LGPS staff are concerned about resources, according to an PLSA survey: while Broadstone predicts a bumper second half of the year for buyouts: questions over the FCA's consumer duty and a £200m property deal between SLIP and PIC, here's the news you may have missed this week.
LGPS staff positive but 'concerned'
A survey conducted by the Pensions and Lifetime Savings Association (PLSA) found that employees of the Local Government Pension Scheme (LGPS) had concerns about resourcing, the overlapping of various governing organisations and the burden of regulatory initiatives.
The LGPS, the largest funded defined benefit (DB) pension scheme in the UK and one of the biggest in the world, has 7.1 million members, over 15,500 employers, and assets worth over £425bn.
In July 2022, a PLSA report identified areas where existing good practice can be fortified and where action can be taken to address the ever-increasing regulatory and environmental challenges facing the scheme. It followed this with a survey of its LGPS members.
The 2023 edition of the survey, conducted in May, included responses from 92 LGPS representatives. It found 85 per cent of those surveyed remained positive about working within the scheme. However, concerns about resourcing persist – with a quarter not feeling they have the right staff in place.
When questioned about the topics government and regulators should be focusing on, three-quarters identified good governance as a priority. Responsible investment and stewardship, alongside pensions dashboards, are also high on the priority list, while only 18 per cent feel they should focus on pooling.
More than half felt that the legislation/regulatory requirements were too complex to execute, while two in five continue to feel legislation/regulatory requirements are hindering them from doing their job effectively.
Simpler and clearer regulations came top of the survey's wish list.
Tiffany Tsang, head of DB, LGPS and investment at the PLSA, said:“The LGPS is in good financial health and employees report having a positive experience of working within it.
“However, a swathe of regulatory initiatives in recent years mean the LGPS is increasingly being asked to do more with its limited resources, with our surveys showing LGPS funds find it particularly challenging to recruit.
Second half of 2023 set to be a bumper year for buyouts
The Broadstone Sirius Index, a monitor of how various pension scheme strategies are performing on their journeys to self-sufficiency and buyout showed a pension scheme funding environment that looked strongly-placed for a bumper six months of buy-out activity.
During the first six months of 2023, the 50 per cent hedged schemes tracked by Broadstone saw liabilities shrink by -5.1 per cent at a far faster rate than assets which fell by 3.4 per cent.
Broadstone claimed the resulting improvement in its funding position of 1.7 percentage points over the period meant that over the past eighteen months funding levels have risen from 80.0 per cent to 97.1 per cent.
Chris Rice, head of trustee Services at Broadstone, said: "The second half of 2022 saw dramatic swings in gilt yields forcing the Bank of England into a dramatic intervention to quell the LDI crisis.
“In the aftermath, trustees will have been glad to see calm return to markets in the first six months of 2023 and many will have been left in a significantly better funding position as a result. Our modelling shows that funds were someway off buy-out funding at the start of 2022 but could well be within striking distance if 2023 continues in the same vein.
He warned that increased market congestion meant it would become increasingly difficult for schemes to attract attention and receive as many competitive quotes as they’d like. While there are murmurings of new entrants in the market, there is significant work required for an insurer to start writing business, so this additional capacity is a way off.
“This means schemes wanting to buy-out need to be patient, well prepared and work flexibly with their brokers and insurers to get the best result.”
FCA consumer duty and retirement advice
The FCA's consumer duty arrives in days but its fall out is still being speculated. Richard Parkin, head of retirement at BNY Mellon Investment Management said the big question now was how the FCA would apply the duty in its supervisory activity around retirement advice..
He said: “The regulator has made it clear that its thematic review of retirement income advice, which is well underway, will be “an important indicator of how firms are implementing the consumer duty”. Until the findings are published, expected to be the end of this year, there is probably not much advisers can or need to do, but it is worth thinking how their retirement advice propositions could be perceived.
"The FCA will be looking very closely at the value of ongoing advice and product suitability, and these areas cut across the Consumer Duty outcomes.
“A potential challenge for the review is the change in the environment for retirement income advice, which is very different now from that we have experienced since pension freedom. With increased market uncertainty, higher interest rates and the cost of living still not under control, the shape of retirement advice and the solutions used are likely to change. It’s vital that this change of environment is recognised by the FCA and that they understand how firms are adapting their advice approaches to accommodate this.
“Through our work with advisers, we know firms are thinking hard about how they respond to this challenge. Approaches are developing, and it is evident that difficult environment for retirees renders professional support more valuable than ever.”
SLIP enters into £200m partnership with PIC and Octopus
Senior Living Investment Partners, SLIP, a £200 million partnership between Pension Insurance Corporation (PIC), a specialist insurer of defined benefit pension schemes, and specialist real estate lender and investor Octopus Real Estate (‘Octopus’), this week announced a multi-site joint venture with Audley Group, a provider of integrated retirement communities.
In total, SLIP said it aims to house up to 2,000 people in the coming years across 10 IRCs and deliver around £1bn gross development value into the sector. The IRCs SLIP is developing with Audley Group will create 600 new retirement units across four new villages, the first of which will transform the historic Headley Court in Surrey.
The Audley Village at Headley Court will consist of 112 apartments, providing much needed specialist accommodation for the local area. SLIP said it would "safeguard the future of the Grade II Listed historic mansion house and restore the extensive landscaped grounds, which will be made available for the local community to enjoy for the first time in its history."
The IRC will include the Audley Club, a high-quality health and wellbeing experience for those in the local area aged 55 and above, as well as a restaurant focussed on excellent food and service.
Max Cawthorn, head of PIC Capital Strategy, said: “Our joint venture with Octopus Real Estate continues to make excellent progress in helping to meet the twin challenge of an ageing population and an undersupply of appropriate housing. The calibre of Audley Group and its long experience in the UK retirement market make it a perfect partner for Senior Living Investment Partners. Through our relationship we will help address these societal issues while also providing long-term, secure investments which underpin the pensions we pay to our policyholders.”
Nick Sanderson, founder and chief executive, Audley Group, said: “The demand for retirement villages is only growing. Octopus Real Estate and PIC have recognised the opportunity in the retirement space and it’s wonderful to see a new JV with dedicated capital to grow the sector.
Audley Group has been active in this market for over 20 years, and the 21 villages in its portfolio, when completed, will provide over 2,000 units nationwide.
