“Facing The Midlands Group Conference · TPR Discussion Paper ... PMI Midlands Group, Annual Half Day Conference 7 June 2017. ... slide apply throughout this presentation Introduction

“Facing The Challenges”Midlands Group Conference

7th June 2017

Sponsored by

Chairperson’s IntroductionAndy GreigChairperson

21st Century Trusteeship - What Does the Future Hold?

Matthew GilesPMI Midlands Group, Annual Half Day Conference 7 June 2017

squirepattonboggs.com

What’s it all about? The edited highlights!111

222 Why it’s not worth the paper it’s written on!

In a change to the advertised programme……

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How did we get here?

• July 2016 • “21st Century Trusteeship and

Governance”

TPR Discussion Paper

• Deadline 9 September 2016• 74 responses submitted

Responses

• December 2016• Summarises responses • What next?

TPR Discussion Paper Response

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Trustee qualifications

Issue

• Should there be a minimum qualification or a barrier to entry for professional trustees, chairs or lay trustees?

Responses

• Few thought mandatory qualifications appropriate• Hard to demonstrate behavioural qualities

What next?

• Statement of standards for chairs and professional trustees• Further consideration of “fit and proper” regime

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CPD and Trustee Toolkit

Issue

• Would a CPD framework for trustees help them meet the challenges of governance?

• Should the Trustee Toolkit be compulsory?

Responses

• Most opposed formal frameworks• Learning needs to be flexible to reflect scheme specific

requirements

What next?

• Further guidance, practical tools and products • Streamline existing material and better signposting


Trustee probation periods

Issue

• Would a six month probationary period for new trustees help them build TKU?

Responses

• Difficult to administer • Would cause decision making issues in the interim

What next?

• No follow up proposed• Education campaign to be launched in 2017


Conflicts of interest

Issue

• What is the best way of managing conflicts of interest?

Responses

• Conflicts are inevitable• Aim should be to manage not eliminate them

What next?

• Further guidance!• Will it address confidentiality issues this time?


Reporting

Issue

• Chair’s statement for DB schemes?• Scheme return to focus more on governance?

Responses

• Respondents advocated greater reporting on compliance with governance standards

What next?

• TPR to liaise with DWP on encouraging better governance & which framework will work best for DB scheme reporting?


Enforcement

Issue

• What should be done with schemes unwilling / unable to deliver good governance?

Responses

• Focus on education and support• Consolidation feasible in DC but not in DB

What next?

• Updated compliance and enforcement policy, wider use of powers

• Recommend consideration of consolidation


• Those that engage tend to practise good governance

• And are inclined against generic regulation

Limited engagement

333111 222• Most respondents have there own

commercial agenda

Vested interests

• TPR’s capacity to do much more than educate and guide is very limited

Capacity crunch

Three fundamental flaws

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Any questions?

Matthew GilesPartner, Pensions

T +44 121 222 3296E [email protected]

•

SPB Pensions by Numbers Our pensions team boasts:

More than 500 years combined pensions experience

More than 100 client publications in the last five years

More than 4,000 delegates attended our events over the last five years 12 national and international industry awards in last 12 years

18 “leaders in their field” as recognised by legal directories

23 overseas offices with pensions / benefits / investmentspecialists

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Abu Dhabi

Beijing

Berlin

Birmingham

Böblingen

Bratislava

Brussels

Budapest

Cincinnati

Cleveland

Columbus

Dallas

Darwin

Denver

Doha

Dubai

Frankfurt

Hong Kong

Houston

Kyiv

Leeds

London

Los Angeles

Madrid

Manchester

Miami

Moscow

Newark

New York

Northern Virginia

Palo Alto

Paris

Perth

Phoenix

Prague

Riyadh

Israel

Italy

Mexico

Panamá

Peru

Turkey

Venezuela

Global Coverage

Africa

Argentina

Brazil

Chile

Colombia

Cuba

India

Office locations

Regional desks and strategic alliances

San Francisco

Santo Domingo

Seoul

Shanghai

Singapore

Sydney

Tampa

Tokyo

Warsaw

Washington DC

West Palm Beach

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21st Century Trusteeship - What Does the Future Hold?

Matthew GilesPMI Midlands Group, Annual Half Day Conference 7 June 2017

The information in this presentation is proprietary and confidential and shall not be disclosed to or used by a third party unless

specifically authorised by the relevant GKN plc group company

GKN – Pension DeriskingSteve Jones| 7 June 2017

Proprietary and confidential restrictions on title slide apply throughout this presentation

Introduction

£2.4 bn

Pensioners

Deferred

Active

Assets Liabilities

£2.7 bn

In 2012 - one Defined Benefit Scheme for the UKLarge proportion of orphaned liabilitiesOver 60% of the Scheme related to pensions in payment


Splitting the Scheme - 2012

OriginalScheme

2012Scheme

LegacyScheme

PensionersDeferredActive

Orphan pensioner liabilities and WULS eligible members in “Legacy Scheme”All other members transferred to new “2012 Scheme”


Buy-in number 1

Sponsor was willing to make an additional contribution to cover the difference between buy-out cost and the funding cost – to a limit!Size of the deal was constrained by the size of this contribution£120m of liabilities secured with Rothesay Life

Key learning – we had an expensive benefit structure


Pension Increase Exchange

Assets Liabilities


Buy-in number 2

Agreed with insurer up front that they would re-shape buy-in policy if covered members accepted PIE offerA substantial amount didThis led to a return of premium to the SchemeBetter terms were on offer if additional lives insured rather than cash returnedThis refund covered the funding strain of an additional c£50m of insurance

c40% increase in the size of the buy-in for a given Company contribution by reshaping the benefits


Splitting the Scheme again!

GKN Group Pension Scheme 2016 Settled liabilities

Pension Insurance

After Settlement

Non WULS deferreds

Residual pensioners

Pensioners

Members accepting WULS

Pensioners not accepting PIE

Deferreds

GKN Scheme

Prior Position

Pensioners


Winding up the Scheme

Project consisted of three major workstreams:−Broking the market for the buy-out−Making WULS/trivial commutation offers to eligible members−GMP reconciliation

Wind up triggered in December 2016 and required £15 million cash injection from GKN

Project removed − 30% of the Scheme’s liabilities (£285 million) from the balance sheet − 45% of the members from the Scheme (and their associated administration costs)

Remaining Scheme is marginally better funded and over 25% of the Scheme is covered by buy-in policies


Key Lessons?

Clean data is crucialVaried communication Close co-operation between Sponsor and TrusteeAdvisor team

Bob Coppage – Update from the PMI

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Documents

“Facing The Midlands Group Conference · TPR Discussion Paper ... PMI Midlands Group, Annual Half Day Conference 7 June 2017. ... slide apply throughout this presentation Introduction