Towers Watson: UK pensions reforms not understood

24 July 2015 Consultancy.uk

As a result of the UK pension reforms, those aged 55 and over have considerable more options to put their pension savings to work, or lose them. In a recent survey run by Towers Watson, the consultancy looks at how the public has adapted to the new rules, their wider opinion on the legislation, and their pension saving behaviour. The firm finds that respondents are worried that the reforms will lead to abuse, and that many are still not saving adequately for their golden years.

In April 2015, new rules for pensions were introduced in the UK, allowing those 55 and over to draw on their retirement savings, with the first 25% tax free. Towers Watson’s survey, titled ‘UK workers left vulnerable and in the dark about new pension reforms’, highlights that many working people (66%) lack adequate understanding of the new rules. Of those that do understand the new rules, 42% say they believe that the reforms will promote irresponsible spending and 26% are concerned that the changes will increase the possibility of fraud.

Towers Watson survey on new UK pension reforms

The survey shows that planning for old age remains an issue. Just over three-quarters (77%) of respondents say they need to talk more about their retirement planning, while 56% admit they rarely discuss their plan. Only 38% have had a conversation with someone on the issue in the last year. Around a third (34%) make ‘putting their pension money where their mouth is’ a priority, with the research showing that employees are on average saving £1,640 less of their salary annually than they think they should. This translates to saving 9.5% of salary instead of the ‘needed’ 14.3%.

“These findings show that people hardly ever discuss savings for pensions and retirement plans and, perhaps partly as a consequence, many UK workers are poorly informed about the Government’s recent pension reforms. This information deficit has the potential to store up major problems in the future, especially as our ageing population means there will be 15.5 million pensioners in the UK by 2030,” comments Fiona Matthews, Managing Director of LifeSight, Towers Watson’s master trust.

Saving money for pension

The group most keen to save for their retirement are 18-24 year olds. Savers in their 20s and 60s are found to have the most financial freedom and those in their 30s the most financial burdens.

“[…] there are signs that young people in particular are keen to address the retirement savings challenge by having more open discussions and increasing their level of understanding. This is a positive step as, more than ever, the onus is now on individuals to make sure they are saving for later life in order to take advantage of the new choices and freedoms that are available,” explains Matthews. “We strongly encourage people to reach out to their employers or pension providers to ask questions, find out about their options and get guidance on what they need to do at this stage in their life to make sure they are well prepared for retirement.”

×

Debenhams administrator handed legal threat from Sports Direct

24 April 2019 Consultancy.uk

Earlier in April 2019, the long-suffering high street entity of Debenhams finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. Now, Mike Ashley, the controversial owner of Sports Direct, has threatened legal action to remove FTI Consulting from its role as Debenhams’ administrators, following the obliteration of his stock in the company.

As the retail sector in the UK continues to endure a torrid period, British retail stalwart Debenhams endured a spectacular fall from grace. The high street ever-present was founded in the early 19th century, with a single store in London, before expanding to 178 locations across the UK, Ireland and Denmark. However, following a string of profit warnings and several rounds of lay-offs, the company engaged advisors from Big Four firm KPMG to consider its options in the Autumn of 2018.

At the time, Debenhams Chairman Sir Ian Cheshire insisted that the chain was not heading for insolvency, or that it was actively embarking on a company voluntary agreement (CVA). Nevertheless, Debenhams fell into administration in Spring 2019. The news saw Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting appointed as joint administrators, immediately selling the retailer to a newly incorporated company controlled by secured lenders.

Debenhams administrator handed legal threat from Sports Direct

The pre-pack administration deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though plans to close around 50 under-performing stores in the next three to five years remain in place. At the same time, the deal maintained its commercial relationships with suppliers, employees and pension holders. However, it also effectively led all of Debenhams’ previous shareholders – including the retail magnate Mike Ashley – to lose their equity.

Ashley’s Sports Direct firm had increased its stake in the department store chain in 2018, but stopped just short of the 30% stake which would require it to put in a formal offer to fully acquire the business. The transaction fuelled speculation that Ashley was waiting for the opportune time to acquire Debenhams, particularly in the wake of his swoop for House of Fraser. Ashley’s deal there enabled Sports Direct to buy the firm out of administration in a pre-pack deal, allowing the new ownership to controversially wash its hands of the company’s pension scheme in the process.

While some believed this was Ashley’s intent for Debenhams, FTI’s decision to sell the store to its creditors has instead resulted in a sizeable loss for Ashley. The hit of around £150 million from his loss in Debenhams comes after an analysis by The Sunday Telegraph suggested the tycoon had accrued “a sprawling web of stakes” in rival companies, and that he may be nursing losses of more than £500 million.

Bad press

Ashley – who recently lost a complaint ruling by British press regulator Ipso allowing the Times to note that he shared many characteristics with North Korean dictator Kim Jong-un – has been outspoken in his contempt for FTI since the news broke of Debenhams’ sale. The Sports Direct CEO has called for the resignation of FTI from its role as administrator, after his stake in the department store chain was wiped out. The Guardian stated that a letter to FTI saw Sports Direct’s lawyers even threaten legal action to remove the advisory firm as administrators because of a conflict of interests.

According to the reports, the document claimed, “[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it.”

The letter allegedly claims that FTI had been involved with Debenhams since the second week of February, and had engaged with the group’s lenders. The legal team reportedly suggested that this would consistute a conflict of interest, because FTI sold the retailer’s operating companies to the same lenders via a pre-pack administration.

This comes weeks after Sports Direct was itself accused of becoming overly cosy with a professional services firm, which has seen its auditor Grant Thornton placed under scrutiny for its continued role with the firm. In 2018, it was reported that Grant Thornton was set to stand aside from the role due to competition rules. It had held the role since before Sports Direct floated on the London Stock Exchange in 2007, while Phil Westerman, the Partner at Grant Thornton responsible for signing off Sports Direct's accounts, had himself undertaken the work for five years. 

Neither situation is understood to have changed, leading to the questioning of the independence of Grant Thornton’s auditing work with Sports Direct. Such is the level of bad press surrounding the retailer, that the Big Four of the accounting and advisory world – wary of incurring a new scandal of their own – are said to have ruled out taking the contract over.