New FTK to increase Dutch contributions by 14% – Mercer

first_imgPension contributions in the Netherlands will increase by 14% under the new financial assessment framework (FTK), despite the Dutch Cabinet’s proposal to lower tax-facilitated accrual to 1.75%, according to Mercer’s estimates.The consultancy ran the numbers at the request of IPE sister publication IPNederlands, Erik van den Doel, principal at Mercer, and confirmed the previous contribution-increase estimates of civil service scheme ABP.According to Van den Doel, a premium increase of 14% is a fair estimate of the total increase as a result of adopting a new pensions contract under real terms.“The savings from a reduction of tax-friendly pensions accrual, as proposed by the Cabinet, is unlikely to be delivered by the pension funds,” he said. Van den Doel said he based his calculations on “prudent” assumptions, such as the premise that pension funds would not change their ‘franchise’, or the amount of salary exempt from pensions accrual.If pension funds do lower the franchise, contributions would need to increase even further, he said.Van den Doel conceded, however, that his calculations were based on rough estimates and liable to change in either direction.To date, the Dutch Cabinet has stuck with the savings estimates presented in the coalition agreement – €1.4bn in 2015, €2.4bn in 2016 and €2.9bn in 2016.Earlier this month, Frans Weekers, state secretary for the Treasury, told the Senate the effects of the new FTK had been factored into the government’s savings estimates, citing data from the Bureau for Economic policy Analysis (CPB) and the regulator (DNB).CPB researcher Marcel Lever declined to specify which elements of the FTK it included in its savings calculations, pointing out that no decision had been taken on the FTK, and that it was therefore “premature” to address the issue.He claimed there was a risk that the files of the FTK and tax accrual were “getting mixed up”.The DNB also declined to clarify its figures.However, according to IPNederland, there is a significant discrepancy in its calculations.In a bulletin in April, the regulator suggested the expected overall savings would come to €9bn, whereas prime minister Mark Rutte said in July that the DNB expected the new FTK to lead to a premium reduction of €6bn.IPNederland’s estimates show the pension savings over 2015, 2016 and 2017 would be €3.5bn less than suggested.Earlier, the Treasury conceded that the new FTK would increase costs.However, the Finance Ministry, recently fielding questions in Parliament, largely attributed the difference to an income tax reduction following lower pension benefits.It added that, “based on national statistics, the actual contributions and benefits during 2012 turned out to be different from the assumptions”.The savings, as factored in by the Cabinet, remains intact, according to the Treasury.In July, Jetta Klijnsma, state secretary at the Social Affairs Ministry, said the Cabinet would look “thoroughly” at the issue during the FTK consultation.“Following the outcome of the consultation, the Cabinet will consider whether the premium system is necessary in the rough draft legislation,” she said.“When the bill is tabled, the expected premium effects will be made clear.”State secretary Weekers, in his answers to the Senate, suggested the effects had been factored in.last_img read more

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ERAFP calls on French regulators to allow infrastructure investment

first_imgThe €14bn pension fund for French civil servants (ERAFP) has asked local regulators to soften rules towards alternative asset classes, allowing it to make its first investments in infrastructure.Speaking at the first IPE/Sterling Capital Partners infrastructure conference in London, Jean-Michel Horrenberger, deputy chief executive at ERAFP, said the fund was currently “not allowed by law” to invest in asset classes such as infrastructure.He added that the pension fund, currently more than 70% invested in bonds, cannot invest in open-ended mutual funds, is restricted when investing in non-listed securities and must tender mandates publicly.Horrenberger said ERAFP’s board of directors asked French regulators at the beginning of this year to soften the regulatory constraints to allow the scheme to invest in alternative asset classes. According to him, ERAFP expects local regulators to make their final decision and soften the rules in the coming months, which would enable the fund to proceed with its first investments in infrastructure.   In 2011, the French pension fund was already granted the authorisation to invest in real estate and timber assets.ERAFP currently invests 74% of its portfolio in fixed income, 23.5% in equities and 1.5% in real estate.last_img read more

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​PensionsEurope warns of ‘significant burden’ of collateral regulation

first_imgIntroducing concentration limits on the types of assets counterparties may accept as collateral during derivatives trades could result in significant burdens to pension funds and increase trading costs, PensionsEurope has said.The umbrella group for Europe’s pension associations also warned there would be disproportionate costs if the sector was forced to post initial margin, pointing to individual funds’ inability to access low-cost liquidity, compared with the banking sector’s access to central bank credit lines.The association was responding to a consultation by the European supervisory authorities – comprising the European Insurance and Occupational Pensions Authority, the securities and markets authority ESMA and the banking supervisor EBA – on draft regulatory technical standards (RTS) for over the counter derivatives not cleared by a central counterparty, an area addressed in the European Market Infrastructure Regulation (EMIR). IORPs enjoy a temporary exemption from EMIR.”Requiring IORPs and their asset managers to post initial margin, as opposed to the current practice [of no initial margin], would create significant costs for IORPS and their beneficiaries and would therefore be against the rationale of such exemption since it would render it completely otiose,” the response said. The authorities further propose caps on the amount of collateral they can accept from any one issuer.This could be problematic for pension funds, as they are likely to use their high-rated government bond holdings as collateral, and those portfolios tend to be concentrated in their domestic government’s bonds or in the largest, most liquid markets, such as UK Gilts, German Bunds or Dutch government bonds.PensionsEurope insisted any concentration limits would result in pension funds needing to sell assets to post collateral for trades. The consultation also raised concerns counterparties would be unable to close their exposure if they were forced to liquidate “substantial amounts” of single securities in times of market uncertainty.  “Importantly, concentration limits on government bonds will also introduce unwanted valuation issues for derivatives,” it said.“Indeed, when high-grade government bonds are posted as collateral, the valuation of the accompanying derivatives is straightforward.“The requirement of diversification in government bonds as collateral will lead to difficulties in valuation of derivatives and therefore disturb secondary markets.“This is to the disadvantage of the IORPs that rely on efficient markets in derivative instruments.”The organisation also warned that capping the government bond use for collateral could adversely impact a country’s ability to finance itself, and said it was therefore strongly in favour of dropping any cap consideration.Instead, it suggested that as a compromise the European supervisors should consider limiting the percentage of a country’s overall issuance that can be used as collateral.It concluded that the “very low” counterparty risk of pension funds, reliant on derivatives to decrease investment risk, needed to be addressed further by European supervisors.It stressed that it would increase costs for pension funds and negatively affect their ability to provide retirement benefits.“Moreover, IORPs and their dedicated asset managers would have less available resources to capitalise long-term investments in Europe,” it said.The European supervisors have promised to finalise the RTS by the end of 2014,WebsitesWe are not responsible for the content of external sitesLink to PensionsEurope consultation responseLink to consultation by European regulators on derivatives tradeslast_img read more

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Dutch decision to cut UFR costs Philips scheme €16m [amended]

first_imgThe €17.8bn Philips Pensioenfonds has claimed the new ultimate forward rate (UFR), lowered recently by the Dutch government to a more “realistic” level, has set the pension fund back by €16m annually.In a clarification of its second-quarter report, the pension fund said it also had to raise its fixed contribution of 24% to 26.6% to remain on target for the annual accrual rate of 1.85%.At the start of 2014, when the pension fund switched to collective defined contribution arrangements, the company and its workers agreed a fixed premium for a five-year period.The scheme said the premium gap had to be filled from its dedicated contribution reserve, “under pressure” even before the government reduced the UFR. The pension fund already drew €8m from its dedicated premium reserves due to the scheme’s financial position.In July, the Dutch regulator lowered the UFR – part of the discount rate for liabilities – from 4.2% to 3.3% with immediate effect. The measure lead to a funding drop of 2 percentage points to 112% of the scheme’s coverage, drawn from market rates.As of the end of the second quarter, the Philips Pensioenfonds’s official policy funding – the average coverage of the previous 12 months, and now the criterion for indexation and rights cuts – stood at 114%.Meanwhile, over the last quarter, the pension fund reported an overall 7% loss on investments and a 1.9% loss on its combined interest and inflation hedge.The scheme said long-duration government bonds were hit hardest, losing 16%.It added that it incurred a “limited loss” on its equity holdings and that it made a profit on its real estate portfolio.In other news, Vervoer, the €19.6bn industry-wide pension fund for private road transport, posted a quarterly return of -14.6%, lowering its first-half return to -1.1%.The pension fund cited rising interest rates combined with falling equity markets.Over the course of the second quarter, the scheme’s actual funding fell to 108.3% and its policy funding to 110%.Vervoer follows a “defensive” investment policy, with a 58.5% allocation to fixed income and a 30.3% allocation to equities. The transport scheme did not provide returns for individual asset classes.last_img read more

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Mylan bows to pension fund pressure on use of drug in executions

first_imgA pharmaceutical company is to prevent one of its drugs from being used in lethal injections after pressure from the Dutch government and pension managers ABP and PGGM.Mylan said it would contractually prevent its distributors from selling the drug rocuronium bromide for use in lethal injections.In a statement, the company did not directly credit any one party with its decision, which followed claims its product was being acquired by a US department of corrections. The company said it never directly distributed the muscle relaxant to prisons and did not condone third-party distributors selling it for use on anything “outside of the approved labelling”. Mylan said it contacted the US correctional facility for the state of Virginia, asking for assurances the drug was not being used for anything other than its dedicated purpose, but received no reply.It then went on to demand the facility in Virginia return its product, ahead of an execution scheduled for 1 October, the state’s first in three years.“It is important to note rocuronium bromide is not approved for, labelled for or marketed for use in lethal injections,” the company said.“Mylan takes this matter seriously and will continue to work with distributors and other interested parties to ensure its products are used appropriately.”Peter Borgdorff, director of Dutch healthcare scheme PFZW, applauded Mylan for listening to the concerns of its shareholders.“We are convinced this step will have a positive contribution to the reputation of a company that has an important contribution to medical care in the Netherlands and the rest of the world,” he said. Eloy Lindeijer, chief investment manager at PFZW’s asset manager PGGM, said its approach to responsible investment meant it occasionally engaged in “intensive and at times elaborate” discussions, and cited Mylan’s decision as a successful example of its ESG policy.Fellow pension manager ABP earlier this year announced that it sold its stake in the company after unsuccessful talks with Mylan.Its decision followed a report by UK human rights charity Reprieve that purported to show the Virginia correctional system stocking the drug, a report that led to the Dutch Ministry of Foreign Affairs engaging with the pharmaceutical.ABP has previously engaged with pharmaceutical company Hospira over one of the company’s products being used in lethal injections, efforts that were also prompted by Reprieve.last_img read more

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European returns: Strong ATP performance bucks downward trend

first_imgInvestment returns at many European pension funds came crashing down in 2015 compared with the previous year, with Denmark’s ATP providing a rare exception, posting a 17.2% return for 2015.The €94bn pension fund easily outperformed the rest of the European pension fund sector based on results announced so far. Its full-year return for 2014 was 6.5%.The 17.2% return for 2015 came in part thanks to ATP’s Danish equity holdings, which generated 48% – marking a third “stellar” year in Danish equities for the fund, according to chief executive Carsten Stendevad.Inflation and credit also produced positive returns for ATP in 2015, although the other two risk classes – interest rates and commodities – made losses. DenmarkATP17.294 There were large differences between the performance of listed and unlisted asset classes at the five largest Dutch funds.Property, infrastructure and other alternative asset classes delivered strong results, in the double-digit range, although the schemes incurred losses from their commodities exposure and their extensive currency and interest rate hedges.Jan Willem van Oostveen, investment manager at PFZW, attributed the scheme’s negative result to the appreciation of the US dollar and the Japanese yen relative to the euro.ABP’s fixed income portfolio returned 3.2%, and PFZW’s credit portfolio 2.6%. Equities at the latter returned 7.9% in 2015, compared with a 11.7% return on developed market equities for ABP and a loss of 4.7% from emerging market equities.The €60bn metal scheme PMT, the €48bn pension fund for the building sector BpfBOUW and €40bn metal scheme PME reported 2015 annual results of 2.3% (2014: 20.6%), 1% (24.3%) and 1% (17.8%), respectively.In Finland, 2015 annual returns were closer to the previous year’s.Elo’s investments earned it a return of 5% in 2015 (2014: 7.8%), while Keva and VER posted returns of 4.8% (2014: 8.7%) and 4.9% (7.8%), respectively.Equity was the best-performing asset class in 2015 for pensions mutual Elo, with real estate also helping it overcome what the CIO said was an “exceptionally turbulent” market environment. “Central banks’ activities and a lack of investment opportunities helped to support equity markets,” said Elo CIO Hanna Hiidenpalo.Elo did not earn anything from its €8.3bn fixed income allocation (40% of the provider’s €20.5bn in assets).Swiss funds had a tough 2015, with the BVK losing 0.7% on its investments, and Publica reporting a 2.5% loss on its open portfolio.The BVK, the CHF30bn (€24.5bn) pension fund for the canton of Zurich, still managed to outperform its benchmark thanks to its real estate holdings. These make up just over 20% of its total investments.At Publica, returns were wiped out by its 14% exposure to emerging market debt and equities. The fund’s decision to fully hedge its developed markets exposure was a boon, however – worth some 130 basis points of return.Both the BVK and Publica’s results were worse than the average return (positive but less than 1%) that consultancies calculated for Swiss pension funds.The Swiss federal railways pension fund and the CHF14bn (€11.4bn) pension fund for Credit Suisse beat the average, however, with returns of 1.5% and 1.6%, respectively. Still, that was half the annual return it would have needed to maintain a study funding level.In Belgium, the average return for 2015 was 4.4%, compared with 11.06% in 2014. This was based on a sample of funds with more than €14.1bn in total assets.PensioPlus, the national industry association, is encouraging investment in the ‘real economy’ to boost yields and protect against inflation. It said the focus on the real economy was also necessary because bonds were no longer a safe haven but increasingly volatile.In 2015, the largest share of Belgian occupational pension funds’ assets was invested in bonds, at 45%, followed by equities at 34%. Real estate accounted for 5%, liquid assets (cash) 3% and ‘other’ assets 13% (mainly insurance infrastructure, own funds and convertible bonds). AustriaAll funds (Pensionskassen)2.3620.2 Philips1.217.6 PFZW-0.1161 DIP5.1-  FinlandElo520.5 PME140 Vervoer1.520 BpfBouw148 Keva4.844.2 VBV (Vorsorgekasse)22.7 VER4.917.9 Pension Fund for Pharmaconomists2.41.3 “If you look at our current risk allocation, we are overweight equities and underweight rates and slightly underweight inflation,” said Stendevad. “That is the best representation of our view, and that reflects our view of the market.”Also in Denmark, DKK147bn (€19.7bn) Industriens Pension reported a 6.7% overall return in preliminary results, down from 11% last year. Its chief executive said active management of equities and bonds and unlisted asset classes delivered good results.In the Netherlands, returns among the five largest pension funds were weak, with the 2.7% posted by €351bn civil service scheme ABP the highest, although this was down from 14.5% in 2014.Results at PFZW were at the other end of the spectrum, with the €161bn healthcare pension fund making a loss of 0.1% on investments. In 2014, PFZW reaped returns of 15.5%.  KLM (ground staff)0.77.4 VBV (Pensionskasse)3.56 Industriens Pension6.719.7 Publica-2.529.5 KLM (cockpit staff)2.37.9 PMT2.360 NetherlandsABP2.7351 SpainAll funds2.8835.5 KLM (cabin staff)0.52.5 SwitzerlandBVK-0.724.5 Selected 2015 returns for European pension funds and markets CountryPension fundAnnual return 2015 %Total assets 2015 €bnlast_img read more

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ERAFP plans €50m low carbon equity fund investments

first_imgA spokeswoman told IPE that ERAFP selected two funds based on the amLeague platform. Not all strategies applied on the platform were available in the form of UCITS funds, she added.Its first investments, for around €10m, have been made in an “Inflection Point Zero Carbon” fund from asset manager La Française.ERAFP also selected four funds taking a more thematic approach to combating climate change, focusing on companies that offer products or services that could help cut carbon emissions. These were not identified via the amLeague platform.The La Française Inflection Point Zero Carbon fund seeks to invest in companies “delivering solutions to the climate change challenge,” according to a fund document. It has a five-year investment horizon, and aims to outperform the MSCI All Country World index over that time frame.The fund was created in June 2015. Its Euro-denominated ‘S’ share class for institutional investors has so far underperformed its benchmark by more than 10 percentage points, according to an April factsheet. The announcement of ERAFP’s plans for further low carbon investments comes shortly after the scheme launched a €200m real estate tender, as reported by IPE Real Estate. France’s €27bn civil service pension scheme is planning to invest €50m between now and the end of the year in international equity funds aimed at combating climate change.In selecting the funds, ERAFP said it used a virtual asset management platform it helped create in November 2015.The platform was the outcome of a partnership with Cedrus Asset Management and amLeague, an active management index performance and data provider. Managers can use it to demonstrate their performance on a notional low-carbon international equities mandate. “Now that it has more than one year of performance history (financial and non-financial) with which to compare the portfolios put forward by this platform, ERAFP has decided to add to its purchase list funds using the best strategies of the amLeague platform,” the pension scheme said.last_img read more

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Whitbread pensions chief Williams to retire

first_imgLesley Williams is to retire from hospitality company Whitbread’s pension scheme, which she has led for more than 10 years. Lesley WilliamsWhitbread has hired Steve Jones as Williams’ successor, a company spokeswoman confirmed. He is currently senior director of pensions and treasury at supermarket chain Asda and will take up his new role in January.Williams joined Whitbread in 2007 from Henderson Global Investors, where she was head of pensions for four years. She also held a similar role at Pearl Assurance for eight years. Whitbread’s defined benefit (DB)pension scheme had £2.4bn (€2.6bn) in assets at the end of March, according to the company’s annual report, and a deficit of £425m.Jones became pension manager at Asda in 1998, and senior director in 2014. He currently oversees the firm’s £2.5bn DB scheme as well as its defined contribution fund. Jones is also a trustee director at the Premier Foods Pension Scheme.Williams is also stepping down from chairing the UK pensions trade body, the Pensions and Lifetime Savings Association (PLSA), in October.Richard Butcher, managing director of independent trustee firm PTL, will take over from Williams for a two-year tenure.last_img read more

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Politicians step in amid fears of poor advice for British Steel members

first_imgThe FCA’s notice to Active Wealth, restricting its permission to give pension-related adviceSource: FCA Register In his personal submission to the select committee, Tapper said: “We have found evidence of a breakdown in orderly advice in Port Talbot; we have anecdotal evidence that matters are little better in other towns where BSPS members [live].”Tapper added: “I hope that in future cases where members are asked to take choices as tough as those in [BSPS], lessons are learned and members are not abandoned to the market.”The FCA has visited advisers in Port Talbot and the surrounding area to “remind them of their requirements”. After a deal was agreed to allow BSPS to be separated from its sponsor, BSPS’ members – of which there are some 150,000 – have the option of joining the Pension Protection Fund or a new British Steel scheme.They can, however, also transfer their benefits out of the fund, an option that is available independent of the restructuring of the fund.Members had until 11 December, two days before the committee meeting, to make a decision. It today extended to 22 December the deadline for members to send their completed option form to the scheme.The scheme has also reportedly extended to 26 January the deadline for pension transfer quotes for current quotes near expiry. The committee’s special evidence session is part of its inquiry into the operation of ‘pension freedoms’.British Steel Pension Scheme was shortlisted for IPE’s 2017 Corporate Pension Fund award. IPE understands individuals claiming to be pension advisers have been approaching employees of Tata Steel – BSPS’ sponsoring employer – outside the company’s factory in Port Talbot.The politicians will also hear from representatives of steelworkers and their union, the BSPS trustees, the Financial Conduct Authority (FCA), and financial advice firms Celtic Wealth and Active Wealth. The latter is reported to be engaged in poor advice practices, luring members to transfer out, and FCA has told it to stop accepting any new clients on pension business. UK parliamentarians are to hold a special meeting about evidence of dubious advice being given to members of the £15bn (€13.2bn) British Steel Pension Scheme (BSPS).In a statement the committee said it had “received evidence of questionable approaches and unsuitable advice being given to members of the BSPS, which the chair has described as a ‘honeypot for scammers’, and there are fears of BSPS members nearing retirement losing huge amounts of their life savings”.The special evidence session will inform a report that will propose regulatory and other measures to prevent similar situations.The pensions select committee of the House of Commons is to hear evidence from Henry Tapper, a director at First Actuarial, and independent financial adviser Alastair Rush. The pair have visited Port Talbot in Wales, where Tata Steel UK’s operations are based, and have reported poor advice practices and confusion about what options are available.last_img read more

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UK academic advocates for ‘collective individual’ DC schemes

first_imgA leading UK pensions academic has argued for lawmakers to consider introducing “collective individual” defined contribution (CIDC) schemes.Professor David Blake , director of the Pensions Institute at Cass Business School, is one of a number of experts to have submitted evidence to the UK’s Work and Pensions Select Committee’s inquiry into collective defined contribution (CDC) pension schemes , also known as defined ambition plans.The select committee, formed by members of the lower house of the UK parliament and chaired by Frank Field, launched its inquiry last November to assess the merits or otherwise of introducing CDC schemes.Such structures are currently not allowed in the UK, but have been debated in recent years. CDC was put forward by a mediator as a potential solution to a dispute between Royal Mail and workers’ union CWU late last year. However, CIDC schemes would be better suited to the immediate needs of the UK’s system, according to Blake. Professor David Blake, Cass Business SchoolIn his submission to the Committee, he said said: “CIDC schemes maintain individual accounts, they are better able to deal with sudden cash withdrawals than CDC schemes, yet are still able to exploit economies of scale to the full which lowers costs, such as through automatic enrolment and the pooling of investment and longevity risks.”According to Blake, CIDC schemes include three key features that are specific to each individual member and make them easy to understand:The CIDC scheme maintains individual accounts for all members in the accumulation phase, so it is easy to value each individual’s pension pot;The contribution rate is set to be actuarially fair to each member, implying a direct relationship between the contributions that an individual pays into the scheme, and the pension they eventually receive. This contrasts with CDC schemes, in which contributions are averaged on a collective basis to meet a target average salary pension;Each individual has their own de-risking investment strategy in the lead up to retirement.Professor Blake recommended that the government examine the feasibility of establishing CIDC schemes, for both the accumulation and decumulation phases.He said: “Such schemes would be compatible not only with the defined ambition agenda, they would also be compatible with the new pension flexibilities following the 2014 Budget, while at the same time exploiting economies of scale to the full, and allowing a high degree of risk pooling.”The deadline for written submissions to the inquiry has been extended to 31 January, after which there will be a call for oral evidence.The committee is expected to publish its report in the spring.last_img read more

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