The €293bn civil service scheme ABP has lowered its contribution by 3.8 percentage points to 21.6%, mainly following cost-cutting measures for its pension fund.It said the main reasons for its decision were the reduction of the yearly pension accrual from 2.05% to 1.95% for 2014 and the increase of the official retirement age from 65 to 67.Half a percentage point of the premium reduction came as the result of ending a temporary recovery levy, leaving the excess contribution for recovery at 3 percentage points for 2014.ABP said it based its decision on its funding of 106.2% on 1 November. However, it stressed that the financial position at year-end would be “crucial”.If its coverage ratio is less than the minimum required level of 104.2%, a second rights cut – effective as of 1 April 2014 – will be unavoidable, it warned.However, if the scheme’s funding is sufficiently solid at year-end, the board may decide to undo last April’s rights discount of 0.5%, ABP said.If the coverage ratio is unexpectedly high on 31 December, the board may even look into the possibility of removing the remaining recovery levy or indexation, it said.Opposition politicians have been suspicious of the motives behind the sudden and significant premium reduction at ABP.Barry Madlener of the Freedom Party (PVV) said he suspected the government might have played a role in the decision.“Other pension funds don’t seem to be keen to follow ABP’s example,” he said.Paul Ulenbelt, spokesman for the Socialist Party (SP), echoed the sentiment.“It is very odd that, soon after a 0.5% rights discount, the contribution is decreased by 3.8 percentage points,” he said.“It seems the Cabinet is granting the civil servants a salary rise, without paying them from the national budget.”On its website, the AbvaKabo, the largest public sector union, claimed it achieved a net salary increase of 2% for civil servants as compensation for the reduced pensions accrual.
An undisclosed industry-wide pension fund in the Netherlands has tendered a $250m (€184m) emerging market debt mandate using IPE-Quest.According to QN1393, the fund prefers to invest in a separate account against a custom, blended benchmark that consists of both local and hard currency sovereign bonds.Preferred managers will have an established investment history of investing in both these asset classes, as well as managing a blended mandate and ability in tactical allocation over both categories.To be considered for selection as a manager, the applicant must meet the following minimum qualifications: A track record of at least five years of investing in line with the mandate indicated aboveA minimum of $2.5bn of assets in this strategy under managementA licence to provide financial services in the Netherlands – experience in servicing existing Dutch institutional investors is preferredAsset-level visibility, performance and risk attribution and cost transparencyA fee structure without any performance fee elementsInterested parties should state performance to the end of December 2013.The closing date for applications is 24 February.The IPE.com 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 3465 9330 or email [email protected]
A draft proposal seen by IPE in March previously listed requirements for schemes to produce risk evaluations immediately following any significant change in risk profile.In what will likely be perceived as a swipe against the Dutch and Irish pension systems, the Commission said the changes were necessitated by a “failure of certain funds” during the financial crisis, leading to reductions in benefits for members.“This has shown a need to strengthen governance provision,” the Commission said.In a detailed Q&A dossier, the Commission stressed that its proposals would seek to “ensure the soundness of occupational pensions” by laying down minimum governance standards and requiring all of the sector’s regulators to conduct stress tests.It said the revised directive would remove existing obstacles to cross-border provision so that funds and sponsors alike could “fully reap the benefits of the single market”, and that this would be accomplished by introducing a pension fund transfer procedure to facilitate the shift of funds between member states.“Innovative companies, raging from SMEs to multinationals, would be able to reduce staff costs through economies of scale, risk diversification and innovation,” the dossier added.Additionally, the revised Directive will overhaul investment rules across Europe, seeking to remove nationally legislated investment rules perceived as a barrier to “financing of growth in the real economy”, the Commission said.“The proposal would change the existing provisions on investment restrictions to make sure occupational pension funds remained free to invest in infrastructure [and] unrated loans,” the dossier said, “thus ensuring that investments, in particular with a long-term profile, should not be restricted if the restriction is not justified on prudential grounds.”The overhaul stands alongside Commission pledges to examine whether pension investment can be attracted to infrastructure loans by increasing the level of transparency in the market.In a move likely to be controversial, the Directive retained a requirement seen in several drafts for a uniform pension benefit statement.The Commission insisted the standardised approach would help members compare different schemes and assist pension providers, particularly where these operate cross-border.However, a number of countries – most notably the Netherlands and Denmark – have spent significant time and industry resources developing their own universal statements catered to national needs, which include online portals.The Commission said the statement would be a “first layer in a modern multi-layered approach to communication, with national specifities described more in depth in subsequent layers”. The revised IORP Directive will aim to modernise investment guidelines to foster long-term investment and improve cross-border activity by developing a framework for the transfer of benefits between member states, the European Commission has said.Publishing the long-awaited Directive – excluding the controversial pillar I solvency rules and instead focusing on governance, supervisory and disclosure requirements through pillars II and III of the legislation – the internal market commissioner Michel Barnier said the proposals would “further develop occupational pension funds as key long-term investors”.Barnier previously said the Directive would be “less regulation, more politics”, but he indicated that it would still fall to his successor to consider the introduction of solvency requirements for pension funds.The measures introduced include new governance requirements for internal audit, revised remuneration policies for pension funds to avoid conflicts of interest and a requirement for a self-assessment of fund risk – described as the Risk Evaluation for Pensions.
However, it noted that both companies were improving their policies.The survey argued that 25 Dutch financial institutions were at risk through their stakes in Dutch consultant Arcadis and construction company Boskalis – both working in cooperation with Hyundai – as well as in German building firm Hochtief.Ton Heerts, the FNV’s chairman, said: “It often happens that employers take workers’ passports and force them to work in the full sun for 12 hours.”He said FNV representatives would continue to raise the issue with Dutch pension funds’ boards.PMT and PME – whose assets are both managed by MN – said they would confront Vinci and Hochtief with the FNV report’s conclusions, adding that they had already divested from Hyundai.Meanwhile, Profundo found that APG, the asset manager for the €309bn civil service scheme ABP, has a combined equity stake of €158m in the five companies, while the €142bn healthcare scheme PFZW invested €66m in equity and €59m in corporate bonds.According to Profundo, PFZW responded to its conclusions by starting a dialogue with the companies over their possible role in improving working conditions in Qatar.However, ABP rejected the bureau’s findings, saying a previous, independent survey by ESG specialist Sustainalytics found no evidence of rights violations by the companies in which it invests. BpfBouw, the industry-wide scheme for the building industry, said its own research had produced “little direct proof” that could link specific companies to violations of human rights.Profundo said PGB, the €15bn pension fund for the printing and process industry, had raised its awareness of the issue.It added that the €13bn railways scheme SPF and the €3bn public transport pension fund SPOV had confirmed they would look into violations with the view to starting a possible dialogue, and cited exclusion from investment as a last resort. Several large pension funds in the Netherlands have said they are closely monitoring possible human rights violations and labour conditions by companies involved in the contruction of infrastructure and football facilities for the 2022 World Cup in Qatar. The large metal schemes PMT and PME said they would contact building companies with the view to starting an engagement process, following a survey by Profundo commissioned by union federation FNV.The survey, which focused on investors in five companies, suggested many Dutch pension funds were invested in companies active in Qatar, and thereby ran the risk of becoming embroiled in rights violations.The survey singled out French firm Vinci and South Korean company Hyundai Engineering & Construction for their alleged involvement in the violation of labour conditions, according to “observations by social organisations and unions”.
Insurance Ireland set out a relatively ambitious timescale for launching the reform, suggesting employers begin by contributing 1% of salary – a payment matched by workers – with each group’s contribution rising by one percentage point a year until contributions total 10%.The five-year timeline is more aggressive than in the UK, where minimum contributions will not rise to 8% until 2019, nearly seven years after auto-enrolment was introduced.Australia’s minimum contribution rate only rose to 9.5% in 2014, 20 years after pension saving was made compulsory.However, both union and employer umbrella groups have previously urged the government to forego planned tax cuts and instead divert the money to the proposed pension system, allowing for its introduction to take place without workers seeing a significant decrease in after-tax pay. The report, which set out a replacement rate of at least 50% when combined with the state pension, also called for a focus on “value for money” rather than low cost at the expense of innovative investment.“Excessive pressure on fees and charges may work against the long-term objective of the universal pension to build adequate savings,” the report noted.It added that a simple pension system would be needed to avoid “unnecessary” costs and achieve “cost containment”.In line with the model employed by New Zealand, where new KiwiSaver accounts are assigned to a panel of providers by the revenue office, the report also backed such a ‘carousel’ option.It called on the industry to ensure the administration of the new system is as simple as possible by funding the development of an administration hub, which could help allow pension savings to follow workers to their new employer, removing the risk of stranded savings.It noted that New Zealand and the UK had decided against such a hub approach and suggested the decision had led to increased costs in the long term.“The Hub could also be used by small employers that do not have a pension provider to collect contributions and transmit them to an investment fund chosen by an employee – or allocated by ‘Carousel’ method,” it said. An additional benefit of the ‘carousel’ option would be removing the need for a provider of last resort – in the UK the National Employment Savings Trust (NEST) – which the report said had been launched by the UK government at “considerable” cost.The recommendations come as Ireland’s minority government, in power since February’s election, pledged to push ahead with pension reform.The Irish regulator, the Pensions Authority, is working on reform proposals in parallel to the work undertaken by the URSG, and is set to discuss its ideas at an industry forum attended by minister Leo Varadkar later this week.,WebsitesWe are not responsible for the content of external sitesLink to ‘Universal Pension For Ireland’ report Ireland’s insurance industry has urged its government to learn from New Zealand and Australia when introducing auto-enrolment and backed contributions rising to 10% within five years.In a wide-ranging report, published as the Universal Retirement Savings Group continues to deliberate on the design of any future supplementary pension scheme, Insurance Ireland called on the government to push ahead with the auto-enrolment reform.Kevin Thompson, the industry group’s chief executive, said the report’s proposals could increase pension coverage dramatically – with estimates that approximately 600,000 Irish workers could end up saving as a result of soft compulsion.“Given our demographics and coverage rates, we urgently need a policy approach that maximises participation, achieves simplification of offering and reduces costs,” Thompson said.
German Corporate Governance Commission – Rolf Nonnenmacher will assume the role of chair of the Regierungskommission Deutscher Corporate Governance Kodex with effect from 1 March 2017. The chair of the government commission is appointed by the German federal minister for justice and consumer protection. Nonnenmacher will replace Manfred Gertz, who has been a member of the commission for 11 years, and its chair since 2013. Nonnenmacher is a supervisory board member of German companies Continental, Covestro, and ProSiebenSat.1 Media, and former chair of the managing board of KPMG in Germany. He was a member of the predecessor government corporate governance commission.GAM – The Swiss asset manager has opened its first office in Austria. Based in Vienna, the office demonstrated GAM’s commitment to the region, said Daniel Durrer, head of institutional and fund distribution for continental Europe. Gerald Pistracher has been responsible for GAM’s Austrian operations since 2014, previously operating from the company’s Zurich office.IFRS – The International Financial Reporting Standards Foundation said Sue Lloyd is to take over as chairman of the IFRS Interpretations Committee. The former Goldman Sachs banker, who is also the vice-chair of the International Accounting Standards Board (IASB) is widely viewed as the ‘Mother of IFRS 9’, the IASB’s new financial instruments standard. The Investment Association – The UK’s asset management trade body has named Peter Harrison as its new board chair, replacing Helena Morrissey from 1 May 2017. Harrison is group chief executive of Schroders, the FTSE100-listed asset manager. In addition, Henderson Group chief executive Andrew Formica has been named deputy chair. Both will serve a fixed two-year term.Chris Cummings, CEO at the Investment Association, thanked Morrissey for her “tireless and outstanding contribution to the industry in her time as chair”.European Long-Term Investors Association – The association has launched a High-Level Task Force on Social Infrastructure (HLTF SI), which held its first plenary on Monday, 13 February. The task force is being chaired by Romano Prodi, former president of the European Commission and Italian prime minister. Its vice-chair is Christian Sautter, former French minister of economy, finance and industry. Global Impact Investing Network – Mark Grier, vice chair of American insurer Prudential, has been appointed chair of the GIIN. He replaces Antony Bugg-Levine, who help establish the network in 2009 and has been chair of the board ever since. Among the network’s European members are Dutch pharmacists’ pension fund PMA, the Belgian Investment Company for Developing Countries, and the IKEA Foundation.
The strategy should be benchmarked to one of the following indices: Topix, MSCI Japan, MSCI Japan IMI, Nikkei 225, Nikkei 400, MSCI Japan SRI, or MSCI Japan Small Cap.The objective of the mandate, according to the search criteria, is to “achieve exposure to a diversified, long-only portfolio of Japan equities with the aim of outperforming the net benchmark return after deduction of any costs”.The pension fund expressed a preference for a segregated mandate.Bidders for the mandate must comply with relevant Swiss investment rules.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 direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected] A Swiss pension fund has launched a search for a Japanese equity manager for a CHF100m (€93.1m) active mandate.The search, QN-2283 via IPE Quest, is open until 24 March.Managers interested in bidding must be running at least CHF500m in the asset class already, and have a track record of at least five years.The asset owner is seeking a strategy with a tracking error of 10% at most. Performance gross of fees should be stated to 28 February 2017.
The pension fund expects prospective managers to have a track record of at least five years, but states 10 years is more preferable. The mandate should cover all tranches of CLOs, including senior tranches as well as equity.“The risk of the mandate can be adjusted according to market return/risk opportunities,” the pension fund stated in its IPE Quest submission. The deadline for bids is 22 May 2018 at 5pm UK time.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, 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 European pension fund is seeking a global manager for a $50m (€42m) collateralised loan obligation (CLO) mandate via IPE Quest.According to search QN-2435, the pension fund is looking for an active, opportunistic long-only manager, although it added “some opportunistic shorts could be allowed”.Providers pitching for the mandate must have at least $500m under management in CLOs, with the overall AUM for the company set at the same amount.The benchmark has yet to be decided, and there are no minimum or maximum levels for the tracking error that has been set for this mandate.
Nilsson said: “I very much look forward to working with the trustees and the rest of the team. It is an ambitious and dynamic organisation with a history of successfully using the scale of the fund to find new innovative and forward-looking ways to protect its members’ interests. It is a great privilege to be joining the BT Pension Scheme management.” In May, BTPS’ trustees agreed a £13bn funding plan with its sponsor BT, the FTSE 100-listed telecommunications giant, as part of a 13-year plan to plug its funding shortfall.Other measures taken to cut the pension scheme’s liabilities included closing its defined benefit sections and working with unions to create a hybrid plan.In April, BTPS sold a 60% stake in Hermes Fund Managers, its in-house asset manager, to US firm Federated Investors, raising £246m. The UK’s largest company pension scheme has named Morten Nilsson as its chief executive officer.The £50.7bn (€57.2bn) BT Pension Scheme (BTPS) announced this morning that Nilsson – formerly of Denmark’s ATP and UK master trust NOW: Pensions – would succeed Eileen Haughey , who left earlier this year following the completion of the scheme’s 2017 valuation process.In his new role Nilsson will lead BTPS’ asset and liability management functions, scheme operations, and administration, all of which are predominantly run in-house.Nilsson worked for Danish pension provider ATP for more than 10 years in a variety of roles, including business development director and CEO of its administration arm. In 2010 he became head of international operations, spearheading ATP’s expansion into the UK. He was founding CEO of NOW: Pensions, a UK defined contribution master trust and subsidiary of ATP. He left NOW: Pensions in August last year.
The declining coverage ratio makes it harder for pension funds to avoid benefit cuts, which must be applied when they have been underfunded for five consecutive years. Members of metal industry schemes PME and PMT could face benefit cuts in 2020To PMT and PME, their funding at the end of 2019 will be crucial to avoid cuts. At the end of October, their coverage ratios stood at 102.5% and 101.7%, respectively, compared to the required 104.3%.Although any cuts can be spread out over a 10-year period, they are unconditional and cannot be reversed.PMT said it was already looking at the procedure for reducing payments, adding that a dedicated page on its website would be set up as one of the ways of preparing its participants for such a scenario early next year.PME said it had already been communicating to members the risk of cuts through all its information channels during the past year.“We are trying to find a balance between warning and unnecessarily worrying our participants,” it said.PFZW and ABPABP and healthcare scheme PFZW have more leeway for improvement than the metal industry schemes, as their recovery plans started one year later. This means that any cuts would not have to be implemented before 2021.However, if funding were to suddenly plummet below the “critical coverage” level, reductions would have to be applied sooner. For ABP this level is 89%.Exceeding the minimum required funding level at the end of 2018 would be important to ABP, as any it would reset the recovery plan and take benefit reductions off the table for another five years.ABP has yet to factor in the slowdown in life expectancy improvements, as announced by the Actuarial Society (AG) last September. When it does, this would slightly increase its funding ratio at the end of 2018. The funding levels of the four largest Dutch pension funds dropped significantly in October due to falling equity markets and decreasing interest rates.Figures published by the schemes last week showed that their funding ratios declined by roughly 3 percentage points to approximately 101%, meaning metal industry schemes PMT and PME are closer to imposing benefit cuts in 2020.Last month, pension funds were hit by equity falls – the MSCI World index declined by 6.7% during the month – while interest rates, crucial for discounting liabilities also decreased, with the 30-year swap rate dropping almost 3 basis points to 1.5%.Civil service scheme ABP saw the value of its assets drop by 2.8% to €407bn, while its liabilities rose by 0.1% to €399bn, limiting its chances to recover to the required minimum funding ratio of approximately 105% by the end of the year.