Survey: DB Plan Closures Slowing, Avg. Life Stands at 35 Years

(August 14, 2012) — Amid a dire fate among the defined benefit (DB) market, closures of such plans in the United Kingdom are actually slowing, according to a survey by Greenwich Associates.

A total of 12% of all those surveyed anticipate closure to future accruals within the next two to three years. In comparison, 15% of those surveyed two years ago said they expected closure.

Meanwhile, Greenwich’s 2012 UK Investment Management Study of 353 senior professionals at a range of institutional funds — conducted from January through March — found that the life of the average DB plan is about 35 years.

The study discovered that among corporate plan respondents, 24% said they’re likely to up their exposure to active fixed-income strategies. At the same time, 14% said they plan to heighten their allocation to passive fixed-income.

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The study by Greenwich Associates follows a study by consulting firm Aon Hewitt last November, confirming a continued trend of closure to DB accrual among UK schemes. “Just over 40% of the schemes surveyed have either already closed to DB accrual or are currently in the process of closing to future accrual,” James Patten, benefits design specialist at Aon Hewitt, said in a statement at the time. “Nearly half of those that have closed to accrual, and indeed many of those that have not, are now taking pension risk management to the next phase. In some cases, this might simply be through implementing a liability management exercise such as an enhanced transfer value offer.”

Patten continued: “However, in an increasingly uncertain economic environment, we are seeing more schemes trying to take this concept a stage further. A growing minority is considering, or indeed implementing, ‘flight plan’ strategies to chart a course for reducing pension risk exposure at appropriate times, and/or ultimately fully settling their liabilities with an insurance company.”

Peter O’Neil and Karen Keenan have stepped into leading roles in the London office of State Street; Stephen Smit, long-associated with the firm’s transition business, has seen his role altered.

(August 14, 2012)-Stephen Smit, State Street’s head of Global Markets Europe and Investor Services UKMEA, has seen his role diminished significantly–a direct result, multiple sources say, of the firm’s transition management troubles.

Moving back into the lead role in London for the firm will be Peter O’Neil, who has been based in the Asian market in recent years. Karen Keenan, an executive vice president supporting strategic initiatives, will take the lead role for State Street Global Markets (SSGM).

Smit was responsible for investor services, securities finance, foreign exchange, equities, and fixed-income trading activities in the European market for the firm. There is no suggestion that Smit was party to any improper activities carried out by the transitions team.

As such, he oversaw Edward Pennings–the State Street employee who was dismissed in October 2011 following revelations, first reported by aiCIO, that he had misled clients regarding the pricing of fixed-income transitions. These clients included the Royal Mail and Sainsbury’s pension systems. State Street claims that all clients affected by Pennings’ actions have been reimbursed.

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Smit will continue to oversee State Street Global Services’ business in EMEA.

When asked for comment, State Street said: “Consistent with our global growth objectives and to ensure we can capture all of the opportunities that broad market and regulatory change are driving we continue to deepen our management bench globally. Karen Keenan’s appointment to lead our Global Markets business in EMEA reflects these objectives and builds on other recent appointments.”

There have been other casualties as a result of the scandal. Boston-based Ross McLellan left the firm in October as a result of the revelations; Rick Boomgaardt, head of EMEA transition management, left the in firm earlier this year. In January 2012, former-JP Morgan transition management guru John Minderides was hired to lead State Street’s transition efforts in the United Kingdom.