National Housing Federation Audit Committees Conference. Pensions. Steve Simkins KPMG. 3 December 2013

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1 National Housing Federation Audit Committees Conference Pensions Steve Simkins KPMG 3 December 2013

2 Your risk register Pensions? 1

3 Social housing sector: overview LSVTs Mixed groups Traditional RPs LGPS 2bn+ SHPS 2bn+ Own DB scheme 1bn+ DC scheme 2

4 Managing risk Governance Governance Governance People Finance People 3

5 Managing risk Finance Your current costs are not a good guide to the future! 4

6 Market volatility Finance Example: LGPS Approximate deficit of 100bn at the valuation date bn Developments since the valuation date show a reduction in deficits Liabilities Assets 5

7 Termination debts Finance 6

8 New UK GAAP: pensions impact Finance 7

9 Auto-enrolment People Finance A number of challenges Cost issue due to number of non-joiners Systems issues due to multiple pension arrangements? Extent to which can leverage off existing payroll systems Willingness to use existing DB scheme for auto-enrolment population Competitiveness and quality of offerings from DC providers Engaging with members who have previously declined to join the Company s pension arrangements Board decision will be required on key strategy and design issues 8

10 New LGPS from 1 April 2014 People Finance Increases costs Restructured employee contributions Past service benefits protected Career Average Revalued Earnings (CARE) Reduces costs 1/49ths accrual rate Pensionable Salary to include noncontractual overtime NPA equal to SPA Cost sharing arrangements 9

11 Tax WHAT S CHANGING? People ANNUAL ALLOWANCE LIFETIME ALLOWANCE 50,000 40, million 1.25 million 2013/ / / /

12 What is good governance? Governance Roles, Responsibilities, Representation Public Accountability Good Governance Conduct Clarity and Transparency Capability 11

13 Two dimensions Governance Lord Hutton s recommendations Pensions Regulator Pensions Trust New DC code Representation Corporate Governance Audit & Risk Committees Risk register Internal controls Advisers 12

14 Control panel (example) Governance LGPS SHPS Own Trust Move employees out??? Get investment control?? x? Negotiate funding?? x Contribute to decision making???? Change benefits? x? Increase employee contributions? x 13

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