERSONAL LIFE!
Clear
Supplementary
Context
Call for action
Tone of voice
Consistency
Timescales
Ownership
Ongoing
Mercer 74

75. Effective communication
MESSAGE METHOD VALUES PERSONAL LIFE!
Clear Print
Supplementary Electronic
Context Briefings
Call for action Internal comms
Tone of voice Branding
Consistency Modeller
Timescales Unions
Ownership Media
Ongoing
Mercer 75

76. Effective communication
MESSAGE METHOD VALUES PERSONAL LIFE!
Clear Print Open, honest
Supplementary Electronic Corporate
Context Briefings From the top
Call for action Internal comms Environment
Tone of voice Branding Inclusive
Consistency Modeller
Timescales Unions
Ownership Media
Ongoing
Mercer 76

77. Effective communication
MESSAGE METHOD VALUES PERSONAL LIFE!
Clear Print Open, honest Focus groups
Supplementary Electronic Corporate Feedback
Context Briefings From the top Q&As
Call for action Internal comms Vision Forms
Tone of voice Branding Inclusive Grapevine/
blog
Consistency Modeller Environment
Timescales Unions
Ownership Media
Ongoing
Mercer 77

78. Effective communication
MESSAGE METHOD VALUES PERSONAL LIFE!
Clear Print Open, honest Focus groups Legal
Supplementary Electronic Corporate Feedback Technical
Context Briefings From the top Q&As CEO
Call for action Internal comms Vision Forms Acquisition
Tone of voice Branding Inclusive Grapevine/ World disaster
blog
Consistency Modeller Environment Change of PM?
Timescales Unions Sporting success
Ownership Media
Ongoing
Mercer 78

79. REXAM
MESSAGE
‘You have choices!’ Flexible contributions to
match your lifestyle. Invest what you can afford
METHOD
Paper based, sent to home addresses.
Consistent and regular. Branded
VALUES
Promotes company products and reflects
environmental policy
PERSONAL
Feedback via publications and internal meetings
LIFE
Impact of recession
Mercer 79

80. The Cooperative Group
MESSAGE
‘Working together.’ Harmonisation of
company and equalisation of benefits
METHOD
Diverse audience. Mix of website, print,
modeller andmanagers’ information packs
VALUES
Commitment from the top. Steering Group.
Employers took ownership of problem.
PERSONAL
Feedback through team briefings, website,
internal publications
LIFE
More acquisitions.
Mercer 80

81. BT
MESSAGE
Pension scheme for the future. Affordable and
sustainable. Fair to DC members
METHOD
Flexible and immediate. Website, modeller, Q&As,
Helpline, briefings, consultation packs.
VALUES
Commitment from the top, Ian Livingston. Corporate
values and environmental policy
PERSONAL
Feedback through team briefings, website, Helpline,
employer presentations
LIFE
Redundancies, pay freeze. Ongoing disputes
Mercer 81

82. Final thought...
Mercer 82

83. The Second Biggest Lie
in Pensions...
…COMMUNICATION
IS A WASTE OF TIME
12 November 2009
Kevin Shilling
Mercer 83

84. Occupational Pensions
Workplace Pensions
A new era?
Nicola Wynne

85. Living longer - that’s a good thing, right?
Our society is getting older. The number of pensioners
will double by 2050
In 1901 there were 10 people working for every
pensioner in the UK. By 2050, it is expected that this
will change to just 2 workers for every pensioner
It has been estimated that around 7 million people are
not saving enough to meet their retirement aspirations
© Blake Lapthorn 2009

86. “We need to put in place
an affordable,
sustainable pensions
system which meets the
needs of generations to
come and encourages
people to save for their
retirement.”
Tony Blair in the foreword
to the May 2006 White
Paper
© Blake Lapthorn 2009

87. And the answer is… automatic enrolment
into workplace pensions (aka ‘personal
accounts’)
Government’s White Paper of 25 May 2006
The Pensions Act 2008
March 2009
September 2009
Spring 2010
© Blake Lapthorn 2009

88. Who is responsible for the changes?
The Department for Work and Pensions (DWP)
The Pensions Regulator
The Personal Accounts Delivery Authority (PADA)
© Blake Lapthorn 2009

89. And what do they have to say about it?
“More people will have to give
greater thought to how they will
support themselves in retirement
and employers will increasingly
find that they need to understand
and engage with the pensions
choices they offer.
We remain fully committed to
supporting and enabling
employers to meet this challenge.”
Tony Hobman, Chief Executive of
the Pensions Regulator
© Blake Lapthorn 2009

90. “If we have serious
implementation problems
in the early days of auto-
enrolment that would
affect people's confidence
in terms of their savings
and the whole system.”
Yvette Cooper MP -
Secretary of State for
Work and Pensions
© Blake Lapthorn 2009

91. “The private pensions sector is
not well set up to meet all
employer and employee
needs. Personal Accounts are
really catering for those who
haven't done anything to
prepare for retirement while
still giving them the chance to
opt out.”
Tim Jones, Chief Executive of
the PADA
© Blake Lapthorn 2009

92. Another view……..
“The personal account
reforms are an appealing
idea in theory, but in
practice they are a
disaster in the making.”
Dr Ros Altmann, pensions
industry adviser and
campaigner of the Pensions
Action Group
© Blake Lapthorn 2009

93. So, what does the automatic
enrolment/personal accounts regime mean
in practice?
From 2012, employers will be required to:
– automatically enrol all eligible workers
– into a qualifying workplace pension
– make minimum contributions
© Blake Lapthorn 2009

94. Automatic enrolment
If you don’t opt out of the scheme – you are in it!
Eligible workers – jobholders in Great Britain over 22
and under 65 who have qualifying earnings
Those above and below the target age band can
opt-in and require employers to make a contribution
Phased in over a three year period
– October 2012 - large employers
– September 2013 - medium employers
– 2013 to 2015 - smaller employers
– October 2015 - where a qualifying defined benefit
arrangement is offered
Re-enrolment every three years
© Blake Lapthorn 2009

95. Qualifying scheme
You choose!
– Personal accounts
– A DB scheme which is
either contracted-out or
meets the Test Scheme
Standard
– A DC scheme with
contributions of 8% of
qualifying earnings, of
which the employer
contribution is at least
3%
© Blake Lapthorn 2009

96. Contributions
Year (from Employer Employee
2012) (including
tax relief)
Years 1-3 1% 1%
Year 4 2% 3%
Year 5 3% 5%
onwards
© Blake Lapthorn 2009

97. Unanswered questions
How does this fit with agency workers?
Is this the most appropriate means of saving for
everyone?
General administration
– specific date in the month for automatic enrolment
– how to start automatic enrolment early
– does the cost of not investing contributions for an initial
period in case of opt out outweigh the benefit?
– the practicality of registration and 3 year re-registration
Will automatic enrolment survive a conservative
Government?
© Blake Lapthorn 2009

98. What should employers do now?
Identify eligible workers and consider demographic of
workforce (age, gender, profession)
Consider current pension arrangement and
alternatives
Visit the Regulator and DWP websites
Consider recruitment, HR and record keeping
procedures
Don’t panic!
– the Pensions Regulator is responsible for ensuring
employers are aware of their duties and how to comply with
them. Targeted communications campaigns will start in
2010.
© Blake Lapthorn 2009

99. Trustees’ circle of interdependencies
Employer covenant
Funding
Investment
© Blake Lapthorn 2009

100. Southern Pensions conference - key
questions
What is the current governance model?
Does this still work? If not what can you do about it?
If not, how does it have to change?
If you delegate, what can you delegate?
What should you delegate?
What powers do you hand over?
What powers do you keep?
How do you monitor?
How do you act when you need to?
© Blake Lapthorn 2009

101. Southern Pensions Conference - food for
thought
Royal Mail?
CDs and now DVDs?
Modernisation
Vested interests
Fewer and fewer schemes have any future accrual
Most/all benefits are “fixed” or at least “known” subject to
inflation (and with caps)
Opportunities for
– changes in governance approach
– economies of scale
– “cooperatives” or not for profit?
© Blake Lapthorn 2009

102. Questions to ask - trustees
Do I/we understand all of the risks?
Can we get more from our current and future assets?
How rigorous is our covenant monitoring? How rigorous
does it need to be?
Have we reviewed all our liabilities and operational issue
How do we manage conflicts?
Have we considered all options and issues?
Have we challenged our advisers on these issues?
Have we challenged ourselves and assessed our own
performance?
© Blake Lapthorn 2009

103. Questions to ask - employer
Are we fully engaged with the Scheme?
What is our strategy? Have we thought about the end
game?
Have we considered all of our options?
© Blake Lapthorn 2009

104. To do list
Work together - establish and maintain a good
working relationship
Review governance and operations
2012 is not that far away
Be active rather than reactive
Keep your nerve
© Blake Lapthorn 2009

105. Private sector DB?
Early retirement?
Pensions Manager?
Trustees?
Scheme Actuary?
© Blake Lapthorn 2009

106. If you have questions on this or other related topics, please contact:
adrian.lamb@bllaw.co.uk
Blake Lapthorn is an English law firm regulated by the Solicitors
Regulation Authority under SRA number 448793 whose rules can be
accessed via www.sra.org.uk
This presentation is protected by copyright and is not a substitute for
detailed advice on specific transactions and problems and should not
be taken as providing legal advice on any of the topics discussed.
A full list of our partners is available on our website at
http://www.bllaw.co.uk/about_us/a_to_z_of_partners.aspx or at any one
of our offices http://www.bllaw.co.uk/offices.
© Blake Lapthorn 2009