Pension Reform in the United Kingdom

February 9, 2006

Abstract

London, United Kingdom February 9, 2006

A long road lies ahead for pension companies that must comply with new pension reform regulation in the UK. With the initial deadline known as A-day looming, companies need to get a handle on implementing changes.

will take a big step forward on April 6, 2006, when a new simplified tax regime takes effect, a day known as A-day. Celent traces the steps leading to this day and explores the numerous IT challenges that pension reform presents in a new report, .

There has been considerable debate about Europe's impending pension crisis, which the UK has not escaped. The UK started down the challenging road to regulatory reform of the pension system in 2002. With A-day just months away, the UK is preparing to cross another bridge that may help to prepare companies for future changes. "A review of how insurers are dealing with A-day is a great way to learn how best to tackle the changes that are coming in the future," says Catherine Schmitt, senior analyst and author of the report.

The impending overhaul of UK pension regulation will require pension companies to make extensive changes to their IT systems. Core systems such as policy administration systems and claims systems will be at the heart of these changes. And work in these areas will be further complicated by a myriad of legacy systems, inflexible architecture, and multiple systems by line of business. "As pension companies come to terms with changes required for A-day, they can be assured that this is the beginning of a long and bumpy journey of change," says Schmitt.

Some Key Facts About Pensions in the UK

In this report Celent proposes a strategic approach to pension regulation that addresses key business issues rather than just the minimum compliance requirement. Mapping compliance and business issues to key IT areas allows for implementation of strategic projects with reduced risk, reusable components. "A dynamic and flexible insurer is the one who will be around to implement the reform changes in 2010," says Schmitt.

The 18-page report contains two figures and two tables.

A table of contents is available online.

 

Value

Metric

2:1 Worker to pensioner ratio in 2050. Currently, this is 4:1
56% Increase in number of pensioners by 2050
60% Estimated percentage of people who are undersaving
」65 billion Deficit in occupational pension schemes of FTSE 100 companies in 2005
Source: National Association for Pension Funds

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

London, United Kingdom February 9, 2006

Executive Summary 3
Background 4
  The Pension Crisis in Europe 4
  The UK Crisis 7
UK And Pension Reform 8
  The Lead Up To The Pension Act 2004 8
  Post Pension Act 2004 9
  What Happens Next? 10
IT Impact Of Pension Reform 11
  The IT Challenges of A-Day 11
  Lessons To Be Learnt 12
A Strategic Approach To Pension Reform 14
Conclusion 16
Objectivity And Methodology 17

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