Empowering Trustees through Technology Sanjay Gupta and Danielle

Introduction Technology is an effective medium through which Trustees can empower themselves. Technology can

The valuation process Prior to the valuation date Prior to a formal valuation, the

The valuation process - Asset and Liability tracking tool Prior to the valuation date

The valuation process Following preliminary results Following the initial stages of the valuation, the

The valuation process – Funding Illustrator tool Following preliminary results © 2016 Willis Towers

The valuation process Valuation negotiations § § § Valuation negotiations can be a power

The valuation process Valuation negotiations © 2016 Willis Towers Watson. All rights reserved. Proprietary

Scheme governance Integrated Risk Management Without technology § § An onerous task to dissect

Scheme governance Integrated Risk Management Segments show current practice or control level Key Dotted

Scheme governance Scheme management Trustees need to keep up with the latest regulatory information

Scheme governance Scheme management © 2016 Willis Towers Watson. All rights reserved. Proprietary and

Communication New and existing DC schemes § § Trustees have a duty of care

Communication New and existing DC schemes © 2016 Willis Towers Watson. All rights reserved.

Other Trustee Roles Trustee Knowledge and Understanding § § Trustees are required by the

Other Trustee Roles Trustee Knowledge and Understanding § Use of social media, such as

Other Trustee Roles Trustee Knowledge and Understanding © 2016 Willis Towers Watson. All rights

Questions? © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis

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Introduction Technology is an effective medium through which Trustees can empower themselves. Technology can enhance: o Trustees’ knowledge and understanding; o Trustees’ ability to remain up-to-date in an ever changing pensions environment; o Trustees’ influence and negotiating strength; o The ease and speed with which decisions are made; and o Connectivity and sharing of knowledge. This presentation looks at the ways that technology can play a part in the major Trustee roles and responsibilities. In particular this presentation will cover: o The valuation process; o Pension scheme governance; and o Communication and DC schemes. Throughout this presentation the ‘XYZ Pension Scheme’ with a triennial valuation as at 30 June 2016 will be used as an example. © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 2

The valuation process Prior to the valuation date Prior to a formal valuation, the Trustees wish to monitor the following on a regular basis: § Market conditions; § Likely Scheme assumptions; § Scheme’s funding level on a range of bases; § Scheme’s deficit on a range of bases; and § Scheme’s position against previous recovery plan. Without live tracking tool § § Understanding the Scheme’s funding position can be an irregular and delayed process Monitoring market conditions can be onerous and time consuming With live tracking tool § § The Trustees can gain instant access to a number of pre-agreed bases (e. g. Technical Provisions and solvency basis) Funding levels and movement since the previous valuation can be viewed daily © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 3

The valuation process - Asset and Liability tracking tool Prior to the valuation date © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 4

The valuation process Following preliminary results Following the initial stages of the valuation, the preliminary results will be presented to the Trustees. These will form the backbone of the negotiations with the employer, around a suitable basis and, if necessary, contributions. Without technology § § § Results from the valuation seem static and potentially unengaging Potential difficulty understanding the sensitivity of the results The need to allow for post valuation experience can take significant time With technology § § Trustees can see the impact on liabilities of a change in discount rate, inflation based assumptions or future improvements Trustees can have a live discussion about the impact on the funding level of a different contribution amount or recovery period © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 6

The valuation process – Funding Illustrator tool Following preliminary results © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 7

The valuation process Valuation negotiations § § § Valuation negotiations can be a power struggle between the Trustees and the Employer. The Trustees first and foremost priority is the security of members’ accrued benefits. Securing sufficient deficit reduction contributions is key. Without technology Can be difficult to appreciate the impact on the projected funding level due to the change in any one of the following: § Frequency of payments; § Variability in level of payments; § Recovery period length; or § Assumed asset outperformance. With technology Ability to model a range of recovery plan scenarios with real-time changes in the underlying factors. Example of such a tool is here © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 8

Scheme governance Integrated Risk Management Without technology § § An onerous task to dissect the Regulator’s 46 page document Hard to quantify Trustees level of compliance § § The Pensions Regulator has recently issued guidance on Integrated Risk Management …there is a need for Trustees to comply with this guidance With technology § § Compact way to understand Trustees current compliance against their target levels Ease of creating an action plan to ensure compliance © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 12

Scheme governance Integrated Risk Management Segments show current practice or control level Key Dotted line indicates targeted practice / controls Operational efficiency 16. Paying benefits in accordance with scheme rules 17. Complete or accurate member records 18. Adherence to operational processes 19. Helping members to understand the scheme 20. Helping members to make decisions © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. Governance 1. Risk management and internal controls 2. Trustee understanding and appropriate skills 3. Relations between trustees and sponsor 4. Relations with service providers 5. Delegation of powers & responsibilities Covenant, funding & investment 6. Understanding and quantifying risk appetite and impact 7. Risk assessment – funding 8. Risk assessment - investment 9. Risk assessment - covenant 10. Risk management – funding 11. Risk management- investment 12. Risk management - covenant 13. Triggers and contingencies 14. Documentation of risk management framework 15. Monitoring of scheme financial position – funding and investment 13

Scheme governance Scheme management Trustees need to keep up with the latest regulatory information and prepare for upcoming Trustee meetings. There is the need to: § Store documents and manage meeting papers § Share information § Transfer data files in a secure manner Without technology § § § Delays in access to news and information Risk of confidential data being leaked Time consuming process to collate Trustee meeting packs With technology § § § Increased efficiency of document sharing Easier to amend Trustee meeting packs Reduces printing requirements © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 14

Communication New and existing DC schemes § § Trustees have a duty of care to employees joining a Defined Contribution scheme. Auto-enrolment has encouraged pension scheme membership across the UK but the benefits to be gained stretch far wider than membership alone. Without technology Communication to members can be: § Unengaging; § Unclear; § Inflexible; and § Not personalised. § With technology Through the use of online portals members are in a position to: § Better engage with their pension; § Make investment choices; § Tailor their investments to their risk appetite; § Make decisions on a suitable level of contributions; § Understand their benefits; and § Bring all of their retirement benefits together in one place. The use of technology significantly helps to achieve the Regulator’s current focus on transparency of information, especially around investment charges © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 16

Other Trustee Roles Trustee Knowledge and Understanding § § Trustees are required by the Pensions Act 2004 to have a minimum level of knowledge and understanding in relation to scheme funding, the pensions environment and investments. Trustees can use technology to: o Keep up to date between Trustee meetings; o Understand market movements Particularly in the context of Brexit and the US election result; o Access online training; o Listen to talks from trained professionals; and o Remain commercially aware, not just in the direct context of pensions. © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 18

Other Trustee Roles Trustee Knowledge and Understanding § Use of social media, such as Twitter or Linked. In, to follow key individuals or organisations to keep up-to-date, examples include: o Pension Advice (@Pension_Advice) o The Pensions Regulator (@TPRgovuk) o Department for Work & Pensions (@DWP) o Association of Member Nominated Trustees (@Amnt. Org) o Key political figures • Richard Harrington (@Richard 4 Watford) • Ros Altman (@Ros. Altmann) • Steve Webb (@Steve. Webb 1) o Various news broadcasters o Consulting firms (actuarial, investment) § Online Trustee Toolkit with a range of additional learning § Webinars and live conferences from various organisations © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 19

Other Trustee Roles Trustee Knowledge and Understanding © 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 20