Pensions Conference 2019

2 hours of Mandatory Professional Skills can be claimed at the Pensions Conference. 

Speakers: Chiara McCormack and Ben White, IFoA, Malcolm Slee

Conference Chair: Harvi Rana, Aon 

The Lloyds Banking group judgment has brought focus to one of the most complex equalisation issues that remains outstanding in pensions.  In this session some of the issues that arise regardless of solution will be examined before going on to consider some of the issues that arise specifically under GMP conversion.  Finally, there will be an update on the work of the three industry groups, with an opportunity for questions and comment.

Speakers: David Everett, Lane Clark and Peacock

A1: Bringing CDC to the UK

A new “third way” of providing UK pensions, Collective Defined Contribution (“CDC”), is now around the corner.  The IFoA’s new CDC working party will describe the views reached in its work so far, including:

• Key aspects of the Government’s new legislative and regulatory framework for CDC.
• The wide range of potential CDC benefit designs including master trust designs.
• Options for CDC valuation assumption setting powers and the actuary’s role in decision making.

We’d be interested to hear views from the audience on the various CDC design options.

Speaker: Simon Eagle, Willis Towers Watson and James Franklin-Adams, Aon

A2: Why Climate Change is a Survival Issue for Pension Schemes: The Maths!

Summary:

With climate change rapidly moving into the ‘must do’ category for pension schemes, this collaborative talk from the IFOA and Ortec Finance gives a high level overview of how schemes can approach this – going beyond explanations of what climate risks and opportunities are to present a methodology for translating these to scheme level funding impacts.

Description:

The talk presents the results of globally leading research carried out by Ortec Finance in 2018 with a group of major asset owners, which for the first time quantifies the macro-economic impact of different climate scenarios. The talk is in 4 sections covering:

• Climate scenarios - covers what climate scenarios are, the very serious implications of an additional degree of warming and thoughts on probable, rather than possible, climate scenarios.
• Capital market impacts - a description of the dynamic link between different climate scenarios, covering both macro-economic and stock level impacts.
• Quantification - a methodology for linking climate models to traditional financial models or economic scenario generators typically used for pension scheme asset-liability modelling.
• Scheme level impacts – presents the results from the 2018 research led by Ortec Finance’s climate savvy modelling programme, illustrating why climate mitigation is a survival issue for pension schemes

Speaker: Sandy Trust, Grant Thornton and Lisa Eichler, Ortec Finance

A3: Setting Long Term Interest Rate Targets

This talk looks at various ways of setting long term interest rate targets and explores their implications for asset return projections. We look at methods based on market fundamentals, econometric forecasting techniques and targets based on forward rates. For each we consider the practical methods of implementing a particular approach and the practical implications when implementing such an approach. We also discuss several approaches for setting the interest rate volatility targets and the importance of maintaining consistency between the central assumption and the volatility assumption. We also touch on the importance of expert judgment in forming and validating any final assumptions.

Attendees should leave the workshop with a good understanding of the common techniques and considerations when setting targets for interest rates.

Speaker: Matthew Lightwood, Conning

A4: Baby Boomers and the Pensions Crisis: Demography and Gerontophobia

Actuaries are frequently involved in debates about pension provision that are increasingly framed in terms of a ‘generational conflict’ over social resources. The ‘Baby Boomer’ generation – a large cohort currently at retirement age, some of whom had access to relatively generous pensions – is targeted as the problem, while younger generations are presented as unfairly having to shoulder the burden of the elderly. Campaigners for ‘intergenerational equity’ claim that a reduction in pension entitlements will lead to greater fairness between the generations. I will draw on my research into this claim to argue that on the question of pensions, as with other aspects of this debate, economic and political problems are being wrongly reposed as a conflict of generational interests. I employ the concept of ‘doomography’ to show how reductions in pension entitlements are presented as a necessary response to a natural crisis, while a ‘gerontophobic’ narrative frames older people as the ‘undeserving rich’. Such arguments both incite resentment against the old, and compel young people to expect less from their own pensions.

Speaker: Jennie Bristow, Canterbury Christ Church University

B1: RPI

• Introduction to Prices – A background to Prices Division including the published series and their histories.
• Comparison of CPI / CPIH as a measure compared to RPI – Including collection and aggregation methods.
• Outcome of the House of Lords Economic Affairs Committee (and the way forward) – Covering the Government’s response to the report into Measuring Inflation.
• Explanation of the ‘wedge’ between the CPI and RPI – A summary of what contributes to the difference between the CPI and RPI (including the formula effect) and how this ‘wedge’ has changed over time.
• Household Cost Indices – An introduction to the HCIs, what they represent and how they differ from the CPI.
• Forward workplan – Outlining our future workplan to integrate scanner and webscraped data within the CPI/CPIH by 2023. Including a link to Technical and Stakeholder Advisory Panels for Consumer Prices and their role in the development.
• Introduction to Prices – A background to Prices Division including the published series and their histories.
• Comparison of CPI / CPIH as a measure compared to RPI – Including collection and aggregation methods.
• Outcome of the House of Lords Economic Affairs Committee (and the way forward) – Covering the Government’s response to the report into Measuring Inflation.
• Explanation of the ‘wedge’ between the CPI and RPI – A summary of what contributes to the difference between the CPI and RPI (including the formula effect) and how this ‘wedge’ has changed over time.
• Household Cost Indices – An introduction to the HCIs, what they represent and how they differ from the CPI.
• Forward workplan – Outlining our future workplan to integrate scanner and webscraped data within the CPI/CPIH by 2023. Including a link to Technical and Stakeholder Advisory Panels for Consumer Prices and their role in the development.

Speaker: Michael Hardie, Andy King, ONS Head of Inflation, 

B2: Member Options - Valuable option or member exploitation? A 2019 update

James is a member of Aon's specialist Member options team, with experience of over 25 bulk member options exericses, I also head up Aon's IFA selection team. James will prepare a presentation for the day, with the intention of sharing his most recent expriences of member options. A lot has changed in a relatively short period of time since pensions freedom was introduced back in 2015, with new innovation in the market constantly. Topics James would look to cover include:

- Morals of member options
- Use of online tools
- Development of the IFA market
- Partial Transfers
- Flexi-PIE
- Member options and GMP conversion
- Any other new innovation over the next few months

Throughout the presentation James will share Aon's most recent statistics of various options.

Speaker: Jamil Merali, Aon 

B3: CMI – SAPS Update and the Latest on Mortality Projections

The CMI will provide an update on:

• The SAPS “S3” Series mortality tables for pension schemes, published in December 2018;
• SAPS mortality experience for the period 2010-2017;
• The CMI_2018 Model; and
• Recent mortality in England & Wales and its implications for users of the CMI Mortality Projections Model.

Speakers: TBC

B4: ESG – 7 Habits of Highly Effective Pension Scheme Integration

The 7 habits of highly effective ESG risk management for pension funds.  ESG considerations mean many things to many people – not least regulators, who are now viewing them as core to the duty of pension scheme trustees. In this presentation, Catherine and Bruce describe effective strategies for trustees  focusing on both the trustee board governance and investment processes. 

Speakers: Catherine Ogden and Bruce White, Legal & General Investment Management

Presidential Address: John Taylor

Fiona Frobisher, Head of Policy at TPR, will talk about what quicker, clearer, tougher means in practice.   She will also provide an update on the development of the new DB funding code and how TPR expects to regulate scheme funding going forward. 

Gareth Thomas will be talking about some of the evidence underpinning the current round of DB reform, his interpretation of some of that evidence, and some of the key issues and principles in play as policy thinking has developed in consultation with a whole range of interested parties.

Speakers: Fiona Frobisher, The Pensions Regulator and Gareth Thomas, Department for Work and Pensions

C1: Bulk Annuities – Finding Solutions to an Increased Demand

This will be a presentation on the bulk annuity market and will reflect on the reasons for the increased demand over the last two years and actions being taken to ensure that supply is there

Focus will be on:

• Why has demand grown and is the level of demand likely to change
• What insurers are doing to increase the supply - (e.g. asset sourcing, human capital, making internal processes more efficient)
• How scheme trustees and their advisers can engage with insurers who are now being more selective (clearly defined process/project plan, good preparation)
• How insurers and advisers can work together to streamline and improve the efficiency of the transaction process. - standard legal contracts, data in agreed format, trustees discretions codified

This session will be as interactive as possible with questions being asked both during and at the end of the presentation.

Speakers: Martin Parker and Rob Mechem, Just Group

C2: Developing a Framework for Managing LPI Risk

The LPI risk working party was formed in 2018 bringing together actuarial professionals working across the finance and investment industry. Current members include actuaries representing pension and investment consultants, insurers, asset managers, market data providers and academics.

The working party's main aim is to improve the understanding and transparency around the assessment of the inflation sensitivity of LPI-linked liabilities. This is an area that to date has had limited public research and general understanding of, resulting in a divergence in methods.

During this session, the working party will present a simple framework for use by all interested parties including Pension Scheme Trustees. This will cover key aspects of the valuation of LPI-linked liabilities and the inflation sensitivity of the resulting cashflows.

LPI risk, for context, will be set alongside the other risks/decisions that a Trustee/Actuary is required to make with regards to the valuation and hedging strategy of a pension scheme.

Speakers: Alexandra Miles and John Southall, Legal & General 

C3: Pensions Law Update – Current Issues/Cases

In this session Anne-Marie will give a wide-ranging pension law update that covers:

• Upcoming legislative changes;
• Recent court cases;
• Consultations and other news from the DWP;
• Pensions Regulator activity; and
• Stop press and horizon scanning

Attendees will be welcome to ask questions and discuss the issues raised.

Speaker: Anne-Marie Winton, ARC Pensions Law

C4: Big Data and Socio-Economic Mortality

Summary: In this session Andrew will use highly-detailed geographical population data from the Office for National Statistics to assess what socio-economic and other factors drive mortality rates.

Andrew will investigate what types of information about where you live affects mortality and life expectancy.

Data:
- ONS population and deaths data at the level of small geographical areas (LSOA's)
- Socio-economic covariates for each LSOA
- Geographical covariates for each LSOA.

Andrew will discuss first which combination of covariates have the strongest predictive power. Second we will investigate how much regional variation there is in our resulting models: is region a genuinely significant factor in the level of mortality or is observed regional variation simply reflecting differences in the socio-economic makeup of local populations.

The use of advanced statistical methods will allow us to investigate how much variation there is across England in mortality rates and life expectancy. We canthen use that to inform mortality assumption setting in pension scheme valuations.

The underlying research is part of the research programme "Modelling, Measurement and Management of Longevity and Morbidity Risk" funded by the Actuarial Research Centre of the IFoA.

Speaker: Andrew Cairns, Heriot Watt University

This session will debate the practical and sometime challenging considerations when considering a transfer to a commercial consolidator. We will fast forward a few years to an environment in which the debate has moved away from whether consolidators are desirable to one in which they are actively operating. We’ll navigate through the issues with a panel made up of a professional trustee, pensions lawyer and scheme actuary.     

Speakers: Costas Yiasoumi, Willis Towers Watson, David Felder, Law Debenture,​​​​ Jane Kola, ARC Pensions Law and Michael Butterfield, Willis Towers Watson

How do you advise your clients on their target end game? Can a scheme invest better than an insurer meaning buyout should only be the exception? What about covenant – how does that impact end game planning? Do new style commercial consolidators offer a genuinely new option or are they simply a last resort? This and more will be covered by three members of the Self-sufficiency, buyout and consolidation working party in an active and engaging style.

Speakers: Richard Farr, Lincoln Pensions, Kevin Wesbroom, Aon