PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Setting the scene for DB Janet Brown, Partner

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change What developments are we going to cover? DB look back in anger? 2016 events in brief The Green Paper The Pensions & Lifetime Savings Association – the interim report and the case for consolidation Election promises What does the future hold ?

DB look back in anger? 2016

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Some defining DB moments in 2016 Work & Pensions Select Committees BHS PLSA DB Taskforce British Steel Halcrow

DWP/BIS report July 2016

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Growing deficits BhS Sale Sir Phillip Green and Frank Field M.P DWP / BIS Further investigations into DB pensions Role of tPR

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Economy Low interest rates for prolonged period Market volatility Employer Need to allocate capital for growth Appropriately reward current employees Over-regulation & complexity Entrenched benefits Difficulty making changes Why are DB schemes under pressure?

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change

SAUL – Trustee training 19 January 2017 Lack of inter-generational fairness and risk bearing is sub-optimal Rigid benefit design Key theme: 2016 DB pensions “under pressure“ Fragmented system – scheme consolidation considered Inflexible regulation

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Current options when under pressure? Pension increase exchanges Factors Trivial pensions Buy-in / buy-out RPI/CPI Transfer options Future service benefits

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Work & Pensions Committee Report – 21 December 2016 Trustees armed with more powers Mandatory clearance Actuarial valuations Tougher / nimbler TPR Help schemes restructure PPF levy better reflecting risk Treble fines payable

Green Paper Feb 2017

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Government Green Paper – 20 February 2017 “Security and sustainability” Indexation Funding & investment Employer contributions & affordability Stressed schemes Member protection TPR’s powers Consolidation

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Green Paper – commentators’ common ground? Extend tPR’s powers Statutory RPI/CPI override? Key areas Stressed schemes need flexibility Valuations – how often? how?

PLSA – The case for consolidation- March 2017

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change PLSA’s DB taskforce 2nd report The case for consolidation (“Superfunds”) Four models

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change 4 models of consolidation in the PLSA report Model 1 Scheme services consolidated Model 2 Investment – asset pooling Model 3 Single governance across schemes Model 4 Superfunds

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change Where next from the Green Paper? Consultation closed on 14.05.17 Building consensus White Paper in the Autumn? & a new Pensions Bill?

Election promises

PMI Trustee Seminar: 2017 a year of controversy, evaluation and change It was the night before the General Election…… (as at May 22nd) the main parties’ key points are: Con Lab Lib Dems Extend tPR’s powers Amend the Takeover Code to protect pensions of “systemically important” businesses Review of tax relief on pensions – single rate of relief at rate higher than 20% State pension - double lock State pension - triple lock State pension - triple lock to the end of the next Parliament Increase State Pension Age (SPA) in line with life expectancy Consolidation of schemes Same sex couples full equality Extend auto-enrolment to self-employed New SPA pension review Promote LISAs as saving vehicle

Questions

Janet Brown, Partner Janet.brown@sackers.com 4127-0005-6843