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Reward Masterclass July 2013
- 1. From default to design: why good governance matters Niall Ferguson | 4 July 2013 Smarter. Simpler. Better. www.nowpensions.com
- 2. Our achievements • NOW: Pensions is a UK multi-employer Trust • Supported by ATP, Denmark’s leading pension provider • • • Low cost operating model c£74bn FUM ATP investment team +7.95% p.a. (average) for the last 5 years* 45 years Equiniti Paymaster administrator to 2.9m UK workers C 160,000 employers 4.7m members * Back tested data for the UK based on ATP’s investment strategy and NOW: Pensions’ implementation strategy to 30 Sept 2012 2 Smarter. Simpler. Better. 2
- 3. GPP Multi-Employer Trust – Best of both worlds • Costs met by • Cost options are your choice • No Trustee • Trustee Board in place • No fund selection required members Board • Wide range of funds • Undefined Governance framework 3 • Defined Governance framework Smarter. Simpler. Better. Trust DC • Costs met by employer • Trustee Board set up by employer • Funds selected by Trustees • Defined Governance framework 3
- 4. Design of Default Investment Funds matter Pensions Institute Findings 4 Smarter. Simpler. Better. 4
- 5. 5% 10% Yes No 85% Don’t Know The results, displayed in the chart, show there is a huge lack of understanding about investments and finance amongst the population shown by the high “No” responses 5 Smarter. Simpler. Better. 5
- 6. Does your workforce understand pensions? We surveyed consumers to ask if they would be able to rank the riskiness of assets (bonds, cash, commodities and equities) from very risky to least risky 6 Smarter. Simpler. Better. 6
- 7. Do members make good investment managers 7 Smarter. Simpler. Better. 7
- 8. What’s the most you would bet on the toss of a coin, if you stood to win £1,000? £450 8 £200 £100 Smarter. Simpler. Better. 8
- 9. Even professional investors end up chasing the market FTSE All Share Index Net Retail Flows into UK Equity and Property Collective Mutual Funds £bn Source: FTSE, Investment Management Association and AllianceBernstein 9 Smarter. Simpler. Better. 9
- 10. It is important to focus on the right issues • • What do I want to do when I retire? • 10 When do I want to retire? Do I need to make contributions in excess of the minimum? Smarter. Simpler. Better. 10
- 11. one Advantages of investment solution? 11 Smarter. Simpler. Better. 11
- 12. Why do other providers offer a range of funds 12 Smarter. Simpler. Better. 12
- 13. Contract Based DC = Insurance Company has full responsibility …and is conflicted Trust Based DC = Scheme Trustee Board has full responsibility …and is nervous Master Trusts = But… Independent Trustee Boards have responsibility • They may be nervous about press reaction • Their wider distribution strategy may compromise their ability not to offer choice • Distancing themselves from a conventional approach may be too difficult 13 Smarter. Simpler. Better. 13
- 14. Our Masterbe nervous about press reaction Trust • They may • Knowledgeable and independent Trustee Board takesstrategy may full responsibility • Their wider distribution for investment solution compromise their ability not to offer choice • New Proposition, so no blind spots created by considering legacy issues/ existing proposition • Distancing themselves from a conventional approach may be too difficult • No unwelcome pressure from other sources influencing our decisions 14 Smarter. Simpler. Better. 14
- 15. Guided investment solution Growth phase 10% (+/- 10%) 20% (+/- 10%) 25% 10% (+/- 10%) (+/- 10%) Rates Credit Equities Inflation 35% Commodities (+/- 15%) 15 Smarter. Simpler. Better. 15
- 16. Guided investment solution Glidepath phase 100% Return Target: Cash 90% 80% Return Target: Annuity Prices 70% 60% 50% 40% 30% 20% 10% Return Target: Cash + 3% 0% Protecting your Tax Free Cash Entitlement Protecting the Buying Power of your Pension Fund Annuity Rates • Fund They may be nervous about press reaction Values • Their wider distribution strategy may Growth Phase Performance & Protection compromise their ability not to offer choice • Managed Diversified Growth Fund 16 Distancing themselves from a conventional Retirement Protection Fund Cash Protection difficult approach may be tooFund Smarter. Simpler. Better. 16
- 17. Charges matter Pensions Institute Findings 17 Smarter. Simpler. Better. 17
- 18. Simple charging structure for all Providing a better pension for employees • They may be nervous about press reaction • Their wider distribution strategy may compromise their ability not to offer choice • Distancing themselves from a conventional approach may be too difficult Two explicit elements to our charges 18 Smarter. Simpler. Better. 18
Notas del editor
- ATP – PADA – gap in market for cost efficient, simple pensions with investment funds that perform …
- ATP – PADA – gap in market for cost efficient, simple pensions with investment funds that perform …
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Members find it difficult to assess their own attitude to riskThe answer to this question will be very different at different life stages.
- Anecdotal evidence suggests that new members to pension arrangements have an average attention span of 15 minutes when considering the scheme. After that time, interest starts to wane, and engagement becomes more difficult to achieve. During that 15 minutes its important to focus on the right issues. Considering attitude to risk and investment options eats into that key 15 min period
- Anecdotal evidence suggests that new members to pension arrangements have an average attention span of 15 minutes when considering the scheme. After that time, interest starts to wane, and engagement becomes more difficult to achieve. During that 15 minutes its important to focus on the right issues. Considering attitude to risk and investment options eats into that key 15 min period
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap
- Worrying about investment decisions detracts from key issuesMembers find it difficult to assess their own attitude to riskThose who self-select focus on recent market commentaryMembers rarely review their investment decisionsThose that do change, often fall into the ‘buy high / sell low’ trap