Monthly Archives: September 2020

Irish DB pension funds told to assess strength of sponsors regularly

first_imgTrustees of Ireland’s defined benefit (DB) pension funds should be required to assess the strength of their employer covenant regularly, allowing them to better gauge future financial risks, the Pensions Authority has been told.The regulator was also urged to ensure the chair of each trustee board is independent from the sponsoring company as it published industry responses to its consultation on guidelines for the financial management of DB funds.Brendan Kennedy, head of the Authority, said it would consider all the points raised during the consultation before it finalised the new guidelines.According to the summary of responses, the regulator found that there was “broad agreement” on the need for the proposed practical guide but reflected industry concern that funds were not underfunded due to bad management practices. “While acknowledging that the reasons put forward in the guidelines certainly contributed to some schemes failing to meet the funding standard, it was commented that the legislative requirements and the introduction of the pensions levy were also contributing factors to the problems that arose,” the consultation added.“It was suggested that the guidelines, while useful, cannot fully protect schemes from extreme conditions.”The Irish government in 2011 introduced the 0.6%, four-year pensions levy and added a second, two-year stamp duty of 0.15% last year, effectively increasing it to 0.75% for one year.However, in the most recent Budget, minister for finance Michael Noonan confirmed that the new charge would end next year.The consultation responses also noted that many trustees were already exceeding the minimum financial management standards set out by the regulator, and said it should be made clear that the new framework is a risk-management tool rather than a means of increasing paperwork for trustees.Asked which areas should be added to the proposed framework, the Authority was told trustees needed to improve their communications with members, but also suggested a more regular assessment of sponsoring companies.“Trustees should be required to carry out a formal assessment of the sponsoring employer covenant, to allow the trustees to ascertain how willing and able the employer is to maintain/increase the contribution rate needed to pay the benefit, and to gauge the implications for the future financial risks in the scheme,” the consultation said. Arguably, such an assessment is important in a country such as Ireland, which does not have any debt-upon-the-employer legislation and can see sponsors wind up schemes in deficit.last_img read more

Folksam Liv chairman to step down to avoid conflict of interest

first_imgA spokesman for Folksam said Sundström had taken on the role of chairman at Folksam Liv to stabilise management as Jens Henriksson – the new chief executive of the group’s two main units, Folksam Liv and Folksam Sak (non-life) – settled into his role. However, it was no longer seen as necessary for Sundström to stay, the spokesman said.Since there was a conflict of interest inherent in holding the role of chairman of Folksam Liv while at the same time serving as chairman of the board of Swedbank, Sundström decided the best thing was to resign the Folksam position, the spokesman said.Folksam is the largest shareholder in Swedbank. Sundström will continue in his roles as chairman of Swedbank and chairman of cooperative organisation Kooperativa Förbundet (KF), the spokesman said.Folksam is closely connected to Swedish cooperative and trade union organisations, having started as an insurance branch of KF.It runs Sweden’s main local government pension scheme KPA Pension and owns 60% of it.Its life and non-life subsidiaries are incorporated as mutual organisations. The chairman of Swedish insurer and pensions provider Folksam Liv is to step down in April because of possible conflicts of interest due to his chairmanship of major Swedish bank Swedbank.Anders Sundström has announced he will resign as chairman of Folksam Liv – the main life-insurance subsidiary of the Folksam group – at the company’s next annual general meeting in April. The company said in a statement that its nomination committee would propose a new chairman at the meeting.Sundström was president and chief executive at Folksam from 2004 to 2013, and was subsequently elected as chairman of Folksam Liv in April this year.last_img read more

Bank of England to run rule over asset managers’ liquidity strategies

first_imgThe committee also said it would work with the FCA to better understand how UK financial stability could be affected by a market correction or a reduction in market liquidity, analysing the corporate finance sector specifically.It will also assess how liquidity may have become more fragile recently, and said it would use evidence from episodes of “heightened” market volatility.“The Committee remains concerned investment allocations and pricing of some securities may presume asset sales can be performed in an environment of continuous market liquidity, although liquidity in some markets may have become more fragile” the FPC said. “Trading volumes in fixed income markets have fallen relative to market size, and this could lead to heightened volatility and undermine financial stability.”Concerns from the BoE had been raised before the latest move.In its December meeting, the FPC said the concern that market liquidity could prove illusory would contribute to disruption.In December, the FPC wrote that heightened volatility had been seen in markets often considered to have deep liquidity.“Financial markets had recovered relatively quickly, in part because longer-term asset holders had maintained their positions,” it said.“But tail events could trigger a larger and more prolonged reaction in asset prices and volatility. Some asset managers might be assuming they could sell assets quickly in the event of redemptions. If many asset managers tried to do this simultaneously, this might amplify price falls and market volatility.”Fixed income, particularly corporate bond markets, have become a source of increasing concern among institutional investors, as the lack of banks and primary dealers has left buyers with few opposite parties in times when liquidity is needed.This growing concern comes as the high-yield market saw record issuance in 2014, across both the US and euro-zone, driven by the ‘search for yield’ and changes to the legal structure of issuance.Concerns from the BoE over the risk of asset managers trying to exit a market simultaneously fall into existing work in both the US and Europe over whether asset managers or investment funds carry systemic risk to financial stability.Work is currently underway to decide whether asset managers are ‘too big to fail’, and whether capital reserves could be a potential solution.The BoE’s executive director for financial stability, Andrew Haldane, said in a speech last year that distress at an asset manager could increase friction in financial markets and liquidity.Central bank concerns over market corrections comes as ING Investment Management publishes research showing institutional investors are split over whether to prepare portfolios for a market correction.Among 226 global institutional investors, ING found 47% were positioning portfolios expecting corrections, with 47% not. The UK central bank is set to gather information from asset managers over strategies to manage liquidity, as long-term concerns over the “fragile nature” in some fixed income markets turns into action.The announcement came from the Financial Policy Committee (FPC), the Bank of England’s (BOE) team charged with monitoring the UK economy, taking action to remove systemic risks and protecting the UK financial system.In a meeting last week, the FPC agreed it would ask the Financial Conduct Authority (FCA) to gather information from UK-based asset managers on how they manage liquidity in investment funds in both normal and stressed conditions. The FPC said the exercise would inform a study on which markets relied on investment funds offering redemptions at short notice.last_img read more

Dutch court blocks airline KLM from launching pension fund for pilots

first_imgThe Amsterdam court has blocked KLM from starting a new pension fund for its pilots after the airline cancelled its contract for pensions provision with the existing Pensioenfonds voor Vliegend Personeel as of 1 December.KLM had sought “substitutional approval” from the court, as its works council (OR) “failed to agree in a timely manner” with its plan.The OR’s support had been KLM’s legal fallback after pilot union VNV refused to approve a new pension fund.KLM said it was assessing the situation following the court’s decision that substitutional approval would not be possible, as the choice of pension fund had been covered by the collective labour agreement (CAO) between the employer and the unions. The airline said it would keep making contributions into the pension fund but took pains to emphasise that it would stick with the cancellation of the contract.The sponsor wanted to establish a new pilot scheme, as union VNV refused to support a downgrade of indexation rights.KLM, however, insisted on making the adjustment, arguing that the rules of the new financial assessment framework (nFTK), combined with the low-interest environment, would lead to a disproportionately high indexation contribution.It had suggested that this could jeopardise the company’s operational management.As a consequence of the VNV’s refusal, the employer cancelled its indexation agreement with the pilot union, as well as the contract with the €8bn pension fund.The pilot scheme, for its part, announced a legal procedure against KLM, arguing that the sponsor had unilaterally terminated the contract.The pension fund said it would have to close if an agreement could not be reached.The VNV previously lodged an appeal against a court ruling that KLM did not have an indexation obligation.Last month, KLM said the new pension fund would be very similar to the existing one but include indexation clauses drawn on previous legislation.Meanwhile, the Pensioenfonds voor Vliegend Personeel said it would not support a new pension fund, “as it would not be beneficial to the pilots, who would, for example, no longer be represented on the board or the stakeholders body”.The VNV, which said it had tried in vain to reach an alternative pension agreement with KLM, said it would prepare for industrial action.Steven Verhagen, the union’s chairman, said: “We are fed up with KLM’s attempts to economise by tackling a supposed pensions problem.”last_img read more

European IORP assets up ‘significantly’ in 2015, fund numbers down

first_img“This increase was partly caused by the drop in interest rates during 2015, which increased the market value of bond portfolios,” said EIOPA, noting that the UK and the Netherlands accounted for 83% of the European occupational pensions sector.In most countries, the size of the occupational pension fund sector with respect to GDP – the penetration rate – grew in 2015 compared with 2014, according to the EIOPA report. The ratio shrank in countries such as Ireland, the Netherlands and Finland.EIOPA said the investment allocation for occupational pension funds – IORPs – had been “relatively stable” in the past three years.Total exposure to bonds stood at 47% in 2015, and equities accounted for 28%.Over a nine-year period, changes have been more substantial, however, according to EIOPA.It said there had been a decline in equities from 46% to 28% based on data for 16 countries (accounting for 97% of assets in the EEA) for the period from 2007 to 2015.“A possible explanation is the de-risking of investment portfolios in the UK,” it said.UK DB schemes’ average allocation to bonds hit 50% for the first time in the 2015-16 financial year, according to the UK’s Pension Protection Fund.It published its latest ‘Purple Book’ of DB scheme data this week, according to which private sector DB funds had an average fixed income allocation of 51.3% at the end of March.EIOPA said cover ratios for European defined benefit (DB) schemes had decreased “and remain a big concern for a number of countries”, EIOPA said.It put the average weighted cover ratio at 95% for 2015, down from 104%.The number of IORPs in Europe fell further in 2015, decreasing by 3% versus 2014, while overall active membership increased by 7%.EIOPA said the overall increase in active membership could be attributed “to a large extent to the (gradual) introduction of auto-enrolment in the UK”.The Dutch regulator has predicted that some 100 fewer pension funds will exist in the Netherlands by the end of next year due to consolidation.The information in the pension fund overview is based on feedback provided by EIOPA members, with data for 2014 provided to EIOPA “with an approximate view of the financial position of IORPs during the covered period”.The supervisory authority said several countries were in the process of collecting data and that, in some cases, 2014 figures were incomplete or based on estimates that may be subject to major revisions in the coming months.It noted that the main valuation method applied by each country varied due to differing accounting principles applied across the EU, and that data availability varied substantially, “which hampers a thorough analysis and comparison of the pension market developments between [EU] member states”. Total assets in European occupational pension funds increased “significantly” in 2015, with asset allocation remaining broadly unchanged, according to the European Insurance and Occupational Pensions Authority (EIOPA).The supervisory authority this week released its second half-year financial stability report for 2016, which includes a chapter capturing broad developments in the European occupational pension fund sector.Much of the report is focused on the other part of EIOPA’s remit, the insurance and re-insurance sector.It said the occupational pension fund market grew by 13.5% for the European Economic Area (EEA) in 2015 in terms of assets “owned” by the funds, and by 2.5% for the euro-zone; it did not state an absolute figure.last_img read more

Swiss pension fund association refuses to back benefit ‘adjustments’

first_imgAddressing the director of the association, Hans-Peter Konrad, Deprez continued: “When the entity responsible for the pension fund is trying to find solutions to the benefit of active members and beneficiaries – including involving existing pension benefits – then ASIP has to support this approach.”Konrad had earlier spoken against cutting pensions already in payment, saying that this was a fundamental question that went to the heart of the pension system and needed to be decided at the political level.It cannot be dealt with without a “fundamental debate about whether this systemic correction is wanted” taking place, said Konrad.Deprez disputed the reference to cutting pension payouts, preferring to refer to “adjusting” benefits.Thomas Schönbächler, chief executive at BVK, the pension fund for employees of the canton of Zurich, argued that it wasn’t right “to change the rules in the middle of the game”, but that levels for new and future pension benefits should be set at the correct actuarial level – which would mean lower payments for future retirees.Konrad took a similar stance, saying ASIP was not against the introduction of flexible pension models for new and future beneficiaries, but that cutting pensions that were promised at a certain level is “the wrong way” for pension funds to address funding difficulties.Deprez reminded the other panellists, and delegates, that pensions in payment were not always “sacrosanct”, as as this only came into effect as a result of legislative change in 2005. Delegates at a conference of the pensions supervisory authority of the canton of Zurich (BVS) last week were treated to a heated debate over cutting, or “adjusting”, guaranteed pension benefits.Olivier Deprez, a pensions expert and a member of the board of the Swiss actuarial association, argued passionately in favour of supporting trustee boards address funding problems, even if it means, in his words, “adjusting” pensions already being paid.“There is only one entity responsible for the financial security of pension funds and that is the board of trustees,” he stressed.He called upon the Swiss pension fund association, ASIP, to support a lowering of pension benefits by funds trying to shore up their financial stability.last_img read more

Scandinavian investor seeks multi-asset, systematic manager via IPE Quest

first_imgA Scandinavian investor has tendered a “multi-asset style/risk premia” mandate via IPE Quest.According to search QN-2314, the investor is looking to invest €50m in global, systematic strategies.Compliance with European UCITS fund rules is a key requirement.The benchmark is cash plus a “naive premium”. Interested parties do not have to be of a minimum size to apply, and the investor is also not requiring interested parties to have a minimum level of assets under management for the asset class in question.A minimum track record of three years is preferred. There is no minimum or maximum tracking error.They should state performance gross of fees to 31 March 2017.The closing date is 22 May.The IPE news team is unable to answer any further questions about IPE Quest 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 7261 4630 or email [email protected]last_img read more

CERN seeks external expert for investment committee

first_imgThe investment committee is responsible for making proposals to the pension fund’s board regarding investment principles, reviewing the fund’s investment performance, and monitoring its risk tolerance.  The committee holds “up to six” meetings per year at CERN in Geneva, according to the job description.The job description said candidates should have “board level experience and a good working knowledge of investment committees”, as well as knowledge of asset management, portfolio construction, and risk management.“Candidates are sought with experience of managing the assets of pension funds, or similar long term institutional investors, such as endowments, foundations, and sovereign wealth funds,” the advert said.The full job description is available on CERN’s website. The CHF4bn (€3.7bn) CERN Pension Fund is advertising for a new investment committee member.The defined benefit scheme’s investment process is overseen by its internal team with the assistance of the committee, which includes internal staff and external experts.It is currently chaired by Alessandro Raimondo, with the pension fund’s CEO Matthew Eyton-Jones and CERN’s director for finance and human resources Martin Steinacher as members.The external experts are Jayne Atkinson, CIO of Unilever’s UK pension fund, and Pierre Sauvagnat, senior vice president at Banque Cantonale de Genève. last_img read more

Analysis: Pension policy promises in draft German coalition deal

first_imgAndrea Nahles, meanwhile, could be nominated the new head of the SPD later today following a meeting of the party’s leadership, although opposition to this is mounting, according to German media reports. As minister for labour and social affairs, Nahles played a key role in steering Germany’s major pension reform – the Betriebsrentenstärkungsgesetz (BRSG) – through to completion. Credit: Susie KnollAndrea Nahles, SPD, GermanyThe BRSG was passed in the lower house of parliament in June last year, and entered into effect last month.The protracted negotiations to form a new government since then are good grounds to be relieved that the BRSG was passed before the end of the last parliamentary term, says Klaus Stiefermann, managing director at aba, Germany’s occupational pension fund association.“You don’t want to imagine the law not having made it through the process before the end of the last legislative period, and things now being up in the air because we didn’t know how the political situation would continue,” he says.Pension promises from the ‘grand coalition’The coalition partners have promised to develop an attractive, standardised ‘Riester’ product as quickly as possible, in dialogue with the insurance industry. The Riester is a state-subsidised private pension saving product. aba does not want to be left out of these discussions, however. Individuals can also save into a Riester through their employer, and such arrangements have been made more attractive by the new German reform law, according to Stiefermann.“If it touches on occupational pensions then we will also need to be considered,” he says.The association also wants a voice in the pensions commission that the new coalition government proposes to establish.According to the coalition document, the committee will focus on the future of the state pension after 2025, as well as that of the other pension pillars. It will aim to come up with a recommendation for “a reliable inter-generational contract”. It should report back by March 2020. The deal struck by the CDU/CSU and the SPD promises that state pensions will be fixed at 48% of average salaries by 2025, with contributions capped at 20% of gross pay. If necessary the parties will resort to taxes to help fund this cap, according to the draft agreement. The government will change the formula used to calculate pensions in order to secure the 48% level, it says. The employers’ association for the influential German metal and electrical sector has strongly criticised the outlined approach to state pensions, warning it will penalise younger generations.Pensions portal coming up? After months of talks, the CDU, its sister party the CSU, and the SPD – roughly centre-right and centre-left parties, respectively – came to an agreement last Wednesday that paves the way for them to govern Germany in a grand coalition. But what does it mean for pensions policy in Europe’s largest economy?The coalition agreement that looks set to form the basis of Germany’s new government does not mention occupational pensions outright, but the national association for the sector still sees it being in play. In the 177-page draft agreement, a section on pensions expresses the parties’ commitment to the three-pillar pension system, and their desire to further develop private pensions.The agreement is only a draft as it is subject to a vote by the SPD’s members – the final result is expected by 4 March, according to local reports. Assuming the coalition goes ahead, it would be a continuation of the constellation that was in power in the previous legislative period, although key changes are to take place. The finance ministry, for example, is due to be led by the SPD for the first time in nine years, with the mayor of Hamburg, Olaf Scholz, slated to succeed the CDU’s Wolfgang Schäuble.center_img Angela Merkel is set for another term as chancellorThe coalition government also has plans for improving pension communication. It says it will introduce provision of an overarching overview of an individual’s pension situation, pulling in information from all the pillars – the state pension, occupational pensions, and private personal pension savings.As a plan, this is not new: under the last government, the SPD and the CDU commissioned Aon Hewitt and Hans-Joachim Zwiesler, an academic at the University of Ulm, to carry out research into the idea.Aba has previously cautioned against expecting too much from providing such information to individuals, and Stiefermann reiterates the association’s view that information alone will not move people to take action where it is necessary.It is important that whatever the government comes up with is compatible with the multiple information requirements that employers and pension institutions already have to meet, be it under national or European regulation, says Stiefermann.“The experience abroad has shown that this is not easy, so it’s good that [the coalition agreement] does not give a date for the introduction of such an information overview,” he says.last_img read more