Financial News would like to congratulate the companies, teams and individuals shortlisted in the Awards for Excellence in Institutional Pensions, UK 2012.
Best Pensions Administration
The Railways Pension Scheme’s in-house administrator, is rolling out a new facility this year to provide members with more up-to-date salary and benefits calculations in real time, instead of just annually, as at present. Due for introduction before September, the facility comes complete with an explanatory smartphone-enabled web video. RPMI is also expanding its business beyond the Railways Pension Scheme. This year it took on PFI construction group Amey as a client, and acquired Electricity Pensions Administration Limited, the in-house pensions department belonging to E.ON UK, adding about 30 Coventry-based staff together with the admin contract for E.ON’s 30,000-member scheme.
Superannuation Arrangements of the University of London
The £1.5bn SAUL pension fund handles all its own administration in-house and is looking to add external clients; a ‘key strategic priority’ for the board thanks to the cost savings it can bring from efficiencies of scale. Last year SAUL commissioned independent accountants PKF to review its administration procedures, such as data checking, member joinings and leavings and financial records, and received a clean bill of health. SAUL’s chief executive, Penny Green, helped set up the Pensions Administration Standards Association and chaired the best-practice body until last August.
The Avon Pension Fund
The Norfolk Pension Fund
This £2.7bn public scheme, sponsored by Bath & North East Somerset Council, has spent 2011 developing a new administration strategy, preparing for expected changes to pensions arising from the government’s reforms. It says it is one of ‘only a small number’ among the 99 local government schemes to be undertaking such a full review. It has introduced new IT systems so that members can review their records and make changes online, and wants large and medium-sized employers participating in the scheme to be able to submit data electronically by April.
The £2.1bn pension fund for Norfolk County Council is a keen follower of pensions administration best practice. It is a member of the Chartered Institute of Public Finance and Accountancy’s administration standards benchmarking club, and during the year to March 31, 2011 its in-house department scored between 89% and 99% on a variety of performance indicators, well above the average for other members of the club.
Best Member Communications
Bacardi-Martini Pension Scheme
A small fund with about £70m under management evenly split between DB and DC sections, has one of the best-looking websites in the business. It is lively and well designed, and very appropriate to the company’s fun-loving image, with instructions on ‘how to mix the best pensions cocktail’. This year, it has updated the DC section so members can view more of their personal information online, and its regular communications booklet, PensionsWise, has won multiple awards.
The brewing company, began a consultation on replacing its valued defined-benefit scheme with a DC alternative in January 2011. It took three months and involved a blizzard of DVDs, booklets, website notices and repeated reminders to take part in the consultation. Once the consultation concluded, a similar level of effort was put into assisting workers to fill in forms. Management provided professional advice on pensions communications, retaining a consultant for 18 months. Heineken even stumped up for its employee council, a staff body, to have its own independent pensions adviser: Alan Pickering, one-time chairman of the NAPF. The result of all these efforts was a 94.4% take-up of the new DC scheme, something achieved without auto-enrolling anyone.
The buyout insurer founded by Edmund Truell, now looks after pension funds worth £4.5bn, and last year it began a new service aimed at keeping in touch with their 50,000 members. Its regular policyholder forums are held around the country and feature talks on investment and pensions security from the firm’s top decision-makers, as well as star turns from the likes of Brian Blessed. The firm also invites various charities to exhibit at its forums, including Age UK, the Royal British Legion and the Citizens’ Advice Bureau.
The Pensions Trust
A pensions provider for the educational and charitable sectors, has undertaken not one but two major communications initiatives in the past 18 months; a new website and communications strategy for the new DC pension scheme of the Social Housing Pension Scheme (SHPS), and for its own Flexible Pension Plan, another DC offering. Both offer online administration and a multitude of scheme documents, as well as informative videos and an eyecatching design.
Best De- Risking Strategy
Airways Pension Scheme (BA)
Late last year the £6bn Airways Pension Scheme, sponsored by British Airways, doubled the size of its longevity cover to £2.6bn through a second deal with Rothesay Life, part of Goldman Sachs. Emboldened by the deals, Paul Spencer, chairman of both BA schemes, which are worth £14bn, reiterated an intention to take both schemes back to linking pensions to the retail price index, rather than the consumer price index, a switch it was obliged to make when the government changed the legal basis for inflation-linkage in 2010.
ITV Pension Scheme
Broadcaster ITV led a trend for pension schemes to cover their liability risk last year. It signed a £1.7bn longevity deal with Credit Suisse in August. The £2.2bn scheme also took steps to improve funding levels to cover the cost of the improved cover, and significantly diversified its roster of managers.
Pilkington Superannuation Scheme
The £1.4bn fund of the UK glassmaker, signed a longevity swap in January with Legal & General, covering about 60% of its liabilities against the risk of pensioners living longer than expected. This was the culmination of a liability-driven investment programme undertaken during 2011, with 70% of the fund’s assets now in bonds, cash and swaps.
Rolls-Royce Pension Scheme
Engineer Rolls-Royce halved its pension scheme deficit to £400m in the year, following decisive action to reduce risk in its portfolio. It has confirmed: ‘Interest-rate and inflation risks are largely hedged; exposure to equities has been reduced to around 20% of scheme assets.’ It arranged a £3bn longevity swap through Deutsche Bank in November to underpin its position.
TI Group Pension Scheme
One of two sponsored by electronics manufacturer Smiths Group, has been on a steady de-risking path for the past four years or so, signing two buyout deals with Rothesay Life and with Legal & General throughout 2008. Last year, it followed up with its third deal also with Rothesay, insuring a further £150m tranche of its liabilities. TI is relatively unusual for having spread several partial deals out among multiple insurance firms. For the latest one, TI’s trustees developed a target price mechanism together with Rothesay that pressed ‘go’ on the deal as soon as its price requirement and TI’s asset portfolio matched. Addy Loudiadis, the chief executive of Rothesay Life, told Financial News in December that this had allowed the deal to be done ‘within hours of the target being hit’.
Most Influential Person in Pensions
One of the leading lights at professional trustee house Bestrustees, of which he was managing director until recently. He has been doing important work at the £2.2bn Nortel Networks UK Pension Scheme, where he is a trustee, which is at the centre of a transatlantic legal tussle between the UK Pension Protection Fund and the administrators for Nortel. It is a crucial case for establishing pension funds’ position in bankruptcy situations, but Gilchrist has been at the forefront of the industry for years, sitting on the NAPF investment council among many other roles and trustee board appointments.
Cllr Ian Greenwood
Chairman of the Local Government Pension Fund Forum, chairman of the £8.7bn West Yorkshire Pension Fund and leader of Bradford City Council, seems to be the right man in the right place at the right time in the corporate governance debate. He is that too-rare thing in pensions: a trustee chairman who leads from the front in both public debates and private negotiations in FTSE 100 boardrooms on shareholders’ concerns, such as pay and ethical issues. The West Yorkshire fund, where Greenwood also chairs the investment committee, is also one of the best-regarded local authority schemes in the country, beating its investment benchmarks over the past one, three and five years.
Head of environmental finance and pension fund management at the Environment Agency, has become one of the most renowned advocates of green investing in the UK. In 2005, the Agency’s two pension funds embarked on a radical programme to ensure all their £1.9bn of assets were invested sustainably, and in the years since, they have made it their mission to spread this experience far and wide. But green and sustainable investing is never a substitute for returns; and the Environment Agency’s £1.8bn active pension fund is one of the best-funded in the public sector, 96% solvent as at March 31, 2011. Pearce and the Environment Agency have continued to lead from the front in green investing, banding together with a group of 13 other investors and consultancy Mercer early in 2011 to release a report on climate change’s impact on investors’ portfolios.
Chief executive of the National Association of Pension Funds, might seem like a perennial and obvious choice for most influential but her profile has risen markedly in the past year as the full implications of the financial crisis, and the Bank of England’s quantitative easing policy, for UK defined-benefit pensions has become clear. With appearances on TV and radio and in the newspapers, she has emerged as an articulate voice for pension funds with the media, regulators and government, just when they needed it most. Elsewhere, another new initiative, the NAPF’s Pensions Quality Mark, has won praise from the pensions minister Steve Webb for recognising generous contributions and good governance in DC.
It is probably fair to say that Steve Webb has proved to be the best-liked pensions minister in years, and that is not just because he has already been in post for longer than most of his Labour predecessors. Webb’s good standing in the industry is impressive given the headache his government gave everyone with its sudden decision to switch the indexation of pensions benefits to the Consumer Prices Index. But the positives outweigh the negatives – he has made the political weather on issues such as Transfer Value Exercises, giving guidance to trustees that couldn’t be clearer, and he has come up with new and interesting-sounding thinking on pensions risk-sharing and the consolidation of small pots.
Best Investment Strategy (DB)
Invensys Pension Scheme
The £4bn Invensys pension scheme easily beat its 4.5% performance target in the year to March 2011 with 7.7%. Chief investment officer Thomas Mercier, former telecom and utility company debt adviser at Goldman Sachs, has completed his first year in the job. Robin Claessens, chief executive, also joined from Goldman Sachs in 2008. Scheme chairman is Kathleen O’Donovan, once Sir Owen Green’s finance director at Invensys’ predecessor company BTR. Invensys is a firm believer in using in-house expertise: a buyout has been contemplated and the scheme has the expertise to talk a tough price.
Pension Protection Fund
The UK's £10bn PPF has established a position at the forefront of liability-driven investment. It was one of the first schemes in the UK to take advantage of gilt repo transactions to match its liabilities, exploiting an unusual situation in the swaps and gilts markets whereby the latter is cheaper to use than the former. More lately, it has sold equities and moved money into alternative assets, including farmland and timberland - far from the norm for UK pension funds. And it is also playing a leading role in developing a platform for investment in UK public infrastructure, which it hopes will raise £2bn from its fellow pension fund.
RBS Group Pension Scheme
The £19.5bn RBS Group pension scheme raised its interest rate and inflation cover to 50% last year just ahead of news of a fresh round of quantitative easing by the Bank of England. Performance over the last year, led by veteran fund manager Robert Waugh, was good. Last year, the scheme poached Ray Martin as head of pensions from DHL, where he rationalised a string of pension schemes within the group.
Stagecoach Pension Scheme
Chaired by industry heavyweight Derek Scott, the travel group’s main £1bn pension fund is known for a diversified and esoteric investment strategy, and for being early adopters of many well-regarded fund managers, such as Cedar Rock Capital and Ruffer. This has led to impressive returns in the long term, according to observers.
Trafalgar House Pensions Trust
The £1.3bn Trafalgar House Pensions Trust investment committee has been ticking all the performance boxes by using a diverse range of as many as 50 managers to meet a targeted return 3.5 percentage points ahead of liabilities. Renowned hedge fund manager Sushil Wadhwani has become an adviser, alongside bond strategist Roger Bartley, who earned his spurs at NatWest and Gartmore.
Best DC Plan Design
BlueSky Pension Scheme
Not to be confused with the Dutch pensions manager of the same name – this is the new name for the old JIB Pension Scheme. A not-for-profit, industry-wide DC plan originally for electrical contractors, with 15,000 members and about £200m under management, it relaunched in late 2011. Its new default investment option incorporates the latest thinking on target date funds, an innovation also selected by the UK’s new national scheme Nest. BlueSky has also ticked the boxes on scheme governance: its staff all hold qualifications from the Pensions Management Institute and its directors are in training with a professional trustee firm. It has now thrown its doors wide to employers and members from all industries, not just electricals.
It has been a busy year for Finmeccanica FuturePlanner, the UK DC pension fund of the Italian aerospace and defence manufacturer. It has rethought the investment options on offer to its 1,500-strong membership, moving its default fund from simple indexed equity to a blend of different assets, actively managed by consultants P-Solve, with an explicit target to beat inflation. Its lifestyling process is now spread over a much longer time period than the standard five years before retirement; this is criticised as a ‘cliff edge’ switch in some quarters. To communicate these changes, Finmeccanica has redesigned its website and communications strategy and to cap off a busy 2011, the scheme was awarded the NAPF’s Pension Quality Mark Plus kitemark in October.
Marks & Spencer
One of Britain’s most recognisable high street brands, has also lead the way when it comes to pension provision. Its new defined-contribution offering stands out as the biggest convert so far to the ‘Master Trust’ concept, a potentially multi-employer DC structure favoured by the NAPF. M&S’s £120m or so of existing DC assets will now transfer to Legal & General, its chosen provider, and its contribution structure has been simplified too. M&S won plaudits from its consultants for beginning its auto-enrolment planning early, in August 2010 a long lead-time that apparently very few UK firms have allowed themselves.
A new DC pensions provider set up in 2010 by the Danish public pension fund ATP, was perhaps one of the more unexpected entrants to the UK pensions market ahead of this year’s auto-enrolment reforms. It has brought as much as it can of the cutting-edge investment thinking that is currently applied to ATP’s £76bn Danish portfolio. In a bold step, it has decided to offer no investment choice to members: everyone is enrolled into its default fund, which is a multi-asset fund actively managed by ATP’s Danish portfolio managers. NOW’s trustees and management will have to be ready to stand or fall according to their success, or otherwise rather like a DB plan. The unusual approach has won at least one convert so far. NOW’s first UK client is signed up; the Retail Data Partnership, a small IT firm. NOW says paperwork is ‘being finalised’ on further client wins.
Volkswagen Pension Scheme
The carmaker, has brought German employee paternalism to its UK DC pension scheme, which stands out for the service offered to members whilst at work and at retirement. Its trustees arrange both “at work pension clinics” and pre-retirement “surgeries” with members to discuss their range of options, and also provide understanding of the annuity-purchase process including the open market option. Volkswagen was one of the first DC pensions to win the NAPF’s Quality Mark, and late last year it made further changes to its investment arrangements, hiring well-regarded multi-asset manager Baring to invest a portion of its default-fund assets. Employee and member engagement is very high with around 90% take up of Scheme membership and member surveys demonstrate that the Pension Scheme is seen as a highly valued benefit by employees across all ages.
Pension Scheme of the Year
B&CE Benefit Schemes
A not-for-profit organisation that runs £1.5bn in savings assets for the building trade, has seized the opportunity presented by auto-enrolment. Last year it launched The People’s Pension, a simple, low-cost DC pension scheme that will take in employers from any sector. Auto-enrolment doesn’t come into force until October, but it has already won its first client: Morgan Sindall Group, a UK small-cap construction firm, hired B&CE to manage the pensions savings of its 2,200 staff in January.
British Steel Pension Scheme
One of the largest in the country, is also one of the best run. Its investment returns are second to none among large schemes. British Steel, whose in-house team is led by Hugh Smart a former investments chief at Swiss Re Investment Management, has beaten every other UK scheme with more than £1bn of assets during the past decade, according to a report from performance analyst State Street. Over the past three years, the fund has made average annualised returns of 7.1%, beating its internal target by an annual one percentage point.
London Pension Funds Authority
Became the UK’s highest-profile public scheme with its campaign on public pensions reform, and in 2011 it has stayed at the forefront of the debate. In January it was part of a group of funds that signed a memorandum of understanding with Chancellor George Osborne to explore options for funding public infrastructure projects. Meanwhile, LPFA, which also runs administration for other schemes, took on its biggest client yet in April: the Hertfordshire Pension Scheme.
Transport for London Pension Scheme
The £5.7bn Transport for London Pension Scheme, one of the public sector’s biggest, is another that had a busy 2011. It appointed new investment adviser Towers Watson in April, and created a new liability-hedging investment subcommittee. With a diverse and expanding manager roster, featuring names like Bridgewater, First State and BlueCrest, investment performance has been robust, outperforming its benchmark by 0.3% during the year to March 31. During the year, the scheme was also recognised in several industry awards for governance, IT and for its fund secretary, Stephen Field. TfL’s admin team is also introducing a new one-on-one appointment service for pensioners to discuss financial options.
United Utilities Pension Scheme
A £1.8bn private sector fund, had a busy year in 2011: a triennial valuation, the sale of its parent’s non-regulated business, and a covenant review. The trustees have also been de-risking the fund’s liabilities and investments, and, has taken the decision to remove well regarded and performing managers like Majedie and Taube Hodson Stonex as part of its de-risking strategy, moving the funds to its LDI mandate with Insight and diversified growth manager, Wellington. Performance was good: 6.7% for the 12 months to March 31. The trustees also found time to take advantage of the sale of pensions provider Winterthur Life to rival Friends Life; in October they negotiated a fee-reduction on behalf of the fund’s DC section and picked up an NAPF Quality Mark Plus. Finally in advance of auto-enrolment a company wide communication exercise has been taking place with posters, roadshows and email communications encouraging non members to voluntarily join the DC section now, rather than waiting to be compulsory included in 2013.
Scheme Sponsor of the Year
The UK’s monopoly rail-infrastructure group is another sponsor offering members a good spread of pensions choices ahead of auto-enrolment: membership of the industry-wide Railways scheme, its own career-average arrangement, and a best-of-breed DC offering put together with the help of consultants P-Solve. The company is also talking to unions over the future of its section of the Railways Pension Scheme, in which it is one of the primary employers, with contribution increases on the table.
Tata Group of India has become a model sponsor to pension schemes after providing the necessary support to British Steel, Jaguar and Land Rover. It negotiated with unions to keep the Jaguar scheme open to future accruals and restored the link of benefits to RPI. Land Rover and Jaguar recently delegated investment decisions to Towers Watson. British Steel retains its reputation as one of the best-managed pension schemes in Britain.
Tesco, the retail giant, is one of the few FTSE 100 companies whose career-average pension scheme is open to new members, following Shell’s decision to close its final-salary fund. It is working hard to prepare for auto-enrolment and sees the benefit in using it to recruit and retain quality staff: a message that is often lost on sponsors concerned about the cost of benefits. The scheme is led by pension veteran Ruston Smith: its surveys show that 90% of Tesco workers appreciate the value of its pensions.
The Co-Operative Group
Like many private-sector sponsors, the Co-Op is consulting on a planned closure of several of its defined-benefit schemes but it is unusual for offering a generous alternative in doing so. Its group career-average scheme, known as PACE, is well regarded and from the group’s perspective, it makes sense to consolidate legacy schemes, acquired through acquisition, into the main one. Crucially, trade unions are on-side, with Usdaw national officer Sharon Ainsworth welcoming Co-Op’s “continuing commitment” to PACE and the fact that it is “actually more generous than some of those schemes earmarked for closure”. Reinforcing that point, Co-Op is increasing its contributions into PACE and introducing a new DC option ready for auto-enrolment.
Last year the Uniq pension scheme managed to deal with a £400m deficit on liabilities totalling £1bn by the unusual route of taking 90% control of its holding company, a chilled food concern, and selling it to European rival Greencore. The gap was also closed by a 100% gilts portfolio, which also came good in the ongoing market crisis. After an increase in its assets to £830m, Uniq sold itself to Goldman Sachs’ Rothesay Life and pensions owed to its members are at least 90% safe.
Award for Outstanding Individual Contribution (Editorial Choice)
Chairman, Pensions First
Chairman of the Low Pay Commission and former
Chairman of The Pensions Regulato