The European pensions industry has taken a dim view of recent news the European Commission is planning to submit IORPs to stress tests as early as next year.Earlier this week, IPE revealed that the European Insurance and Occupational Pensions Authority (EIOPA) is preparing stress tests for institutions for occupational retirement provision (IORPs) for some time in 2015, according to Patrick Darlap, chairman of EIOPA’s Financial Stability Committee.James Walsh, EU and international policy lead at the UK National Association of Pension Funds, said EIOPA’s plan to begin stress tests in 2015 risked imposing “new and unnecessary burdens on schemes without strengthening protection for members”.“The UK has just introduced a revised approach to the regulation of DB schemes funding, and we have a range of initiatives underway to ensure quality in DC schemes,” he said. “It is difficult to see what value EIOPA stress tests would add, or what mandate EIOPA has for this project.”The Finnish Pension Alliance (TELA) said EIOPA should hold off on aiming for early stress tests, and that EU regulation should be changed to take account of the social aspects of pension funds.Ilkka Geitlin, legal counsel at TELA, said: “Instead of aiming for the stress tests, EIOPA should wait and see what direction economic development will take and what the new Commission will look like.”He said that, having reviewed the recent draft of the Shareholder Directive and IORP II, he questioned whether EIOPA and European Commission completely understood the social and labour dimensions of IORPs.“There seems to be an ambition to regulate these actors as if they were asset managers, banks or investment funds, which is troublesome since IORPs manage social pension security, not asset management per se, although managing the funded parts of pensions is necessary for actual payments,” he said.A spokesman at EIOPA confirmed to IPE that the main objective of the stress test is to “assess the resilience of IORPs to adverse market developments”, such as a prolonged low-interest-rate environment.He said the stress test would cover a “representative sample” of all types of IORPs in the EU, including defined benefit, defined contribution and hybrid schemes.The spokesman pointed out that the test was part of the regulator’s remit to “conduct regular stress tests for IORPs and insurance undertakings”, and that there was “no relation with the review of the IORP Directive” scheduled for 2018.Helmut Aden, chairman at the VFPK, Germany’s association for company pension funds, said the stress tests would reveal EIOPA’s hand on which method it preferred for calculating additional capital requirements.He said “all signs pointed to the introduction of such requirements for IORPs in future”, but he questioned the use of stress tests in the current market environment.“It is more than questionable to talk about a mark-to-market approach when the market is massively manipulated by politics,” he said.Germany’s other pension fund association, the aba, also called on the European watchdog to apply the stress tests “responsibly”.Klaus Stiefermann, managing director of the association, warned that pension funds needed money and resources for the tests, and argued that they should only be put in place if the results provided valuable information.He also pointed to the “major political impact” of such tests and called on EIOPA to make use of them “as responsibly as possible”.The Dutch Pensions Federation said it was not surprised EIOPA wanted to link a stress test to a second quantitative impact study (QIS), as this would “make the conditions comparable”.But the industry organisation said it expected any second QIS would again conclude that quantitative demands at European level were “complex”, and that the introduction of the holistic balance sheet (HBS) would “prove difficult”.It also reiterated its view that the pensions industry would require “ample time to thoroughly map out the impact of the HBS”.
Nedlloyd Pension Fund, Alger, Berenberg, BNY Mellon, Capital Group, Capital International, Invesco Perpetual, Legal & General Investment ManagementNedlloyd Pension Fund – Frans Dooren has been promoted to managing director at the Dutch Nedlloyd Pension Fund, assuming his new responsibilities from August onwards. He joined the fund in 2009 and has been its CIO since 2011. Prior to joining Nedlloyd, he was CFO at the now closed Stork Pension Fund.Alger Associates – Kirk Hotte has been named senior vice-president and head of institutional sales, charged with establishing the manager’s new London office. Hotte has previously worked at Old Mutual Global Investors and Investec Asset Management, where he was European business director.Berenberg Bank – Markus Zipperer, Thomas Lehr and Ingo Kürpick join Berenberg Bank’s chief investment office. Zipperer has been named head of institutional portfolio management, after 16 years at Credit Suisse, most recently as its head of investment strategy and chair of its German investment committee. Lehr also joins from Credit Suisse and has been named deputy head of investment strategy. Kürpock, meanwhile, joins from Deutsche Asset & Wealth Management and will oversee fund-based asset management strategies. BNY Mellon – Werner Taiber has been appointed as country executive for BNY Mellon, taking on the role in addition to his responsibilities as chief executive at subsidiary Meriten Investment Management. Taiber takes on the role following the departure of Fred Bromberg, who is to take on an expanded role in the company’s global client management group.Capital Group – Adam Harrison joins the London-based business development team at Capital Group from Standard Life Investments. Prior to joining SLI, Harrison worked at ABN AMRO Asset Management.Capital International – Feike Goudsmit has joined the US asset manager, departing Threadneedle Investments to help the company set up a Dutch office. Goudsmit spent eight years at Threadneedle as managing director of its Benelux operation and will be replaced by Prosper van Zanten, who joined the company in 2004 and has been named head of distribution, Benelux.Invesco Perpetual – Robin West and Tim Marshall join Invesco Perpetual’s UK equities team as UK equities fund manager and senior investment analyst, respectively. West joins from Aviva Investors and has worked at Oriel Securities and Invesco Asset Management. Marshall, meanwhile, has worked at equities broker Redburn and UBS.Legal & General Investment Management – Simon Males, Adam Willis and Laura Brown have all joined Legal & General Investment Management. Males has been named head of active fixed income distribution, joining from Pramerica Fixed Income. Willis has been appointed head of index distribution, joining from MSCI, while Brown is the firm’s new head of liability-driven investment distribution, joining from Ignis Asset Management.
Mercer concluded that the average funding had dropped 1 percentage point in July, based on the most recent funding figures of regulator De Nederlandsche Bank.In the opinion of Aon Hewitt, which uses the average strategic investment mix of Dutch schemes as guideline, the average coverage ratio increased by 1 percentage point last month. Mercer’s Van Ek said the official discount rate – the three-month average of the market rate with application of the UFR – for the average scheme was now 2.32%, below the three-month average. “If interest rates remained at their current level over the next three months, average funding would fall by 3 percentage points,” he said. Van Ek noted that the new FTK prescribes a funding policy based on the average coverage over the previous 12 months, rather than the previous three.Driessen of Aon Hewitt said coverage ratios would remain under pressure as a result of “interest-limiting decisions” at the European Central Bank, the crisis in Ukraine and new discount rules for pension funds scheduled to take effect on 1 January 2015.Aon Hewitt, meanwhile, estimated that pension funds’ liabilities increased by 2.3% in July on the back of falling interest rates.Mercer said the average market rate for discounting liabilities for an average pension fund fell from 2.65% to 1.97% in 2014.Van Ek added that the difference between the official discount rate and the market rate was 0.35 percentage points at July-end.Aon Hewitt estimated that Dutch pension funds’ combined assets grew by 1.6% in July due to returns on government bonds (1.9%), equity (1.4%) and property (3%). According to the pensions adviser, the average scheme lost 3.1% on commodities last month. Industry experts have warned that coverage ratios at Dutch pension funds could fall by as much as 5 percentage points under the new financial assessment framework’s (FTK) discount rules for liabilities.Frank Driessen, chief commercial officer for retirement and financial management at Aon Hewitt, estimated that average funding, under the new FTK, would have been 106% at July-end, rather than the current 111%. Dennis van Ek, a principal and actuary at Mercer, agreed, saying new ultimate forward rate (UFR), applied for discounting liabilities, would contribute no more than 2.5 percentage points to the funding of an average scheme, rather than 4% of the current methodology.Both Mercer and Aon Hewitt found that Dutch schemes’ average coverage ratios remained level in July, at approximately 111%.
Peter Thompson, chair of the trustee board, said the deal was a positive step in managing the scheme’s liabilities, and improved security of benefits for all members.The trustee was advised on the deal by Mercer, with legal counsel provided by Scottish law-firm Shepherd and Wedderburn. Hymans Robertson acted as actuarial advisers.Head of longevity swap consulting at Mercer, Andrew Ward, said reinsurance firms were the end destination of longevity risk with the deal showing a range of interest from the reinsurance market.“As a result, it was ultimately possible to remove the risk at below the level of the current funding assumptions thereby achieving the holy grail of reducing both risk and deficit,” he said.The SPPS deal kicks off 2015’s market as the last year saw a record breaking £25.4bn of longevity swap deals, led by the £16bn transfer between the BT Pension Scheme and Prudential Insurance Company of America (PICA).Legal & General today published research demonstrating growing demand from longevity swaps and bulk annuities among the UK’s largest pension funds.In other news, the Pension Protection Fund (PPF) has published its latest data on UK scheme deficits showing the worst funding level in history.Deficits among the 6,057 schemes in the PPF 7800 Index, calculated on its ability to provide PPF-level benefits (s179), hit £367.5bn at the end of January.This was a rise of £101.2bn in a single month as funding levels fell to 77.6%, a drop of 4.7 percentage points.Over 12 months, deficit levels have risen over 600% as discount rates calculating liabilities continued to be squeezed by falling government and corporate bond yields.Liabilities among the schemes now reached £1.6trn, rising over £144bn in January and exceeding asset returns of 3%.The yield on 15-year Gilts fell 41 basis points over the month of January – which the PPF said act as the main driver of funding levels.Over 2014, increased pressure on bond markets saw yields dramatically fall in the latter half, further causing pressure on the funding in UK pension funds. The ScottishPower Pension Scheme (SPPS) has announced a £2bn (€2.7bn) longevity swap arrangement with Abbey Life Assurance, as insurance risk-reduction products continue in popularity.UK pension funds now have a total value of longevity swaps in excess of £50bn in just over five years since the first deal in 2009.SPPS’ longevity swap, which acts as an insurance policy against the risk of pensioners living longer than expected, will cover 9,000 pensioner members as Abbey Life, a wholly owned subsidiary of Deutche Bank, takes on the risk. The scheme, which had £2.8bn in assets at the end of 2013, estimated the average male SPPS worker would live to be 88 years old, while female employees had an average life expectancy of 89.9 years.
Pensions and investments are only one aspect of the retirement challenge. Many people are keen to explore how other strands of well-being can be integrated into financial planning for later life. Old-age care provision, for example, is seen as fundamental to any coherent strategy for well-being in retirement. As a result of such factors, will a broad consensus emerge that endorses a full-blown national savings strategy? And, as is already practised in countries like New Zealand, will an independent figure emerge who sits in or alongside the Cabinet as a Retirement Commissioner?Given that the guidance guarantee steers clear of product recommendation, many consumers will still need to seek out regulated advice. Innovation in multichannel, at-retirement advice is seen as one of the most exciting developments that could come out of the new pension freedoms.At the same time, encouraging the mass market to become closely engaged with its retirement planning brings a new set of challenges. If the new pension freedoms are to be used effectively, both guidance and advice will need to be delivered actively to the consumer, both before and throughout retirement.As the characters in Cocoon found out, the nature of later life can change in surprising and positive ways. The percentage of over 65 year olds participating in the UK workforce has approximately doubled over the past decade, and earned income could be a key source of improved income for older age groups in the future. But work needs to continue to narrow the disparity in wealth levels between the UK’s richest and poorest retirement cohorts.Notwithstanding, greater life expectancy and longer working lives mean retirement planning solutions need to be increasingly flexible and capable of working around the different needs of the individual. For this version of Cocoon to end well, the industry needs to ensure those on more modest incomes receive a similar level of flexibility to those already taken care of in the workplace.Benjie Fraser is global pensions executive for Investor Services at JP Morgan JP Morgan’s Benjie Fraser calls for greater flexibility in retirement planning solutionsThere was a film made in the 1980s called Cocoon about a group of elderly people – in today’s parlance, we would describe them as ‘silver surfers’ – who are rejuvenated by aliens. The changes to the UK pensions landscape in 2014 heralded a similar extra-terrestrial experience for many in and outside the industry.Defined contribution pension holders, from April, will have previously unheard-of freedom in how they can choose to use their accumulated pension funds, from age 55 onwards – as well as the ability to pass on unused pension funds on death, free of tax. The UK government points to the beneficial impact these changes have already had on people’s pension intentions. Given the modest size of the average pension pot, how will these changes affect how people make financial decisions?The impact of the changes on the UK annuity market is already evident. Yet, given the unique ability of annuities to deliver a guaranteed income, many people believe they must continue to be promoted as a core element of the retirement income mix. The key to optimising retirement income, some believe, is not to walk away from traditional annuities but to encourage savers to exercise an open market option and to drive greater competition among providers. In a nutshell, many retirees simply want to replace their regular wage. But to do so without an annuity offers a different set of challenges.
A Nordic pension fund is tendering $20m (€17.7m) worth of credit and commodities mandates, using IPE Quest.The unnamed asset owner tendered two $5m-10m mandates, building on a series of $40m worth of equity mandates previously released.Search QN-2158 seeks to allocate towards an actively managed US high-yield credit strategy, stating that performance will be measured against a “broad benchmark covering all sectors”.The pension fund asked that the strategy have a minimum tracking error of 1% but not exceeding 5%. The second search, QN-2159, is for commodities, measuring performance against the Bloomberg WTI Crude Oil total return sub-index, or the NYMEX WTI Crude or ICE Brent Crude futures market.The fund allows for the tracking error on the commodities mandate to be significantly higher, placing an upper limit of 10%.Interested asset managers must have at least $500m across either strategy, and total assets of $500m under management.Additionally, they should have at least three years’ experience, but preferably five years, and submit proposals stating net of fees performance to the end of January.Proposals for the searches must be submitted by 7 March.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
“Moreover, as corporate governance is considered one of the 12 Key Standards for Sound Financial Systems, a review of compliance with the Principles could highlight important vulnerabilities that would be appropriate for further work.”The review will specifically look at how to ensure an effective corporate governance framework, ensure disclosure and transparency around engagement and address the responsibility of company boards.The consultation document adds that the review will look to find examples of good practice in implementing the principles as well as challenges in their implementation across a number of jurisdictions.Additionally, it said it was interested in “material weaknesses, inconsistencies and gaps in implementation” prevalent across the FSB’s member states.,WebsitesWe are not responsible for the content of external sitesLink to FSB review The Financial Stability Board (FSB) is to review pension fund engagement, with a wide-ranging examination of how countries around the world are implementing OECD guidelines on governance.The FSB said the peer review of the OECD’s Principles for Corporate Governance would examine how member states have applied the guidelines to listed companies, with results feeding into a further review being conducted by the World Bank.The principles, a revised version of which was published last year as part of the G20 in Turkey, also inform a number of sector-specific codes, including those for pension funds.In a document summarising the review’s terms of reference, the FSB said: “The G20/OECD Principles are foundational to the establishment of effective governance frameworks, and a peer review may provide useful insights on these issues.
“This should entail an appropriate mix of centralised powers and tools and a clear mandate to reinforce supervisory convergence.”Bernardino said insurance providers following a standard design template for such “profit-sharing” PEPP products could receive more favourable regulatory treatment.“Provided that, by design, these collective profit-sharing products avoid the exposure to short-term market volatility, the regulatory treatment in Solvency II could be aligned to the risks effectively incurred, resulting possibly in lower capital requirements,” he said.He also reiterated the supervisor’s proposals for a hands-on policy for the creation of PEPPs.In February, EIOPA favoured a parallel, so-called second-regime approach for PEPPs and advised the Commission to adopt standardised information provision, standard investment choices, regulated but flexible charge caps, and flexible biometric and guarantee options as part of its technical advice.However, a Commission consultation exercise, launched in July and which closes at the end of October, presented four options, including enhanced co-operation between EU member states, creating a new product similar to a US individual retirement account (IRA), a voluntary approach based on common features and outright harmonisation.Martin Merlin, director in the Commission’s directorate general for financial services and the capital markets union, said it was too early to say whether there would be draft legislation on PEPPs but indicated that a decision was expected in the first half of 2017.Merlin acknowledged the hurdle of taxation and said the Commission had a study underway.“One possibility is to see to it that a new potential European pension product gets at least the same treatment that national products get, so that the European product is not disadvantaged against national products,” he said.Bernardino said the supervisory approach developed for collective risk-sharing PEPPs could be applied to defined contribution occupational schemes.“A further important step would be the design of a simple and transparent second regime for defined contribution occupational pension schemes,” he said, adding that such a framework could provide a cross-border platform for multinational sponsors.The chairman also acknowledged the need to make the CMU tangible for European consumers and said PEPPs could be part of this process.But he conceded that trust in personal pensions was lacking in many countries and said many products were sub-optimal in investment design and in scale. Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA), today called for new powers to create a supervisory regime for Pan-European Personal Pension (PEPPs) products with collective risk-sharing characteristics.Boosting investment in personal pensions is a policy objective of the keystone Capital Markets Union (CMU) policy of the Juncker Commission, which aims to boost investment in areas like infrastructure and SME lending, and is seen as a way to boost Europe’s pension savings gap.Bernardino called for the CMU project to prioritise supervisory convergence to boost cross-border PEPP provision and ensure consistent quality of supervision between EU member states.“The evolution of the PEPP needs to be accompanied with an evolution in the powers and tools available to EIOPA,” the chairman told the supervisor’s annual conference in Frankfurt this morning.
Dutch pensions administrator Syntrus Achmea Pensioenbeheer has said it will stop providing services to industry-wide pension funds, as its new IT system has struggled to cope with their disparate arrangements.The company said it had been forced to take drastic decision after it became clear the new system could not accommodate the schemes’ various pension plans and numerous “exceptions”.A Syntrus spokesman said the company concluded it could not resolve the issue within a reasonable time period.As a result of its decision, Syntrus is to make “hundreds” of workers redundant. At present, industry-wide pension funds (23) account for about two-thirds of Syntrus’s business.Five of them have left to find new providers, while two others have decided to liquidate next year; Syntrus said it would aim to transfer the remaining 15 schemes before 2019.The pensions administrator is introducing an IT system to increase accuracy and cut costs by at least 20%, with a view to stemming losses at its pensions management business since its inception in 2009.The system is also meant to address quality complaints that had lead to the departure of a number of large clients, such as the pension funds for the retail, confectioner and tyre and wheel sectors.Early last summer, when Syntrus first announced the new system, it warned that it would need to “harmonise” pension plans.Tom van der Spek, director of old-age provision at Syntrus, told IPE sister publication Pensioen Pro that the company would need to invest millions to keep the old system running for its sector scheme clients.“Given their decreasing numbers, the investment would not be justified,” he said.Van der Spek said Syntrus would instead focus on corporate and occupational pension funds, as well on the general pension fund (APF) of insurer Centraal Beheer, which is part of Achmea Group.The company’s spokesman added that Achmea’s strategy would also target asset management growth.The provider services about 70 pension funds, including the 23 sector schemes.The ramifications of Syntrus’s decision for the company’s staff of about 700 remain unclear.The union FNV warned that it expected at least 500 jobs to “disappear” over the next two years; Syntrus has said the figure would be “a few hundreds”.
Achmea, for its part, would incur fewer costs and would face an easier closing process for its administration if the negotiations are successful.The pension funds involved are the schemes for the travel sector (Reiswerk), hairdressers (Kappers), dental technicians (Tandtechniek), concrete products (Betonproducten), the furnishing sector (Wonen), the meat industry (VLEP), the wood trade (Houthandel) as well as wood-processing industry and yacht building (Houtverwerkende industrie).A number of schemes told IPE sister publication Pensioen Pro that they considered a collective transfer as an option, but that they were also in individual negotiations with other potential providers.According to Frank Radstake, chairman of Reiswerk, completing a collective move in time was going to be a “hell of a job” because of the time pressure.Radstake said he expected that Centric would also take on staff, as it doesn’t have in-house expertise for board support, actuarial matters, or communication.Centric and Syntrus declined to provide additional details about the proposals.The pension fund for the furniture industry (Meubel) has already moved its administration from Syntrus to Centric – the IT firm’s first client in the pension space.The sector scheme for foodstuffs (Levensmiddelen) is to join provider AZL on 1 January, while StiPP, the pension fund for temporary workers, has chosen PGGM as its new administrator.The industry-wide scheme for architects (Architectenbureaus) indicated that it had already made much progress in its negotiations with a provider.The IT scheme TrueBlue as well as the sector funds for inland shipping (Rijn- en Binnenvaart), butchers (Slagers), private security (Particuliere Beveiliging), and millers (Molenaars) have already found new providers.Hibin, the industry-wide scheme for the trade in building materials, has decided to implement its pensions administration in-house. Pensions provider Syntrus Achmea and IT firm Centric have confirmed that they are negotiating a collective transfer of the administration of eight sector-wide pension schemes.The funds have been looking for a new administrator since last November, when Syntrus announced that it would cease servicing sector schemes within two years, as its IT systems were unable to cope with the multitude of pension arrangements.If negotiations are successful, Gouda-based Centric could initially take over the existing systems and possibly staff as well, and improve efficiency at a later stage.A collective transfer would also prevent a capacity shortage in the market for pensions provision. The pension funds are in a hurry, as some must leave Syntrus by January 2018.