​IORP II remuneration policy ‘impossible’, PensionsEurope warns

first_imgIt will prove impossible to force asset managers to comply with a pension fund’s remuneration policy, as proposed by the revised IORP Directive, PensionsEurope has warned.In its position paper on the Directive, based on the initial IORP II draft published in March, the European association argued in favour of several significant tweaks to the proposed risk-evaluation for pensions (REP), including a relaxation of sponsor assessment requirements and risks stemming from climate change.The paper said matters of remuneration should be the concern of member states, rather subject to delegated acts by the European Commission.Concerns were raised about the draft’s proposal that an IORP’s remuneration policy should apply to all “outsourced and subsequently re-outsourced key functions”, which would include investment mandates. “It will in many cases be impossible for them to ensure service providers publish their remuneration policy,” the paper said.It also pointed to an article within the revised Directive that required those in charge of the fund to ensure that no risks arose from any outsourcing practices, reducing the need to impose remuneration policies on third parties.The association also proposed several changes to the REP, recently revised by the Italian presidency to run four pages rather than the initial one, and stressed the need to ensure that the risk-evaluation rules would not be used as a means of imposing the Holistic Balance Sheet (HBS) on the sector.PensionsEurope said the proposed assessment of climate, resource and environmental risk, one of the issues covered by the initial REP, should be reconsidered due to the difficulty of assessing such new risks.“More important, a detailed analysis of risks relating to climate change, the use of resources and the environment should only be done by IORPs facing these risks,” the paper added.The provision has been removed in the latest draft of the Directive.It also suggested there should be an allowance for multi-employer schemes to conduct an “aggregate” assessment of sponsor solvency, rather than individual assessments for each participating company.“In addition to the employer, any pension protection scheme needs to be taken into account when evaluating the protection of members and beneficiaries,” it said.PensionsEurope also questioned whether the Commission’s assurance that the delegated act, meant to provide further details of the REP, would not “impose additional funding requirements”, as the European Insurance and Occupational Pensions Authority (EIOPA) was still working on HBS proposals.The assurance, alongside proposals for details of the REP to be introduced through a delegated act, has also been removed in the latest IORP draft.,WebsitesWe are not responsible for the content of external sitesPensionsEurope position paper on IORP IIlast_img read more

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Friday people roundup

first_imgLCP – The UK consultancy has made a raft of promotions including six new partners and one principal. Justin Joy, Laura Myers, Carolyn Schuster-Woldan, Myles Pink, Edward Symes and Matthew Thomas have been made partners in the firm’s administration, investment, buyout and actuarial practices, respectively. Peter Clark, with more than 25 years’ industry experience, has been made principal.Ivanhoé Cambridge – Sylvain Fortier has been promoted within Ivanhoé Cambridge, the real estate arm of Canadian pension fund Caisse de dépôt et placement du Québec, to the role of global CIO. His previous title was executive vice-president of residential, hotels and real estate investment funds. The new appointment follows a decision made several months ago at the firm to appoint the previous global CIO Bill Tresham as Ivanhoé Cambridge’s president. Daniel Fournier remains chairman and chief executive of the company.Brown Brothers Harriman (BBH) – Jean-Marc Crepin, Michael Keller and Jean-Pierre Paquin have been made partners at the investment manager. Crepin, who has been with the firm since 2007, is currently in charge of BBH in Luxembourg and its asset-servicing business. Keller, who joined the firm in 2005, acts as a fund manager in BBH’s large-cap equity strategies, while Paquin, who joined BBH in 1996, is co-manager of the private equity business.Accenture – Marco Folpmers has been appointed by the management consulting company as general director of finance and risk for the Benelux region, as of 1 April. Folpmers, who is also professor of financial risk management at Tilburg University – was vice-chairman of financial risk management at Capgemini Consulting. He was also programme manager of the ILAAP (Internal Liquidity Adequacy Assessment Programme) at ABN Amro.Squire Patton Boggs – Judith Donnelly has joined the law firm as a partner in its London pensions practice. She joins from Clyde & Co, where she was also partner, and counts Linklaters Deutsche Asset Management and SG Asset Management as past employers. Donnelly’s work has focused on investment governance and regulation, including the use of private equity, hedge funds and infrastructure for pension funds. Bpf Koopvaardij, F&C Netherlands, UK National Association of Pension Funds, Universities Superannuation Scheme, LCP, Ivanhoé Cambridge, Brown Brothers Harriman, Accenture, Squire Paton BoggsBpf Koopvaardij – Ernst Hagen, head of fiduciary investments at F&C Netherlands, has been appointed as a member of the supervisory board at Bpf Koopvaardij, the Dutch merchant navy pension fund. He still holds his position at F&C. Before joining F&C in 2011, Hagen worked as head of asset management at the Horeca & Catering pension fund between 2007 and 2010.UK National Association of Pension Funds (NAPF) – The NAPF has lost one of its policy team to the Financial Conduct Authority (FCA). Richard Wilson, who has been with the industry group since 2008, confirmed to IPE he would be joining the FCA in July as pensions technical specialist. In his time as defined contribution policy lead at the NAPF, Wilson has overseen its work on the introduction of auto-enrolment and managed the Pension Quality Mark initiative, a certificate for DC funds to demonstrate they meet certain standards of governance and communication. The NAPF is currently recruiting for Wilson’s replacement.Universities Superannuation Scheme (USS) – The pension fund has appointed a chairman after the retirement of Sir Martin Harris last week. Sir David Eastwood will now move from being a director on the trustee board of one of the UK’s largest defined benefit schemes to chairman.Harris stepped down at the end of March after nine years as chairman and 14 years on the board.Eastwood, vice-chancellor at the University of Birmingham, joined the USS board in 2007 and will now be replaced by Anton Muscatelli of the University of Glasgow.last_img read more

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PenSam Liv business grows in first half on pension transfers

first_imgChief executive Helen Kobæk said: “The more active investment strategy has once again shown its worth by securing good pensions for customers.”PenSam produced outperformance in almost all asset classes, she said.“This,” she added, “gives us reason to be optimistic about the years ahead.”PenSam Liv’s solvency coverage fell in the period, to stand at 215.3% at the end of June 2015, down from 233% 12 months before. Danish labour-market pension fund PenSam Liv reported growth in gross contributions of 5.4% in the first half of this year from the same period last year, as an increased number of pension savers transferred their plans to the provider.In absolute terms, gross contributions at the PenSam division rose to DKK2.67bn (€358m) in the January-to-June period, DKK138m more than the level seen at the same point in 2014, the pensions group reported in interim results.It said this rise was due in particular to more people transferring their pension schemes to PenSam.The return before tax on traditional with-profits pensions fell to 1.4% for the six-month period, down from 5.6% the same time last year, while the pre-tax return on capital slipped to 3.2% from 5.4%, according to the interim data.last_img read more

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Dutch companies abandon APF plan due to insurance competition

first_imgCustodian KAS Bank and private bank Van Lanschot have pulled the plug on their €1.8bn ‘general’ pension fund (APF) in the Netherlands, which they had been in the process of setting up together with payment processor Equens.In a blog, Equens chairman Ben Haasdijk said they decided to abandon their plans after it became clear that APFs set up by insurers were likely to charge lower fees than one launched by themselves. In January, Sako Zeverijn, chairman at Van Lanschot’s pension fund, said the players involved had put their plans on hold, as they wished to include quotes from insurers in their decision-making process.By that time, merchant bank GE Artesia had already pulled out of the initiative to launch an APF for the financial sector. The APF vehicle was introduced with the view to helping pension funds cut costs by increasing scale while maintaining independence.To date, however, insurers have been responsible for nearly all of the six pending APFs.The four financial companies represented one of the few attempts so far by pension funds to launch an APF.Unilever previously said it wanted to place its closed defined benefit scheme Progress and its new defined contribution pension fund Forward into its own APF.According to Haasdijk, insurers are able to charge lower fees, as they can “take out an overdraft” on expected turnover, whereas an APF would lack the financial resources for this.“As a consequence, the options for APF growth are limited, yet growth is essential to further drive down costs.”Zeverijn confirmed that the three players would not launch an APF at the moment, “as we have become aware that our growth potential would be insufficient”.He pointed out that the pension funds’ €1.8bn in combined assets probably needed to double at least to achieve the costs savings of an insurer’s APF.Zeverijn said Equens, Van Lanschot and KAS agreed to look jointly at the option of an insurer’s APF.He stressed, however, that no decisions had been taken, and that the three parties would “first thoroughly explore the still settling APF market”.Haasdijk said his pension fund would re-assess its future, including participating in an APF, set up either by other pension funds or an insurer.He added that the scheme would also look into other possibilities for co-operation.However, if his scheme is to remain independent, he said, it will have to contract out an increasing number of board tasks.last_img read more

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BHS schemes ‘weakened’ by management prior to insolvency

first_imgUK parliamentarians have criticised as “wholly inadequate” attempts by the former owner of retailer BHS to address the company’s pension deficit and called for significant contributions to address the scheme’s underfunding.Philip Green was the focus of the parliamentary investigation into the retailer’s insolvency earlier this year, which followed Green’s sale of BHS to Retail Acquisitions Limited (RAL) in 2015.In publishing its findings, the joint work and pensions, and business, innovations and skills committee criticised that Green failed to invest in BHS during his 14 years of ownership, and said his tenure left its schemes “weakened to the point of the inevitable collapse of both”.The company’s staff and executive scheme have begun Pension Protection Fund assessment since the sponsor became insolvent earlier this year, after they were left with a buyout deficit of £571m (€729m). The report further criticised BHS for failing to push ahead with a long-planned restructure of the company’s main scheme, insisting Project Thor could have made the company’s pension liabilities more manageable.It questioned the Arcadia board’s motives for postponing the implementation of Thor, noting it was told that the Scottish independence referendum, instability in Ukraine and Christmas trading in 2014 were variously cited as reasons the restructure did not go ahead.“We do not accept them,” the report said, placing the blame instead at the feet of Green, who, the committee argued, was unwilling to provide key information to TPR as part of Thor’s implementation. “[Green] did not wish to respond to requests for information regarding historic dividends, management charges, sale and leaseback arrangements, inter-company loans and the use of BHS shares or assets as collateral for company purchases,” the report concluded. “At best, this demonstrated a lack of willingness to act to secure the pension funds’ future.”MPs were also critical of the Pensions Regulator (TPR) as “slow-moving” and lacking urgency when dealing with BHS.“TPR will increasingly be called upon to make decisions crucial for thousands of employees and pensioners in a fast-moving and uncertain environment,” the report warned.“It is essential that it has the powers, resources, leadership and commercial acumen to act decisively.”The regulator has already said it would wish to see its ability to scrutinise mergers and acquisitions enhanced.The Pensions and Lifetime Savings Association welcomed the committee’s “clear conclusion” that BHS was not sufficiently supportive of its schemes.Graham Vidler, the association’s director of external affairs, added that the report sent a “welcome and strong message” to sponsors about their responsibility to support defined benefit (DB) funds.He also welcomed the report’s pledge to further investigate the DB regulatory framework and whether it offered protection to members and sufficient support for trustees.last_img read more

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Swiss pension fund seeks passive equities manager via IPE Quest

first_imgApplicants should state performance data net of fees to 30 April 2017.The deadline is 5 June.The IPE news team is unable to answer any further questions about IPE Quest or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected] A Swiss pension fund is tendering a CHF150m (€137m) passive equities mandate using IPE Quest.According to search QN-2321, the mandate is for all/large cap equities in Switzerland.The benchmark should be the Swiss Performance Index and fully replicated.Interested parties should have a track record of at least three years and at least CHF100bn of assets under management, with CHF1bn in the mandate’s targeted asset class.last_img read more

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European financial supervisors to take sustainability into account

first_imgThe European Commission has proposed that the European Supervisory Authorities (ESAs) incorporate environmental, social and governance (ESG) risks into their work. The proposal is one of several measures it presented today to reform the ESAs. These include EIOPA, the supervisory authority for pension schemes and insurers, EBA, for the banking industry, and ESMA, which is responsible for macro-prudential regulation.The Commission’s ESG-related proposals were intended to make sure “sustainability considerations are systematically taken into account in supervisory practices at the European level”. It said the ESAs could help prevent disjointed moves in the area of sustainable finance across the EU. By incorporating ESG risks into their work, the ESAs would be able to “monitor how financial institutions identify, report and address risks that ESG factors may pose to financial stability, thereby making financial markets activity more consistent with sustainable objectives”, according to the Commission.  “The ESAs will also provide guidance on how EU financial legislation can integrate sustainability considerations and promote the implementation of these rules.”Enhancing the ESAs’ role in assessing ESG-related risks was one of the recommendations made by the High Level Expert Group (HLEG) on sustainable finance to the Commission in its interim report in July. The advisory body suggested EIOPA could include ESG risks in its stress tests of pension funds – an idea that PensionsEurope, the European umbrella association of national pension fund trade bodies, has rejected.In its submission to HLEG’s consultation, PensionsEurope argued that there was “no clear picture in the scientific literature whether risks and returns of ESG portfolios are actually systematically different from those of conventionally managed portfolios”.The HLEG also recommended that the ESAs increased their knowledge and expertise on sustainability. PensionsEurope noted that European pension funds did not have a harmonised prudential regime and instead fell under the supervision of national supervisors.“We believe it is necessary that both European and national supervisors start building up capacity and tools in order to be able to consider ESG factors in the future in financial supervision while striving for supervisory convergence,” it said.The HLEG’s consultation on its early recommendations closes today. It is due to present a final report in December and the Commission has said it would decide on any concrete follow-ups by the end of next year.The next step for the Commission’s ESA reform proposals is for them to be discussed by the European Parliament and the Council. Other aspects of the proposals include introducing industry contributions to fund the ESAs, changing the ESAs’ governance structures by introducing independent executive boards, and giving ESA stakeholders a stronger say in the guidelines and recommendations issued by the supervisory authorities.last_img read more

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UK DB deficits could halve via new risk transfers, derivatives: report

first_img“With 75% of schemes already cashflow negative there is an urgent need to fill the funding gap and this can only be done if schemes are open to thinking in a different way,” he said.He said pricing for both pensioner buy-ins and whole scheme buy-outs was currently the most attractive that his firm had seen in recent years. “There are also newly emerging ‘end-game’ solutions such as non-insured risk transfer and insured self-sufficiency,” he said.Non-insured risk transfers involve transferring all scheme assets and liabilities into a new DB master trust backed by additional capital provided by external investors, the report’s authors explained. They gave The Pension SuperFund and Clara-Pensions as examples of emerging DB consolidators . Insured self-sufficiency, meanwhile, was where an insurer worked with a scheme to manage some, or all, of its assets and liabilities as if these were part of its annuity business book.Using these products could reduce the total UK DB deficit by £100bn, the firm said.It also said trustees could adopt capital-efficient strategies – whereby traditional asset classes are replicated, with, for example, synthetic equities being used instead of physical equities and leveraged LDI in place of Gilts.Such strategies allowed schemes to achieve the same investment returns for less upfront capital, said Susan McIlvogue, head of trustee DB at Hymans Robertson.“If these were implemented widely, a further £50bn could be wiped off the total UK deficit,” she said.She also said pension transfers from DB to DC, and “other member options” could reduce the DB UK deficit by as much as £100m. The current £500bn (€561bn) deficit of UK defined benefit (DB) pension funds could be halved by schemes thinking laterally about a range of options besides investment returns and contributions, according to consultancy Hymans Robertson.Alistair Russell-Smith, head of corporate DB at the firm, said: “Taking advantage of new opportunities in the consolidation, risk transfer and investment markets could create billions of pounds of additional value across UK DB.” In a new report the firm suggested schemes consider shrinking their deficits by, for example using new types of risk transfer and capital-efficient investment strategies, where physical securities are replaced with synthetic ones, and allowing members to switch to defined contribution (DC) pensions.Russell-Smith said companies relying simply on investment returns and contributions to reduce the deficit could remain “on-risk” for many years to come.last_img read more

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European actuarial body warns on national liability data misuse

first_imgThe association challenged the approach adopted by Eurostat for the disclosures in the table, saying it was meaningful in relation to employer-provided workplace pensions, but did not have “obvious validity” for national social security schemes.“Just as the accrued liability for pensions in a corporate pension scheme has to be accompanied by an actuarial valuation of the assets and liabilities and an assessment of the required future contribution rate, the Supplementary Table 29 disclosure is of limited value on its own in the context of assessing the financial status of the pension scheme, since it does not provide any information about its financial sustainability,” said the AAE.According to the association, it would be better to use the approach underlying the cash flow projections used in the EU’s 2018 Ageing Report.This “open group” approach was much more appropriate for assessing the financial sustainability of public pension systems operated largely on a pay-as-you-go basis, it said.It also had the advantage of being equally applicable to all the different types of social security systems in the EU.The AAE advocated the creation of “a solid framework for effective communication and interpretation” of the figures, and said it would liaise with Eurostat on providing technical input about how the treatment of the data could be enhanced. Actuarial scrutiny of public liabilitiesThe comments were part of the AAE’s discussion paper, ‘Meeting the challenge of ageing in the EU’, in which it analysed the findings of the EU’s 2018 Ageing and Pension Adequacy reports.It said that actuarial modelling approaches and methodologies should be used to project future cash flows and assess the short, medium and long-term impact of pension policies and reforms on adequacy and sustainability of pension system provision in an integrated way.According to the AAE, this was not being done consistently across the EU at present. Esko Kivisaari, chairperson of the AAEIt also backed the introduction of “some form of” sustainability factor or automatic adjustment mechanism at retirement age to offset increasing longevity.The association suggested a statutory requirement for regular actuarial reporting on the finances of social security, which it said could help ensure sustainability of social security pension promises “as it helps to place the political pressures for more generous social security into a firm financial monitoring environment”.The AAE’s discussion paper can be found here.AAE chairperson Esko Kivisaari said: “The exact future is uncertain but the trend is fairly certain. Possible future scenarios must be examined in a scientifically sound way. This is the field of actuaries. We can help determine the appropriate methodology to assess the future.” The Actuarial Association of Europe (AAE) has expressed concern that new statistics about pension liabilities in EU member states could be misinterpreted.Last year, for the first time, EU national accounts information included disclosures about households’ pension entitlements and pension obligations of contributory social security pension schemes.The AAE said it welcomed the “Supplementary Table 29” data, but it had concerns that the information could be misinterpreted.“If these numbers are disclosed without sufficient and proper explanation, they could be misused or misinterpreted by the media and other users, creating an unjustified negative perception of social security systems,” it said.last_img read more

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Chart of the Week: Equity returns drive LGPS investment gains in 2018-19

first_imgThe £8.4bn (€9.2bn) pension fund for the county of Lancashire was the stand-out performer across the UK’s Local Government Pension Scheme (LGPS) in the 12 months to 31 March 2019, according to data from PIRC.An analysis of 64 LGPS funds from across England, Wales and Scotland showed Lancashire gained 11.7% in the 2018-19 financial year, ahead of the £1.2bn scheme for the London borough of Kensington & Chelsea, which gained 10.9%.Both schemes were aided by strong equity performance, with Lancashire posting the top equity return across PIRC’s sample, with 16%. Kensington & Chelsea’s equity allocation gained 12.9%.At the other end of the performance spectrum, the £733m Havering Pension Scheme – also linked to a London borough – reported a 3.4% return. Its performance was negatively affected by a 1.4% loss incurred on its allocation to diversified growth strategies. Four other London funds posted returns of between 4.3% and 4.9%. Best and worst performers in the LGPSChart MakerThe biggest fund in the LGPS, the £23.8bn Greater Manchester Pension Fund, performed below the median return for PIRC’s sample with a 5.6% gain, compared to the 6.2% average.Within asset classes, PIRC’s data showed that alternatives allocations performed particularly strongly across the LGPS. Islington’s £1.4bn scheme reported a 35.6% return from its alternatives portfolio, which was predominantly allocated to infrastructure, according to council documents.The £2bn pension fund for Gwynedd in north Wales reported a 24.8% return from its alternatives holdings, which included private equity and infrastructure allocations.The West Yorkshire Pension Fund posted the best returns from property, adding 13.3% for the year. The pension funds for Southwark, Surrey and Newham all also reported double-digit property returns.Long-term performancePIRC’s data also revealed LGPS funds’ longer-term performance, with figures covering five, 10, 20 and 30 years to 31 March 2019. Over 10 years, the London borough of Bromley’s £1bn scheme added 13.7% a year on average, the best of any of the LGPS funds analysed by PIRC.Bromley was closely followed by Scotland’s Orkney Islands Council Pension Fund, which has returned 13.4% a year over the same period. At £391m it is the smallest fund within the LGPS system.The two funds also led the way over 20- and 30-year periods.Best LGPS performers over 10 yearsChart MakerAsset allocationPIRC’s numbers showed little year-on-year change in asset allocation across the 64-fund sample, with the exception of a slight increase in fixed income holdings and decrease in diversified growth strategies.LGPS funds held an average of 55% in equities and 19% in bonds as of 31 March, the data showed. They allocated 11% to alternatives and 9% to property, on average.At the end of March 2019, there were 100 funds across the UK’s LGPS system with £347.1bn in assets under management, an increase of 6.3% compared to 31 March 2018, according to data compiled by IPE.Average LGPS asset allocation (%)Chart Makerlast_img read more

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