SLIDE 1
The industry view
Rachel Vahey, AEGON
2
The current DC marketplace
72,000 100,000 34,000
Occ DC GPP GSHP
SOURCE: The Pensions Regulator, 2006
Number of active schemes
680,000 2,700,000 1,900,000
Occ DC GPP GSHP
Number of members
The industry view Rachel Vahey, AEGON The current DC marketplace - - PowerPoint PPT Presentation
The industry view Rachel Vahey, AEGON The current DC marketplace - - PowerPoint PPT Presentation
The industry view Rachel Vahey, AEGON The current DC marketplace Number of active schemes Number of members 72,000 2,700,000 680,000 34,000 1,900,000 100,000 Occ DC GPP GSHP Occ DC GPP GSHP 2 ,5 8 0 ,0 0 0 m em bers in GPP or GSHP
SLIDE 2
SLIDE 3
3
Some interesting facts about AEGON schemes
SOURCE: AEGON – contract-based schemes
Average number
- f members is
21 Our modal payment is £100 per month
Employer pays (on average) 58% of total contribution
57% of GPP/ GSHP members earn below £25,000
SLIDE 4
4
We need a sensible solution to ‘auto- enrolment’
- therwise schemes
will level down or close
SLIDE 5
5
Two thirds of employers will level down
5 10 15 20 25 30 35 40 % of employers Open & reduce Limit & maintain Shrink & maintain Shrink & reduce Open & grow Employers' reaction
SOURCE: PPI – Modelled employer response scenario – based on Deloitte 2006 – DC schemes
SLIDE 6
6
Complement not compete?
Beware of unintended consequences 401k designed to complement DB – in many cases the
- nly retirement plan a US company has
Members not participating, not contributing enough or not making the right choices
The USA Experience
SLIDE 7
7
Losing five years’ saving - £15,000 earner
SOURCE: AEGON, 6% investment growth, 4% earnings growth, 0.5% amc for PAs, 1% amc for GPPs, male aged 65 at retirement, 5 year guarantee, RPI escalation, 9% of full earnings for GPP , 8% of band earnings for PAs
2000 4000 6000 8000 10000 12000 14000 16000
Pension income ( £ pa)
5 10 15 20 25 30 35 40
Years of saving
PA GPP
SLIDE 8
8
A £10k earner gets less than half pension under PA
SOURCE: AEGON, 6% investment growth, 4% earnings growth, 0.5% amc for PAs, 1% amc for GPPs, male aged 65 at retirement, 5 year guarantee, RPI escalation, 9% of full earnings for GPP , 8% of band earnings for PAs, 35 years’ saving
2 0 0 0 4 0 0 0 6 0 0 0 8 0 0 0 1 0 0 0 0 1 2 0 0 0 1 4 0 0 0 1 6 0 0 0 Pension income (£pa) 1 0 1 2 .5 1 5 1 7 .5 2 0 2 2 .5 Earnings ( £ k)
PA GPP
SLIDE 9
9
3 Steps to increase pension saving
1 . Design an em ployer com pliance regim e that w orks 2 . Design a sim ple, inclusive, qualifying schem e test 3 . Create a level playing field
SLIDE 10
10
We need a sensible solution to ‘auto- enrolment’
- therwise schemes