When you think of pensions, it conjures up pictures of elderly people pottering around their gardens or sitting snugly reading, knitting, or watching TV. Providing pensions may hardly seem the ideal career choice to best utilise your hard earned qualifications. But, there is hardly a day when there is not a newspaper headline about pensions – ‘the pensions black hole’, ‘workers strike over pensions’, ‘pensions deficits at record levels’ ‘work until you drop’ etc.
All Western economies are suffering from an increasingly aging population. This makes it all the more important that if older people are to enjoy a comfortable retirement for 20 or more years, they need more than just the State pension.
Pensions can be provided either by the State, by individual provision, or via employer sponsored schemes. For those in employment, traditionally, employer sponsored provision has been the most popular means of retirement saving.
Her Majesty’s Revenue & Customs determine various tax-free limits on both benefits and contributions, which have to be adhered to. In addition, there is a raft of other government legislation concerning the operation of pension schemes. Also, the accountancy standards specify how pension costs should be accrued in sponsoring employers’ books and the Financial Services Act covers various aspects of the investment of pension fund money and the advice or information that can or must be given to purchasers of pension products.
Also, increasingly, pensions are becoming a part of the flexible package of employment benefits offered by companies, which means that employees have to weigh up the merits of pension savings against, say, a dental plan, company car, or home computer.
A medium/large company, which offers a company pension scheme, will typically have a pensions manager or maybe head of pensions. Sometimes this role may be wider, such as head of employee benefits or remuneration or reward. In these circumstances the role may also include responsibility for all employee benefits and/or salary and bonus strategy as well.
Many employers, other than the largest, will ‘outsource’ certain aspects of running their pension scheme. Typically, these will include the investment of fund monies and the day to day administration of recording member details and calculating and paying benefits to scheme members.
Trustees operate many pension schemes, especially those of the type known as ‘defined benefit’ or ‘final salary’. Pension scheme trustees are bound by Trust Law – some would say a rather arcane branch of the law, but quintessentially British.
Although the employer is the major contributor to an occupational (or company sponsored) pension scheme, much of the responsibility and power relating to the scheme will vest in the trustees. The trustees will typically include employer-selected and member-nominated representatives – none of whom are pensions professionals.
The role of the pensions manager is increasingly becoming an arbiter between employers and trustees. The directors of the employer having a fundamental duty to shareholders, whilst trustees have an exclusive duty to act in the best interests of the trust beneficiaries – the scheme members.
A pensions manager needs to ensure that both parties act in an appropriate manner. The pensions manager is often responsible for providing technical support or training to the trustees.
Managing relationships with the delegates of the trustee, e.g. actuary, investment consultants, investment managers, administrators, legal advisers, etc, is a major part of the role. Advisers have to be selected (often following a tender exercise and ‘beauty parade’), contracts negotiated, performance criteria established and then monitored on an ongoing basis with regular reports provided, via the pensions manager, to the trustees.
The pensions manager will also be responsible for setting a programme of trustee meeting dates each year (frequency dependent on the size of the scheme) which includes writing, collating and distributing an agenda and backing papers in advance of the trustees’ meeting, often participating in those meetings and quite likely acting as minute secretary and then ensuring that all agreed action points are duly followed up.
Corporate activity, such as mergers, acquisitions and sales can be a major issue for pensions managers, with many companies carrying significant deficits in their defined benefit pension schemes and with the law often requiring all or part of those deficits to be made good on a company sale; the pensions manager will be a key part of the business bid team and will need to carry out detailed due diligence to establish the extent of any pension liabilities which may well affect the price paid (or received) for a corporate transaction – in some cases it may even scupper the deal.
Additionally, we must not forget that the pensions industry is about delivering benefits to individuals. Alongside all the other more technical aspects of the job, a pensions manager is also likely to spend time communicating with his/her scheme members. This may be through staff meetings, producing newsletters, maintaining a pension scheme website and even one-to-one meetings – especially with senior employees and others who have specific issues in relation to their pension. This is often one of the most rewarding parts of the job.
A meticulous attitude is essential when running pension schemes. Information stored or calculations made today may have repercussions 30 or 40 years hence when a member’s benefits become payable. It is essential, therefore, that administration systems are checked for durability and that procedures and processes are both documented and adhered to. In fact, the whole process of running pension schemes is increasingly coming under scrutiny requiring appropriate governance procedures.
The pensions manager is something of a ringmaster, the key figure in a multi-faceted arena. He trains the participants, he watches them like a hawk and he makes sure everyone does their act at the appropriate time.
In my own case, having taken business studies, I thought that the range of skills learnt would match those needed for a pensions generalist. I started within an insurance company as a pensions administrator and then worked for three firms of pensions consultants. Moving first to a team leader in pensions administration, then to a client manager who was responsible for delivering a range of pension services to a bank of clients and finally to a client director where I ‘owned the relationship’ for all employee benefits’ services provided to a range of key clients.
From there I chose to move ‘in-house’. This is the term used for moving from a pensions consultancy or third party administrator to becoming part of a company’s own pensions team. My role was as Head of Employee Benefits and Pensions. This covered responsibility not only for a range of pension schemes, but also employee share plans, medical insurance plans and voluntary benefit schemes.
Additionally, I have been involved in various international aspects giving an added dimension of overseas and cross-border pension schemes. The way pensions are provided differs enormously around the world – it is a constant challenge to keep abreast of developments in all the countries where we operate. I also work with our foreign parent company on a diverse range of activities including multinational insurance pooling, worldwide pensions governance, worldwide pensions reporting for corporate accounting and on merger and acquisition activities.
The job is constantly changing, due both to legislative and demographic issues in the UK and overseas and due to constant corporate activity. It is a challenging role but exciting and enjoyable and it is a far flight from what I would have perceived when I first joined an insurance company as a junior pensions administrator.