In response to the publication of the White Paper on Pension Reform, Deloitte, the business advisory firm, has identified the impact on the investment management and insurance industries as well as employers and employees.

Insurers and investment managers
Andrew Power, Insurance Partner at Deloitte, commented on the potential impact on the life and pensions industry: “The introduction of the new Personal Accounts scheme will bring up to 8 million new savers into the pension market, generating up to £8 billion of new savings.  The new scheme presents a number of opportunities to the insurance and investment management industries:

• Absorbing new money into existing insurance-run pension schemes as some employers look to bring all employees into existing schemes rather than set up Personal Accounts.
• Running Personal Account investment funds: many of the large insurers own some of the biggest UK investment management brands, which are well-positioned to win the new fund management mandates.
• Administering Personal Accounts: a small number of insurers will have the scale and infrastructure to run the administration contract likely to be put out for tender by the Government.
• Accessing new savers: the insurers will have the opportunity to develop a commercial relationship with a new segment of savers (notably women who only make up a third of current savers).

Stuart McLaren, Investment Management Director at Deloitte, added: “To run the pension funds at low cost implies that the choice of funds available could be limited to index tracker funds and certain forms of balanced funds.  While the industry will not be earning the level of fees achieved in more actively managed funds, the potential £ 8 billion per annum of new assets under management for the industry could mean significant economies of scale.  The scale of money that will be under the control of the new scheme suggests important assurances must be sought as to the robustness of investment manager selection and monitoring and to the appropriateness of the available investment strategies for employees.”          

Employers / employees
Commenting on the impact on employers, David Robbins, Pension Partner at Deloitte, said:  “Employers with existing pension schemes will need to review their schemes to decide whether to seek exemption from Personal Accounts. The Government is proposing a number of relatively simple tests for schemes (existing Reference Scheme Tests for defined benefit and contribution rates equivalent to Personal Accounts for defined contribution). However the Government are minded not to allow any waiting periods which may cause some firms to reflect on whether auto-enrolment into their existing schemes is right for them.

“Employers face further complexity with age discrimination legislation coming in. Companies have recognised that they cannot continue to offer different pension schemes to different employees and the commercial reality of a harmonised scheme is one that offers lower overall contributions to those previously offered. Our discussions with employers in recent months suggest many will level down / close their existing pension schemes once Personal Accounts are introduced."

• The number of employers providing schemes is likely to increase from 132,000 to 1 million.
• The number of private sector employees saving in a pension is likely to increase by more than 100% to 13-14 million.

Ends

Notes to editors

About the Insurance Practice
The UK insurance practice at Deloitte delivers world class integrated professional advice to help clients make better informed strategic decisions, drawing industry insight and knowledge from industry specialists in risk, regulatory, audit, assurance, actuarial, corporate finance, consulting and tax. In the UK, we work with 18 of the top 20 life insurance companies and 17 out of the top 20 general insurance companies. Globally our insurance practices are made up of over 6,000 professionals who work for 18 of the top 20 global insurance companies.

About the Investment Management Practice
The UK investment management practice at Deloitte helps clients across the industry from large fund managers to smaller boutique firms and hedge fund managers.  As industry experts, we deliver a level of technical knowledge that remains unrivalled. Our client teams combine multiple perspectives – from regulatory to tax to IT to restructuring. As a member of the global organisation of member firms, the DTT network has an established investment management team in all key jurisdictions: London, Luxembourg, Ireland, the Cayman Islands, and the key European and US financial centres with the appropriate sector, tax and regulatory skills.

Press releases for Deloitte & Touche LLP
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.