Matthew Arends

Head of UK Retirement Policy for Aon and pensions enthusiast

[Matthew Arends @Matthew_Arends]

One way would be a CDC scheme, which pools assets and so can more easily accommodate illiquid assets. It would also have the time horizon to do it.

[Stephanie Hawthorne @HawthorneSJJ]

@Maria_Espadinha @gosling_tim Liquidity is a serious issue in DC. How do you square the circle of daily pricing/dealing and holding illiquid assets?

[Matthew Arends @Matthew_Arends]

@charlotsmoore The real issue wasn't LDI, which did its job. The issue was the speed and extent of yield movements, which was unprecedented. I think it's harsh to question regulators (or trustees) for that happening.

[Matthew Arends @Matthew_Arends]

@JosephineCumbo Can anyone decode for me the difference between "Autumn" and "Late Summer" in this context? Do they both mean Christmas?

[Matthew Arends @Matthew_Arends]

That will almost certainly give trustees and sponsors less than a year to take in the new code before their valuations could be affected. Hopefully that signals not much change to the existing funding regime - in line with DWP's original White Paper.

[Josephine Cumbo @JosephineCumbo]

NEW: The UK Pensions Regulator plans to launch its second consultation on a new defined benefit funding code this autumn, with the code operational from September 2023.

More to follow:

[Matthew Arends @Matthew_Arends]

@henryhtapper FORO is a critical issue Henry. With DC drawdown, the issue is that no-one knows how long they'll live so savers will either underspend (and have a lower standard of living than they could have done) or overspend and run out of money. DB, annuities and CDC protect against this

[Matthew Arends @Matthew_Arends]

The Pension Regulator's 2022 Annual Funding Statement is out https://t.co/sp88clZJSf. It's really about risk management, though and similar to last year's. But re-emphasis on covenant strength (mentioned 137 times!) - whereas 1st Funding Code consultation downplayed covenant.

[Matthew Arends @Matthew_Arends]

@glesgabrighton @JosephineCumbo Then inflation-linked pensions will cost more to provide, but the prices of the assets backing them won't directly respond to inflation. Result: lower surpluses/bigger deficits (all else being equal)

[Matthew Arends @Matthew_Arends]

Interesting - but as the assets of those same pension schemes are likely to be hedged against gilt yields they would also likely lose value. Swings and roundabouts…

[Josephine Cumbo @JosephineCumbo]

Around £100bn could be wiped from the long-term liabilities of UK pension schemes, if longer-term gilt yields were to increase in line with base rates.

XPS Pensions made this estimate following the Bank of England’s announcement today that base rate will rise from 0.25% to 0.5%

[Matthew Arends @Matthew_Arends]

@DrTonyPadilla Most UK pension schemes are well-hedged against changes in gilt yields. So if a gilt yield rise means the liability value falls, the asset value will also fall. Maybe not by exactly the same amount, depends on circumstances, but similar, so surplus/deficit not changed v much

[Matthew Arends @Matthew_Arends]

I've been waiting for this impatiently - time to get reading! It will be a big moment when all the regulatory pieces are in place to permit UK Collective DC pension schemes.

[Josephine Cumbo @JosephineCumbo]

BREAKING: UK regulator sets out plans for supervision of new Collective Defined Contribution #pension schemes. https://t.co/t07eGSIBka

[Matthew Arends @Matthew_Arends]

Great that we have a date at last for CDC, marking a major milestone in the progression of UK pensions. But I must confess to disappointment that the date isn't in the first half of 2022 - still >7 months to wait.

[Pensions Age @PensionsAge]

Breaking: CDC legislation to come into force from 1 August 2022

https://t.co/ecDR4FXsSp

[Matthew Arends @Matthew_Arends]

@Maria_Espadinha I really hope TPR uses this time to take a good look at the funding code. As I highlighted in my pensions hopes and fears for 2022 note (https://t.co/9HV8jKxWdT) there is a real risk that TPR could create MFR2 based on what was said in the first consultation.

[Matthew Arends @Matthew_Arends]

@glesgabrighton @RButcherptl The other issue with MFR was it was one-size-fits-all which we moved away from with Scheme Specific Funding in 2005. Can we please not go back to one-size-fits-all in the new Funding Code!

[Matthew Arends @Matthew_Arends]

@JosephineCumbo Great to hear this from The Pensions Regulator. David is also right to point out that additional checks and balances would be needed on any commercially available CDC scheme, but they would enable CDC for all pension savers, not just large employers.

[Matthew Arends @Matthew_Arends]

@Tess_invests Too true - and with shorter timescales than we ever used to have... These are not simple subjects to fire off a quick response to.

[Matthew Arends @Matthew_Arends]

UK Collective DC schemes gather more momentum with the publishing of the draft regulations for consultation this morning. Hopefully allowing the launch of the Royal Mail CDC scheme soon. https://t.co/YCNTNrRI7c

[Matthew Arends @Matthew_Arends]

I'm very much looking forward to taking part in the panel session during tomorrow's event. I hope you can join us!

[Josephine Cumbo @JosephineCumbo]

Looking forward to chairing a Royal Society for Arts panel discusison tomorrow on the opportunities and challenges for Collective DC pensions in the UK.

The event runs from 0930-1100 on Wednesday July 7.

Registration is free here. https://t.co/hsI9JAvpkf

[Matthew Arends @Matthew_Arends]

@rosaltmann @Telegraph I agree. Pensions tax is already complicated enough. And there are real issues to be very careful about incl the low paid, but also the high paid, and that implementing change equitably across DB and DC pensions is tough - DB pensions already treated more favourably for tax.

[Matthew Arends @Matthew_Arends]

And also we have rumours of reductions in the Lifetime Allowance, which if they happen would mean DC savers would be increasingly likely to pay 55% tax on investment returns. How are members, trustees and employers meant to reconcile these messages?

[Josephine Cumbo @JosephineCumbo]

Two Government announcements today present conflicting messages to workplace #pension scheme trustees about what they should invest in to drive returns for members. Examples to follow.

[Matthew Arends @Matthew_Arends]

@JosephineCumbo Agree on impact on doctors, but it's also eg everyone else in private sector DC schemes: DC investment returns count against the Lifetime Allowance. Reducing the LTA disincentivises long term investing whereas isn't that what the UK needs? ~£2trn in UK pensions.