News Industry news@theactuary.com
Solvency II is still necessary in spite of damaging delays, says Standard & Poor’s The long run-up is eroding confidence and adding to costs, but new rules for the insurance industry remain crucial The ratings agency Standard & Poor’s (S&P) has issued a report considering the future of the Solvency II plans, based on comments made by S&P staff during a conference in Dublin last month. It noted that the existing regulatory system, Solvency I, was “virtually devoid” of incentives for good risk management. It also lacks capital requirements for asset risk, it said. This means Solvency II, which will place new capital requirements on insurers depending on the results of a risk-based assessment of their assets and liabilities, is “needed now”. However, the long run-up to Solvency II is “reducing investor confidence”, the report warned, adding: “The regulatory uncertainty is raising insurers’ cost of capital and some are deferring strategic decisions.” The rules were originally scheduled to be introduced in January 2014, but implementation is now not expected until 2016. For more on this story, visit bit.ly/11EFlWl
Pensions minister announces crackdown on auto-enrolment consultancy charges Two-pronged approach will outlaw ‘high and inappropriate charges’, promises Steve Webb Consultancy charges on pension schemes being used for auto-enrolment will be banned under plans set out by pensions minister Steve Webb. Regulations will be laid “as soon as possible” to outlaw the charges as part of a “two-pronged” approach to address “high and inappropriate” charges, he revealed. The other aspect of the plan will involve a consultation this autumn to cap the charges levied on all defined contribution (DC) default funds – the investment option used by most pension savers. This move comes in response to the Office of Fair Trading inquiry into competition in the DC market, which was launched in January and is expected to report shortly. Webb noted that the government’s own review of consultancy charges had found that measures to prevent advisers deducting high charges from members’ pension pots were inadequate. This has a disproportionately high impact on people who move jobs regularly, he added. For more on this story, visit bit.ly/15TON9u
MORE BREAKING NEWS ONLINE Visit www.theactuary.com for breaking news and to register for weekly news alerts
14
Deficits rise for pension funds The combined deficit of the UK’s defined benefit (DB) pension schemes increased to £256.6bn in April, according to figures published by the Pension Protection Fund. The estimated figure represents a £20bn increase from the £236.6bn deficit recorded at the end of March for the 6,316 schemes that are eligible for entry to the Pension Protection Fund. bit.ly/10VDGdn
Month’s grace for flood cover Insurers have extended their commitment to offering cover to properties at high risk of flooding by one month to the end of July. The guarantee, which is part of an agreement with government known as the Statement of Principles, was due to expire on 30 June. It will now run for another month to give more time to finalise the details of a replacement arrangement. bit.ly/18NAlyT
Five-year high for pension deals There were 14 pension buy-in and buy-out deals worth over £100m last year, the most since 2008, according to figures from consultancy LCP. bit.ly/19iLeGy
Pensions regulator warns trustees of ‘over-prudence’ The Pensions Regulator has warned trustees against being over-cautious when agreeing their pension funding plans and stressed the flexibilities available to employers struggling to close their scheme deficits. In its annual funding statement, the regulator sets out how defined benefit scheme valuations should be carried out in the current economic climate. It stresses that trustees can use the flexibility in the regulatory system to calculate future liabilities in a way that best suits the individual scheme and employer. Trustees are also urged to take into account what is “reasonably affordable” for employers when setting the contributions they need to make to the pension scheme, and to consider giving them longer to close their deficit. Michael O’Higgins, chair of The Pensions Regulator, said: “I want to see pension trustees agree long-term strategies that protect retirement savers, while also enabling viable businesses to thrive and grow. We expect them to mitigate the risks to their scheme, but this does not require them to be overly prudent.” For more on this story, visit bit.ly/YF7Bqa
Lengthy retirement ‘is bad for your health’, says IEA Ministers have been urged to remove barriers to people working longer after a study found that retirement has a detrimental effect on both mental and physical health over time. The Work Longer, Live Healthier report from the Institute of Economic Affairs (IEA) found that retiring may provide an initial health boost. But, longer term, it decreases the likelihood of someone assessing their own health as ‘very good’ or ‘excellent’ by 40%. Retirement also increases the probability of clinical depression by about 40% and of having at least one diagnosed physical condition by about 60%. Problems were exacerbated by the length of time in retirement. For more on this story, visit bit.ly/15PpcPv
THE ACTUARY • June 2013 www.theactuary.com
p14_june_ind_news_FINAL•CT.indd 14
24/5/13 16:44:40
