LCP in the Press 2008

Year: 2008 2007 2006 2005 2004 2003

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Pension schemes take on risk of rising prices Gavin Orpin, head of trustee investment consulting at Lane Clark Peacock, said: "Pension scheme demand for index-linked bonds has outstripped supply over the past 10 years, pushing prices down." Orpin said: "Most pension scheme trustees are in a dilemma: inflation swaps and index-linked bonds look expensive, but they could become more expensive in the future, which could have an even more adverse effect on pension schemes. If a pension scheme thinks inflation will get worse, then it might start buying inflation protection." Financial News, 16 June 2008

Solvency II solution Solutions need to be created in order to derive vale from Solvency II without being overloaded, Declan Lavelle, a partner with LCP, said: "With the publication of the European Union directive last year and QIS4 currently under way, the ultimate Solvency II landscape is coming into sharper focus, but with all the details, involved, there is a real challenge for those managing the implementation in their firms to do so effectively, The competitive pressures of running a successful insurance business are as strong as ever but management agendas are increasingly filled with regulatory issues, leaving to little time for strategic thinking." Insurance Day, 11 June 2008

Lonmin deal set to spur FTSE pension fund buyouts Clive Wellsteed, a partner at Lane Clark & Peacock, said "The market will continue to accelerate as companies and trustees grasp the opportunity now available". The Times, 14 May 2008

Pension Scheme buyouts set to rise Clive Wellsteed, who heads the pension buyouts practice at LCP, said: LCP sees the decision of whether to pass risk to an insurance company through buyout as simply a question of timing. Most defined benefit pension schemes are closed to new members and were already expecting to buyout with an insurer in the long term. 'Favourable pricing now provides an opportunity to transfer some of all of the risk away much sooner. It's not a question of if these schemes will buyout, but simply a matter of when.' Guardian Unlimited , 08 May 2008

Pension buyout market to be worth £10bn The market for pension buyouts will be more than £10bn this year, a four-fold increase on 2007, a survey by Lane Clark & Peacock shows. At least 10 FTSE 100 pension schemes are considering offers from insurers to buyout some or all of their pension liabilities during 2008, LCP said. The biggest buyout to date was the £800 deal to insure current pensioners in the P&O scheme, but the report found that seven quotations had been issued by insurers for potential transaction worth than £1bn. The Independent , 08 May 2008

Business could top £10bn in 2008 According to a study by Lane Clark & Peacock, actuarial consultants, the value of deals in the six months to the end of March was seven times greater than that of the previous six months. Financial Times , 08 May 2008

Rise in offloading of pension plans Clive Wellsteed, who heads the pension buyouts practice at LCP, said: "A year ago, many commentators were predicting that the pension buyouts market would be a slow-burner, now the question is can insurers keep pace with demand from companies and trustees to offload risk. LCP sees the decision of whether to pass risk to an insurance company through buyout as simply a question of timing. Most defined benefit pension schemes are closed to new members and were already expecting to buy out with an insurer in the long term." Channel 4 News, 08 May 2008

Pension scheme buy-outs to rise Firms that have already taken this step are P&O, Emap and Morgan Crucible. "The market for transferring pension scheme risk to an insurance company has accelerated sharply over the past six months and is expected to grow rapidly from here", said LCP. "At least 10 FTSE 100 pension schemes are evaluating comprehensive quotations to buy out some or all of their pension liabilities during 2008. The pension buyout market in 2008 will exceed 10bn, achieving a fourfold increase on 2007 volumes", it added. Even so, this will still amount to less than 1% of the value of all the assets held in private sector final salary pension schemes. BBC, 08 May 2008

Hiving off pensions Clive Wellsteed, partner at actuaries Lane Clark & Peacock comments: "The large pension buyout deals at the end of 2007, including P&O, Weir Group, ENI, Lasmo and Queens Moat Houses, are the start of a growing trend. We are not simply talking about schemes closing and winding up - the trend is in ongoing schemes. Buyouts of current pensioners are particularly attractive at the moment, often costing less than 10 per cent above the value of corresponding accounting liabilities." CA Magazine, 01 May 2008

'Burden' of enhanced transfer values Lane Clark & Peacock head of pensions research David Everett said trustees needed to get transfer values on their agenda quickly. He said: "They will need to have detailed discussions on the new basis and following their decisions, reach agreement to implement any system changes. It would be extremely useful if The Pensions Regulator's guidance for trustees could be finalised as soon as possible. The danger is if trustees press ahead on the strenght of just the regulations, they may find they have to revisit some of their decisions when the regulator's trustee guidance is issued." Professional Pensions, 24 April 2008

TPR proposals will be far reaching Government proposals to prevent some types of schemes buyouts will have far-reaching consequences, Lane Clark & Peacock says. Partner David Lane said proposed changes to The Pension Regulator's powers - published last week - could stop companies from buying out other businesses with pension liabilities and stop banks borrowing money to refinance businesses. He said: "There are much wider consequences than the government has suggested. Any company with defined benefit pension obligations contemplating a corporate transaction or even an internal restructuring will need to carefully consider the potential impact of the government's proposals." He added: "Further widening the regulator's powers will create uncertainty for UK employers." Professional Pensions, 24 April 2008

A look at the most popular alternative classes Lane Clark & Peacock head of corporate investment Ken Willis says: "Commodities are a great asset class because it helps trustees to diversify the portfolio and reduce the risk. The problem is that commodity prices have had a fabulous run so I would question whether now is the time to plunge in head first. It feels like buying at the top of the market." Professional Pensions, 24 April 2008

The government has moved to give the pensions watchdog a bigger bite Jerome Melcer, a partner with pensions consultant Lane Clark & Peacock said: "Higher debt is clearly bad news for pension schemes and it could also make it more difficult for companies to reengineer their balance sheets if the effect could be to weaken th pension funds. Eastern Daily Press, 23 April 2008

Buy-out bosses react over pensions regulation proposals While a more detailed consultation paper is to be published next week, starting an eight-week feedback period, experts say the proposals have created uncertainty, which could be detrimental to both pension fund members and their sponsor companies. "Banks might be unwilling to be involved in refinancing of a company with a big pension deficit especially in the light of the credit crunch." says David Lane, a partner at Lane Clark & Peacock. Financial Times, 18 April 2008

LCP goes Dutch Lane Clark & Peacock, which recently opened its first office in the Netherlands, has already signed up several Dutch fund clients following its expansion. "We only opened our doors in the Netherlands last month, but have already taken on several new pension fund clients. That, of course, is very pleasing" said David Lane, partner for European business development. European Pensions and Investment News, 07 April 2008

Storm of disapproval over mortality proposals Speaking about the Pensions Regulators proposed approach, Chris Tavener of Lane Clark & Peacock says: "We question whether it is appropriate to set such a prudent trigger that 99% of schemes do not currently comply with and that few schemes stand much chance of reaching in the short to medium term at an acceptable cost to the sponsoring employer. In the circumstances, a trigger set at this level may prove to present a burden on the regulator's resources." Occupational Pensions, 01 April 2008

Storm of disapproval over mortality proposals Speaking about the proposed approach, Chris Tavener of consultants Lane Clark & Peacock says: "We question whether it is appropriate to set such a prudent trigger that 99% of schemes do not currently comply with and that few schemes stand much chance of reaching in the short or medium term at an acceptable cost to the sponsoring employer. In the circumstances, a trigger set at this level may prove to present a burden on the regulator's resources. Occupational Pensions, 01 April 2008

Trustees must be prepared for corporate changes Lane Clark & Peacock says Partner Richard Murphy said "Acting quickly and effectively in the first few days after they become aware that change is happening is critical for trustees. If the change is material, trustees need to be integral in the corporate decision making process. To protect members successfully, trustees first need to understand the changes at the employer and what it means for their pension plan." Professional Pensions, 27 March 2008

First partial buyout of an active scheme Richard Murphy, partner at Lane Clark & Peacock, who advised on the deal, said the objectives of Morgan Crucible and its pension scheme's trustees were quality, security and value. "By structuring the buyout contract as an investment of the trustees, we were able ensure the transaction was a win for all concerned. The trustees now have the security that pensions currently in payment are provided by a Financial Services Authority-regulated insurance company backed by substantial capital, with the comfort that Morgan Crucible still stands behind the pension promises as before." Pensions Week , 24 March 2008

Employer debt changes "increase regulatory burden" David Everett, partner and head of pensions research at LCP, warned: "Those wanting simplification are surely to be disappointed. It seems that through the new definition of an 'employer cessation event' the government has preferred to travel down a road that results in a buyout debt being triggered in more situations than is absolutely necessary. Although the regulations do offer the prospect of some computational cost savings, this could be offset by the additional advice necessary to steer trustees and employers through the far more complex regime that will now start this April, "he added. IPE, 19 March 2008

Contractors face unfair charges Lane Clark & Peacock head of public sector outsourcing, Bart Huby, said of the current consultation on the operation of the admitted body status "This is the first full-scale review after nearly a decade of operation of the existing ABS provisions. We strongly advise all contractors to express their opinions and influence future developments. The government recognises changes are needed. The existing legislation and guidance often leads to considerable uncertainty for contractors - and in several cases has resulted in large extra unanticipated costs" Professional Pensions, 13 March 2008

Employers urged to engage with contract-based plans Mark Smith, a consultant at Lane Clark & Peacock says: "Employers who think that they can dispense with pension engagement should look at the challenge being laid down by the Pensions Regulator in this latest guidance. The advice may be worthy, but do employers even realise that the regulator has passed the baton of responsibility to them? It is not at all clear how the Pensions Regulator is to monitor whether its message is getting to all employers that sponsor work-based DC schemes." Occupational Pensions, 10 March 2008

Trustees warned on PPF deadline David Everett, Head of Pensions Research at Lane Clark & Peacock, said: "Once the levy deadline has passed, so long as the PPF has calculated the levy in accordance with their determination, there can be no appeals to natural justice." Everett recommended that trustees and employers should work with their advisers in the short time remaining to minimise the charge. "Come the end of March, those who do not will be given no quarter" he warned. The Treasurer, 01 March 2008

Trustees increase demand for buyout advice Clive Wellsteed, partner at LCP, said: "We are not simply talking about schemes closing down and winding up – the trend is instead towards ongoing schemes and finance directors looking to see if a buyout contract makes sense as a pension scheme investment." IPE, 11 February 2008

Pensions Corp eyes up public sector liabilities Clive Wellsteed, partner at Lane Clark & Peacock, said: "Buyouts of funded schemes are theoretically possible, but I question the appetite of the public sector for such a solution. In addition, local authority schemes are funded with a metropolitan guarantee from councils, which can always raise taxes if anything goes wrong." Pensions Week, 11 February 2008

Accounting watchdog proposes pension fund changes The ASB's more conservative approach to valuing pension liabilities could push up the value of most companies' pension exposures by 25 percent or more, said pension consultants Lane Clark & Peacock (LCP). The proposals would have increased the aggregate pension deficits of blue-chip UK companies at the end of 2007 by an estimated 80 billion pounds, LCP said. MSN UK, 01 February 2008

Rising to the Pensions challenge Longevity swaps are extremely expensive", says Gavin Orpin, investment partner at Consultants Lane Clark & Peacock. "We say they are not good value and, rather, that schemes should self-insure or do a buyout." The Banker, 01 February 2008

2007 valuations have led to relief from volatility. Jerome Melcer, partner at Lane Clark & Peacock, said: "In accounting terms, those who reported in 2007 are probably breathing a sigh of relief. Those who are struggling are those that still have transactions outstanding and where volatility is a real issue." Pensions Week, 28 January 2008

Risk tops the agenda for UK funds Paul Gibney, investment partner, Lane Clark & Peacock commented: "You are seeing people diversify to reduce volatility and you are seeing people invest in bonds and swaps to reduce inflation and interest rate risk, for a better match against the liabilities. Global Pensions, 15 January 2008

Trustees miss out on meetings to avoid conflicts David Poynton, head of credit analysis at Lane Clark & Peacock said: "The key next step must be to establish why so many trustee boards do not believe independent covenant advice is necessary when set against a background of ever-increasing governance requirements." Pensions Week, 14 January 2008

Is the lay trusteeship under threat from the added pressure heaped on those charged with guarding occupational pension schemes? Aaron Punwani, partner and head of trustee consulting at Lane Clark & Peacock thinks not: "With greater awareness of what's going on in pensions, some well informed members of the general workforce, I'm finding, are in fact putting themselves up - more than might otherwise be expected." Pensions Age, 08 January 2008

Risk Budgets and the efficient frontier Ken Willis, Lane Clark & Peacock, says: " If there is a strong covenant, the trustees may be prepared to accept a higher risk strategy. Trustees increasingly look to the sponsor to help in the risk budgeting process, and these days changes in investment policy are often driven by sponsor objectives. Trustees should also look at company statistics and accounts to determine how serious the deficit could potentially get, and how many years of profit it would take to pay off that deficit." Engaged investor, 05 January 2008

Pension Bill proves a mixed bag Tony Bacon, Senior Consultant at Lane Clark & Peacock said: "Assuming that the Bill obtains Royal Assent around the summer of 2008, the legislative bedrock for the new system of compulsory pension contributions will be in place. There will then be less than four years to build the necessary infrastructure from scratch. This is a very ambitious undertaking for a quango heavily dependent on as yet non existent IT platforms for the new system to work." Investment Life & Pensions Moneyfacts, 03 January 2008

2008 prediction by Jeremy Dell, Partner at Lane Clark & Peacock 2008 will be the year of the pension scheme buyout. Significant numbers of high profile companies will buyout all or part of their pension scheme commitments. It will not just happen to mature schemes but to many middle aged ones and a few teenagers as well. The pensions Act 2008 will be a damp squib, focusing on widening private sector pension provision through Personal Accounts, rather than encouraging employers to provide better pensions. Controversy over whether a successful administrative solution to Personal Accounts is possible will deepen, especially in the light of increased concern about data protection. More positively, the Financial Assistance Scheme will start to work properly with some clear public understanding of its objectives and the level of compensation it will offer. Pensions World, 01 January 2008