While he acknowledged that the current system could benefit from a “pause” and more regulatory stability, MN’s chief executive stressed that a fundamental update was inevitable.He predicted that the Dutch government would clarify the coming changes to the system within the next two years, and that “drastic measures” would be agreed during the negotiations for a new coalition.Hagendijk said that, due to the effect of low interest rates on funding ratios, people were under the mistaken impression that Dutch pension funds were “dirt poor”. “However, the opposite is true,” he said.Hagendijk also expressed doubts about the new financial assessment framework’s (FTK) ability to stabilise the pensions system.“The reality is that more assets will be hoarded up, resulting in no indexation for years to come,” he said.MN manages assets for almost 2m participants and pensioners affiliated with 35,000 employers in both the Netherlands and the UK.Among its Dutch clients are the large metal schemes PMT and PME.In other news, the €72m Dutch pension fund of security firm G4S has said it will join the €1.1bn industry-wide scheme for private security (PPB).In a joint statement, it cited the increasing requirements for expertise, as well as increased costs. The Dutch pensions system should be a hybrid arrangement consisting of mandatory second-pillar accrual for incomes up to the national average and an additional personal and voluntary build-up of pension rights, according to Ruud Hagendijk, chief executive at the €105bn asset manager MN. Hagendijk – who is to step down from MN after 10 years as chief executive and 18 years at the company – said this set-up would be necessary to counter the effects of ever-increasing life expectancy, which, in his opinion, poses the biggest threat to the current system.Speaking at his company’s New Year meeting this week, he warned that, under the existing system, pensions will be unaffordable even for current generations.He argued that dual pensions accrual would provide certainty for an income after retirement, and would come with the extra option for additional pensions saving.
UK trustees must be part of any discussion surrounding the sale of a sponsor company if it is to succeed, White & Case has urged.The law firm warned that “due consideration” must be paid to any concerns raised by the trustees of defined benefit (DB) funds, noting the increasing perception that a trustee board can “hinder” any deals.In a report drafted with consultancy Barnett Waddingham, it said early engagement was “essential”, as were any meaningful discussions about how a transaction could improve the future prospects of both the company and the fund.“If the investor is looking to make changes to the plan, it must carry out an open and transparent consultation, which should be a genuine consultation and not merely a fait accompli,” it added. The report stressed the importance of the consultation process in light of a High Court case involving changes to the UK’s IBM pension scheme, which sought to close to future accrual but was challenged due to “reasonable expectations” that earlier restructurings would prevent its closure.“It is important for an employer,” the report added, “to appreciate that the IBM case was fact-specific and that, by following the approach suggested above, an employer should not be afraid to push back in negotiations with trustees when the concept of ‘reasonable expectations’ is raised.”Greater transparency is now required when companies bid for rivals, after a 2013 change that required any bid to include mention of the new owner’s intention for any DB fund associated with the firm.The changes were proposed by the Takeover Panel in 2012.
The UK’s main political parties have published their manifestos for the 8 June election – and the future of the country’s state pension is a major battleground.The Conservative Party, led by prime minister Theresa May, is expected to consolidate its position as ruling party by winning a greater majority.It has proposed abandoning the so-called ‘triple lock’ on the state pension, which ensures payments rise in line with earnings or inflation with a minimum annual increase of 2.5%.Instead, the Conservatives want to remove the 2.5% lower limit after 2020. Jeremy Corbyn, leader, Labour PartyMeanwhile the Labour Party – led by Jeremy Corbyn – wants to keep the triple lock for at least the next five years. The Liberal Democrats have also pledged to keep the triple lock in place until at least the next election in 2022.The Scottish National Party (SNP), the leading party in Scotland, Wales’ Plaid Cymru, and the UK Independence Party, have all pledged to maintain the triple lock. Former pensions minister Steve Webb, a Liberal Democrat, was instrumental in bringing in the triple lock as part of the coalition government in 2010. Industry comment – Hugh Nolan, president, Society of Pension Professionals“The triple lock is unsustainable with our ageing population and so it’s good to see the Conservative Party being honest about this uncomfortable truth. “While Labour and the Liberal Democrats want to keep the triple lock for the moment, they might have to change that policy by the time inflation is next below 2.5% so there may not actually be as big a difference between the parties as it seems at a first glance.”The Pensions RegulatorAway from the state pension, another key pensions issue is the power and focus of the Pensions Regulator (TPR).During an enquiry held by the Work and Pensions Committee last year into the collapse of high street store BHS, the cross-party group of politicians called for the regulator to have more scope to step in and protect the interests of members during corporate actions. Theresa May, Conservative Party leaderIn its manifesto, the Conservative Party promised greater powers for TPR to stop pension funds being disadvantaged during mergers or acquisitions and protect them from “unscrupulous business owners”.“We will build on existing powers to give pension schemes and TPR the right to scrutinise, clear with conditions or in extreme cases stop mergers, takeovers or large financial commitments that threaten the solvency of the scheme,” the manifesto stated. It also mentioned “punitive” fines and bans for company directors found to be in breach.Labour’s election document made a similar, but less detailed, pledge to amend rules regarding company takeovers “to ensure that businesses identified as being ‘systemically important’ have a clear plan in place to protect workers and pensioners”.Industry comment – Martin Hunter, principal, Punter Southall“One major concern which has been raised in the past when suggestions have been made about making clearance mandatory is that it is often not feasible to conduct detailed discussions with the trustees of a pension scheme and the Pensions Regulator in advance of a deal, given that transactions often need to be completed very quickly.“Waiting for the Pensions Regulator to decide whether to apply some conditions to the deal could represent the introduction of substantial uncertainty into transactions, potentially damaging UK [companies].”The retirement age and other promisesThe Conservatives have promised to tie increases in the state pension age to life expectancy, with current policy set to raise the retirement age to 67 by 2028. Labour, however, rejected this and vowed to launch another review of the state pension age – despite one having just reported its findings in March.The SNP, Plaid Cymru, and UKIP have all rejected the need for the state pension age to increase past 66. UKIP has proposed a “flexible state pension window” to allow people to retire earlier with lower benefits – or later with higher benefits – if they wish.The Green Party – which currently has just one elected member of parliament – wants to replace the state pension with a “citizens’ pension”. This would “ensure that no pensioners are living in poverty, and would be up-rated annually”, the party said.Labour backed the creation of “large efficient pension funds, which will mean more cash for scheme members and lower costs for employers” – seemingly backing the idea of consolidation that has been gathering momentum in recent months.The Green Party said it would campaign for pension funds to invest more in “long-term sustainability projects” such as renewable energy, and would push for divestment from fossil-fuel-related investments. Tim Farron, leader, Liberal DemocratsThe Liberal Democrats want a review of the pensions tax relief system, with a view to introducing a flat rate of tax relief, rather than one linked to the income tax rate.Both Labour and Plaid Cymru in Wales vowed to review a surplus-sharing arrangement between the government and the Mineworkers’ Pension Scheme. Currently, the government is entitled to take a percentage of any surplus in the defined benefit scheme as calculated every three years. This is opposed by unions.The Conservatives said they would expand the auto-enrolment regime to include self-employed workers. The SNP has made a similar pledge. The party said it would also promote long-term savings products such as the Lifetime Individual Savings Accounts (ISAs), a version of the tax-free savings ISA vehicle.Industry comment – Malcolm McLean, senior consultant, Barnett Waddingham“It is good to see that a Conservative government will continue to support the successful expansion of auto-enrolment to include small employers and the self-employed. In the latter case this is long overdue with all the evidence pointing to a continuing reduction in pension saving by the self-employed despite the fact that since the financial downturn in 2008 their numbers have increased considerably.” According to the Office for National Statistics, the government spent £108bn on state pension payments in the 2014-15 tax year.The Conservatives’ manifesto stated: “When [the triple lock] expires we will introduce a new ‘double lock’, meaning that pensions will rise in line with the earnings that pay for them, or in line with inflation – whichever is highest.”
The increased sustainable investment activity mainly fed into increased inflows to sustainable investment funds (+59%), while the assets in directly awarded mandates gained 2%.Many pension funds only started to use sustainability strategies last year, while others have only just started talking about doing so.Overall, the FNG survey found most asset owners were using exclusion criteria, norm-based screenings, and engagement in their sustainability strategies.One of the main drivers of the increased activity in sustainable investments was the establishment of the SVVK-ASIR platform in 2015 by seven major Swiss asset owners – many of which chose to join the FNG survey this year for the first time. Founding member Suva, the accident insurance fund, was the only one of the seven to already take part in 2016.The FNG report also gave an update on the SVVK-ASIR platform, confirming there was “a lot of interest” from pension funds wanting to join. The platform’s role includes developing strategies for its members, discussing exclusion lists, and helping with engagement.Asset owner respondents to the survey included heavyweights such as the public pension fund Publica, Pensionskasse Post, BVK, and the pension fund for the city of Zurich.French-speaking asset owners included the pension fund for the Red Cross and Red Crescent, and Geneva public pension fund Caisse de prévoyance de l’État de Genève (CPEG).See the survey in English here. The value of sustainable investments held by Swiss asset owners almost doubled in the past year, according to a survey by Forum Nachhaltige Geldanlagen (FNG).FNG – the association for sustainable investments in Germany, Switzerland, and Austria – reported that sustainable investments grew to CHF104bn (€95.8bn) as of year-end 2016, compared to CHF55bn a year earlier.The increase was in part due to Swiss asset owners being more willing to open up about their sustainable investment strategies: The number of asset owners taking part in the annual survey of the Swiss sustainability investment market rose from four to 14.FNG has been looking into sustainable investments in the region since 2005. However, it was only last year that Swiss asset owners began to take part in the survey.
The pension scheme for De La Rue, a leading producer of banknotes and security products, will switch its indexation in April in an effort to tackle its funding deficit.In a statement to the stock market this morning, the company said the trustee board of its £974.5m (€1.1bn) defined benefit (DB) scheme had decided to shift its inflation measure from the retail prices index to the consumer prices index (CPI). The latter is usually the lower measure.The move is expected to cut the scheme’s deficit by roughly £70m, the company said. At the end of March this year, the scheme had a £230m shortfall, according to De La Rue’s annual report.“Following a request from the company and a detailed legal review, the trustee concluded that CPI is currently a more suitable index for the calculation of annual increases in the scheme,” De La Rue said. “CPI is used by the UK government for public sector pensions and is increasingly being used by businesses across the UK.” Under a funding plan struck last year, De La Rue has agreed to pay more than £238m into the scheme by 2028.The BT Pension Scheme and Dairy Crest’s pension fund have both made similar moves in recent months. The UK government has voiced tentative support for allowing more schemes to make such a decision, and is expected to flesh out the idea in a white paper on DB reform in the next few months.Politicians call for abolition of ‘clawback’ optionSeven members of the Labour party have backed an early-day motion calling for the government to abolish so-called “clawback” options for some DB schemes.Members of the Midland Bank Pension Scheme – now owned by HSBC – have been campaigning for several years for the bank to scrap its clawback policy, which allows members’ benefits to be reduced by the amount they are expected to get from the state pension. Campaigners have claimed it has disproportionately affected lower earners.The early-day motion – an action used by politicians to publicise issues in the UK’s lower house of parliament – stated that the MPs were concerned that “many staff were denied the opportunity to make additional financial plans for their retirement”. The motion also said that other banks have either chosen not to apply the clawback or have withdrawn it as an option for their schemes.Regulator aims to improve advice for British Steel membersThe Financial Conduct Authority (FCA) is visiting Port Talbot in Wales in an effort to help members of the British Steel Pension Scheme avoid frauds and scams.With a number of the £15bn scheme’s 125,000 members considering transferring their benefits out of the fund – rather than to the Pension Protection Fund or the new British Steel scheme – reports have emerged of poor advice practices and confusion over what options are available.Giving evidence to the Work and Pensions Select Committee last week, FCA director of strategy and competition Christopher Woolard said the regulator was “visiting advisers in the Swansea area and the Port Talbot area, reminding them of their requirements”.Nicola Parish, executive director of frontline regulation at the Pensions Regulator, told MPs: “We are in close contact with the [British Steel] trustees and ensuring that they are making sure that all of the information is getting out to members, to help those members spot and avoid a scam.”TPT appoints RedingtonTPT Retirement Solutions, a multi-employer DB scheme and defined contribution master trust provider, has appointed Redington as its independent investment consultant. TPT manages more than £9bn of assets and caters for 290,000 members.Cliff Speed, the provider’s CIO, said: “We believe that the strong intellectual foundations on which Redington’s strategic advisory services are built will support TPT’s ability to continue delivering a high-quality investment service for all of our schemes and the underlying members.”
Cambridge University’s £3bn (€3.4bn) endowment fund (CUEF) posted an 18.8% investment return for the 12 months to 30 June 2017 – almost three times its return for the previous 12-month period.The fund, managed by the university’s investment office, gained 6.3% in the 12 months to 30 June 2016. Over five years to the end of June last year, it has generated an annualised return of 13.8%.In his report, Professor Duncan Maskell, senior pro-vice-chancellor at Cambridge University, said: “Despite a steady fall in broad market volatility, an increase in the dispersion of individual stock returns in the second half of the year favoured active management, and the CUEF benefited from the outperformance of its equity and hedge fund managers compared to their benchmarks.”He added: “There were strong performances in private investments and direct property assets. Over the year the overall conditions were benign, continuing to favour equities over other asset classes, but also caused few investments to be objectively cheap relative to their histories.” At end-June 2017, CUEF’s portfolio was invested 59% in public equities, 13% in private investments, and 12% each in absolute return investments and real assets.Some long-term investments were held outside CUEF, including certain investment properties in Cambridge and equity investments in spin-out companies overseen by the university’s technology transfer company Cambridge Enterprise.CUEF finances university posts and activities, with several colleges also as investors.Oxford ups public and private equity exposures Meanwhile, Oxford University’s Endowment Fund (OEF) reported a 9.2% investment return for the 2017 calendar year.This compared with a 2016 return of 16.4%, which was due in part to a flexible currency strategy benefited from sterling’s movements after the EU referendum in June 2016.The £2.6bn pooled fund – run on behalf of Oxford University and a number of individual colleges – has returned 11.7% a year on average over the past five years.OEF said the most significant change in 2017 was the increase in exposure to public equity at the expense of cash. It invested an additional 6.3% of its portfolio into listed equity managers in early 2017, finishing the year an allocation of 53.2%.OEF’s public equity managers gained 14.5% annualised over the past five years.In 2017, OEF’s bias towards sectors with the highest potential returns led to considerable investment in consumer franchises in both developed and developing markets, the fund reported.However, it said it had seen less opportunity for growth in more mature, capital intensive and heavily regulated sectors such as energy.At 31 December 2017, the portfolio had a 1.4% exposure to energy exploration and extraction with a further 1.3% in energy-related sectors – much lower than energy’s natural weighting in equity markets.During 2017, OEF continued to commit to private equity – 23.6% of the portfolio at end-2017 – concentrating on growth equity, niche sector strategies and venture investments, and backing some new groups raising their first funds in the US, UK and China. The private equity portfolio returned 18.6% annualised over the past five years.The endowment’s credit exposure – 8.6% of the portfolio – includes investments in direct lending and complex special situation strategies in the US, Europe and Asia.Within its property holdings – 5.9% of the total – OEF said it had built a solid portfolio of UK commercial and residential properties to complement its holdings in strategic land and rural estates. Together with the £500m Oxford Capital Fund, which provides expendable capital over the medium term, typically for building projects, OEF is run by Oxford University Endowment Management, a wholly-owned subsidiary of the university. OEF’s investment objective is to grow its capital by an average of 5% a year in real terms, at a lower volatility than experienced by investing solely in the public equity markets.
Lesley-Ann Morgan, SchrodersSchroders – Lesley-Ann Morgan has been appointed head of multi-asset strategy at the UK-listed asset manager, effective today.In the newly-created role, Morgan will be responsible for Schroders’ global multi-asset client relationships and “strategic partnerships”, and will work alongside global head of multi-asset investments Johanna Kyrklund.Morgan joined Schroders in 2011 from Willis Towers Watson and was most recently the asset manager’s global head of retirement and defined contribution. This role will be taken on by Neil Walton, head of investment solutions.Robeco – The €167bn asset manager has hired Ed Collinge as global head of insurance strategy, a newly created role. He joins from Invesco where he was in charge of the company’s European institutional insurance team.Collinge will work with Robeco’s teams based around the world to develop investment strategies for the company’s insurance clients.Before joining Invesco, Collinge led the global insurance solutions team at JP Morgan Asset Management, and he has held senior insurance investment roles at Legal & General and Lehman Brothers.AMX – Willis Towers Watson’s asset management platform has hired Aaron Overy as head of client and manager development. He joins from Northern Trust where he was senior vice president of asset management.The company, which offers ready-built back office systems and services to hedge funds and boutique managers, has also hired Celia Larkin from Standard Life Aberdeen as manager development director, and Elaine Russell from Mercer as senior client service manager.AMX was launched two years ago and has nearly $7bn (€6.2bn) of assets, according to the company.MEAG Munich Ergo – The German asset manager has appointed Wolfgang Wente as a managing director with responsibility for real estate. He will join the firm on 1 March 2019.Wente has worked at MEAG since 2006, and previously ran money for both insurance group Munich Re and for Ergo Trust, both of which combined to form the €251bn asset manager MEAG.Avida International – Karin Roeloffs has started work at the asset management consultancy group as an associate adviser.She was previously head of Mercer’s Netherlands team, a position she held for seven years. She has also worked at APG Asset Management, where she led the team of client portfolio managers, and at ABN Amro, where she held various positions in the investment banking and asset management parts of the business.Investment 20/20 – The Investment Association, the trade body for UK asset managers, has expanded the scope of its Investment20/20 project aimed at attracting a more diverse range of young people into the sector.The project has now signed up 21 universities across England, many of which it said were at the top of a ranking for social inclusion. SEI, Standard Life Aberdeen, APG, Insticube, SSGA, Morningstar, Dutch Pensions Ombudsman, Russell Investments, Schroders, Robeco, AMX, MEAG, Avida, Investment20/20SEI – Patrick Disney is to retire from the fiduicary management specialist at the end of March 2019 after nearly 20 years at SEI. Ian Love will take over Disney’s role as head of institutional for Europe, the Middle East and Africa (EMEA). Disney will continue to work in an advisory role for SEI, the company said.Disney joined the company in 1999 from Morgan Grenfell, part of Deutsche Asset Management. He helped set up SEI’s London office and establish the company in the UK’s fiduciary and master trust markets.Love has worked for SEI for 15 years and directly with Disney for six years in the institutional business. SEI has also appointed Charles Marandu as head of client strategy for EMEA and Asia, succeeding Nigel Down who is also retiring.Standard Life Aberdeen – The parent company to Aberdeen Standard Investments has named Sir Douglas Flint as a non-executive director and its next chairman. Sir Douglas joins the board effective today, and will succeed Sir Gerry Grimstone as chairman on 1 January.Sir Douglas was group chairman of HSBC Holdings from 2010 to 2017, having previously been the bank’s group finance director and chief financial officer. He chaired the Institute of International Finance for four years and currently chairs the board of technology company IP Group. He is also a special envoy to China on behlaf of the UK treasury department, focusing on China’s ‘Belt and Road’ initiative.Sir Gerry has chaired Standard Life Aberdeen – and Standard Life before its merger last year – for 11 years. He oversaw the merger with Aberdeen Asset Management and its shift from an insurance company to one of Europe’s biggest investment companies.APG – The €485bn asset manager and pensions provider APG has appointed Francine van Dierendonck as the fifth member of its executive board as of 1 November.She will be responsible for member and employer services, a new position created to support the expected changes to the role of members and employers in an expected new pensions system. Key elements of the new portfolio include providing information, advice and support, and she will also be responsible for innovation and ventures.Van Dierendonck joins from webshop Xenos, where she was chief executive for the past two years. She started her career as a strategy consultant at Boston Consulting, and has worked as marketing director at eBay, senior director for digital strategy at Philips, and chief commercial officer and chief investment officer at Etam Group.Insticube – Asset manager research platform Insticube has hired Jan Kehrbaum as head of technology and product development. He joined the company last month, and will oversee the development of its databases for managers for use by asset owner subscribers.Kehrbaum spent several years working on quantitative trading studies, and later was in charge of product development in the capital markets divisions of a number of banks and investment boutiques. He also worked for more than 15 years as a partner at consulting groups KPMG and EY, advising asset managers, banks and insurers.Insticube is a pan-European research platform for asset owners to rate and assess their asset managers, and is supported by IPE.In addition, Insticube has hired Chelsie Doyle from investment consultant bfinance as head of business development for the UK and Ireland. She will be the Munich-headquartered company’s first UK-based employee.State Street Global Advisors – SSGA has hired Jeremy Rideau as head of liability-driven investments (LDI) for its fixed income, cash and currency team in EMEA. He was previously head of solutions fund management at Legal & General Investment Management.In this newly created role, Rideau will be responsible for managing LDI portfolios and developing new strategies, SSGA said.Morningstar – The investment research house has appointed Mark Roomans as head of EMEA. He is currently CEO for Morningstar in the UK, and has worked for the company since moving from JP Morgan Asset Management in 2001.During his 17-year career at Morningstar Roomans has held a number of senior positions, including CEO of Morningstar in Australia, Spain and Switzerland at various points, and chief operating officer of Morningstar Europe. He also helped set up the company’s offices in several countries in South America.Daniel Dunn, the company’s chief revenue officer, said Morningstar wanted to “link our regional markets with our global functions and business lines” as it plotted a global growth strategy. The research firm bought 40% of ESG data provider Sustainalytics last year, and the start of October it struck an agreement with consultancy group Mercer to create a manager research platform. Dutch Pensions Ombudsman – The Dutch Social and Economic Council (SER) has appointed Henriëtte de Lange as the new ombudsman for pensions, to act as an independent intermediator for disputes about the implementation of pension funds’ rule books. She will succeed Piet Keizer, who has been in the job since 2003.De Lange’s powers will be extended, allowing her to also name pension funds as well as conducting independent investigations. Her appointment is for a five-year period, with the option of an extension for another five years. The ombudsman handles 600 complaints annually on average.Currently, De Lange is chair of the €138m pension fund HaskoningDHV as well as a member of the supervisory boards of PDN, the €7bn scheme of chemicals firm DSM, and the €537m sector pension fund for the wood-processing sector. She will step down from these positions later this year.In 2004, De Lange was one of the founders of Stichting Pensioenkijker, a foundation aimed at making pensions comprehensible to consumers, and remained its spokesperson for seven years. The Dutch Pensions Federation praised De Lange for her “great ability to empathise with pension fund participants, to translate complicated pension issues into clear communication as well as to solve problems”.Russell Investments – The US asset management giant has named Jennifer McPeek as chief financial officer, the fourth senior management addition Russell has made this year.McPeek was previously CFO and chief operating and strategy officer at Janus Henderson Investors in the US. She joined Janus in 2009 from ING where she was head of strategic planning.Over the summer, Russell brought in Rick Smirl as COO, Bob Hostetter as head of product strategy and development, and Gene Raffone as chief human resources officer.
The Swiss regulator for second pillar pensions, the Oberaufsichtskommission (OAK), is facing major criticism from pension fund association Asip over planned reforms.The lobby group has this week published statements related to a number of consultations on draft legislation currently being discussed in Switzerland.Among the draft proposals is a revision of the way the technical interest rate – the rate used to determine the return on capital for pensioners in the second pillar – is calculated.In the autumn, a group of experts published a proposal on how to determine a guideline maximum rate. Actuaries at each Pensionskasse would then have to decide on the most suitable rate for the individual pension plan. The OAK has proposed to make this maximum technical interest rate binding for all Pensionskassen.In its statement on the draft legislation, Asip said that the OAK’s proposal would mean “there will effectively be no more flexibility” for actuaries.The pension fund association also noted the proposed transition phase of five years was “disproportionate”, and that it favoured the seven-year-period suggested by the expert group.Asip called on the OAK to wait for a vote on the new proposals by SKPE/CSEP, a group of Swiss pensions actuaries, to take place on 25 April 2019.“It is not the OAK’s remit to issue a decree telling the pension fund experts which recommendations to make to Pensionskassen,” Asip said.Risk control rules rile AsipThe pension fund association also criticised a proposal by the supervisor for a decree on new risk control regulation for collective pension plans.“With this decree the OAK is overstepping its authority,” Asip stated, echoing criticism already voiced by various collective pension plans.Asip criticised the additional effort and resources it would take for collective pension schemes to gather and report all the information demanded by the supervisor.It also questioned the OAK’s legal competence in this matter, as there was “no legal basis” for the regulator to issue general decrees on governance, transparency or decision making structures within a Pensionskasse, Asip argued.Ever since the creation of a single supervisory body for the second pillar was first discussed almost a decade ago, some commentators have voiced fears of increased regulation and possible superfluous decrees being issued.Asset allocation rule changesIn September, a revision of the law on Swiss collective pension investment foundations – Anlagestiftungen or fondations d’investissement – was proposed to give them more leeway in asset allocation and address some governance issues. In response to the related consultation, Asip welcomed the changes but emphasised that “the OAK does not need any further authority” over the vehicles, which are frequently used by Pensionskassen. All of Asip’s statements (only in German) can be downloaded on its website.
Sir Steve Webb“One of the most striking features of the new statement is the tougher language around companies paying large dividends when their pension scheme is in significant deficit. Pension scheme members are understandably concerned when their pension scheme is well short of the money needed to pay their pensions if they see large amounts of money going out of the business in dividends. While there is nothing wrong in companies paying dividends, it is good to see the regulator putting greater pressure on firms to make sure that sorting out the hole in the pension scheme gets the attention it deserves.”– Sir Steve Webb, director of policy at Royal London TPR has been scrutinising dividend payments and scheme funding arrangements as part of its ‘clearer, quicker, tougher’ approach to regulation, rolled out last year after severe criticism from politicians in the wake of the high-profile collapses of BHS and Carillion.The regulator also urged schemes to set out more specific long-term goals for improving funding and securing member benefits – one of the main elements of the government’s reform proposals, currently under consultation.David Fairs, TPR’s executive director of regulatory policy, analysis and advice, said: “In order to support schemes we are setting out what we expect trustees and sponsoring employers to consider on funding, investment and covenant.“The annual funding statement will help them think about the risks facing their scheme, to consider what levels of risk are acceptable and how to mitigate risks where appropriate.“Trustees have fed back to us that they find this clarity helpful in negotiating good outcomes for members and avoiding interventions and action from TPR.“We have taken a tough stance on schemes that have not been treated fairly and will continue this approach where members’ benefits are under pressure.”‘Covenant leakage’TPR said it was “concerned” about the imbalance between payments to company pension schemes and dividends paid to shareholders, as well as other forms of “covenant leakage”.“Recent corporate failures have highlighted the risk of long recovery plans while payments to shareholders are excessive relative to deficit recovery contributions,” the regulator said.TPR has already contacted a number of schemes that were at risk of losing out relative to shareholders, quizzing them on funding approaches and negotiations with sponsoring employers. It indicated that it would continue to make such interventions at a greater number of schemes “where we do not believe that their valuations reflect an equitable position relative to other stakeholders”.The regulator also vowed to engage with a number of schemes this year if recovery periods were considered to be “unacceptably long”, and warned trustee boards to expect communications in the coming months.“While some trustees may not consider their current recovery plan to be long, we will be looking at both the maturity and the covenant of the employer in forming a view on what we consider to be an acceptable recovery plan length,” TPR said.Consultancy firm Hymans Robertson estimated that one in five FTSE 350 companies with DB schemes were at risk of intervention from TPR.The full annual funding statement is available on the regulator’s website.The industry responds Dan Mikulskis, LCP“For weaker sponsors, there is always going to be a very difficult balance to be struck between the interests of pensioners and the ongoing solvency of the company. It is a hard area to regulate but we believe it is important to recognise that in many cases pension scheme trustees are a key stakeholder in the ongoing company, and should be recognised as such – the expectations suggested by the regulator around dividend payments help to achieve this.”– Dan Mikulskis, partner at LCP“Given the desire to strengthen DB pensions funding, the regulator’s robust stance makes perfect sense. It is challenging employers to fund pension schemes ahead of paying shareholders. But it will create challenges for business, and some employers may be surprised by how much the ground is shifting. Many companies will need to give a higher priority to pensions funding and risk management than they do today and some will come under pressure to either increase pension contributions or cut dividends.”– Mike Smedley, pensions partner at KPMG“Businesses with pension scheme valuations this year will be under considerable pressure to pay higher contributions to their pension scheme. This will be incredibly unwelcome for those who are wrestling with tough trading conditions or Brexit-related uncertainty. If businesses are struggling, TPR will be highly likely to intervene to put the interests of pensioners ahead of investors… All trustees are going to have to work harder to demonstrate to TPR that the risks they are running can be supported by the business their scheme relies on.”– Patrick Bloomfield, partner at Hymans Robertson Jenny Condron, Association of Consulting Actuaries“Sponsors, trustees and their advisers need to be assured that the changing approach will not herald an overly inflexible one and that the regulator will remain proportionate in using its powers, particularly those situations where employers are engaged in corporate restructuring – often with the specific aim of enhancing the organisation’s future prospects and therefore the covenant supporting the pension scheme.”– Jenny Condron, chair of the Association of Consulting Actuaries The UK’s Pensions Regulator (TPR) is to visit more defined benefit (DB) schemes and make more interventions as part of a “robust” new approach to supervising the sector.In its annual funding statement, published this morning, TPR stated that it would take a much firmer stance on the ratio of dividend payments to DB scheme contributions.Weaker employers should pay more into their schemes than to shareholders, TPR said, while companies that were unable to support their schemes should not be paying dividends at all.If a company paid dividends greater than the amount paid to its pension scheme, the regulator said it would “expect a strong funding target” and a short deficit recovery period.
The European Commission today adopted a package of measures intended to help EU capital markets support the bloc’s recovery from the coronavirus crisis, including the launch of a consultation on MiFID II changes aimed at increasing research coverage of small and medium-sized enterprises (SMEs) and bonds.Overall the package aims to encourage greater investment in the economy, allow for the rapid recapitalisation of companies, and increase banks’ capacity to finance the recovery.It comprises “targeted adjustments” to MiFID II, the Prospectus Regulation and securitisation rules.The plan to increase the research coverage regime for SMEs and bonds is introduced by way of the launch of a consultation on amendments to a MiFID II delegated act. “The exceptional circumstances resulting from the coronavirus pandemic have instilled a sense of urgency into the debate on investment analysts’ research,” said the Commission. “Increasing the visibility of European companies, in particular SMEs, to investors will promote more investment for the economic recovery.”Investor groups like PensionsEurope have supported exempting research on SMEs from fee unbundling rules in order to foster investment opportunities in this sector of the economy.According to BVI, the German fund management association, the Commission had proposed an optional approach allowing asset managers to choose whether to continue to pay for research directly or to bundle research and transaction costs for SME equities, as was the case before MiFID II.It said it supported this in light of “the sharp reduction in the supply of research on SMEs” but that “the planned limit of €1bn for the market capitalisation of SMEs seems too low.”The association also said it “very much” supported the proposal for a broad-based exemption for the payment of fixed income research, as asset managers currently paid for this type of research twice, once within the spread and another time directly.The Commission today also proposed MiFID II amendments to free up resources for investment firms and professional investors, and to help develop euro-denominated energy markets. BVI suggested the envisaged exemptions on cost information for professional investors could go further.The package of measures also included a type of short-form prospectus to facilitate capital raising in the public markets and changes to securitisation rules to support SME lending and the management of non-performing loans.Valdis Dombrovskis, Commission executive vice president, said: “We are continuing with our efforts to help EU citizens and businesses during the coronavirus crisis and the subsequent recovery.“Capital markets are vital to the recovery, because public financing alone will not be enough to get our economies back on track.”The next step is for the European Parliament and the Council to position themselves with regard to the legislative proposals from the Commission. The consultation on the MiFID II delegated directive is open until 4 September.The Commission is due to present a wider Capital Markets Union action plan in September, following on from recommendations developed by an expert group.Looking for IPE’s latest magazine? Read the digital edition here.
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