Spain meets European Commission deadline with new pensions law

first_imgThe Spanish Parliament has passed a law establishing the basis for calculating annual indexation rates for state pensions, together with a sustainability – or “intergenerational equity” – factor to be introduced at a later date.The new law breaks the traditional link between pension increases and inflation in the country.The changes, following demands from Brussels for reform, are aimed at capping government spending and balancing the social security budget.At present, the replacement ratio for Spanish pensioners is close to 74%, according to the OECD. The law has had a stormy passage through the legislative process, partly because of opposition from the Socialist Party and the unions.But it cleared the final parliamentary vote just before Christmas, complying with the European Commission’s end-of-year deadline, and took effect from 1 January.Previously, pensions were guaranteed to rise in line with inflation.The new revaluation index guarantees a minimum annual increase of 0.25% but no more.Inflationary increases will only be added if certain economic conditions are met.The indexation formula includes factors such as the nominal income of the social security fund, the number of pensions being paid out and a percentage of the social security deficit or surplus.The figures used will include averages for past years and estimates for future years.At present, these factors are largely negative, preventing any inflationary increases in pensions.However, future governments will be able to establish more generous uplifts when the economic situation improves.The maximum increase will be consumer price index (CPI) inflation for the previous year, plus 0.5% (increased by the Senate from the government’s proposed 0.25%).The new ceiling on individual state pensions will be €2,554.49 per month, as from 1 January.This will rise each year in line with the general increase in pensions, but not, as was the case before, in line with inflation.For the 2014 calendar year, state pensions will be increased by 0.25% as from 1 January.The same rules also apply to pensions for work-related injuries and illnesses; extraordinary pensions awarded to victims of terrorism; and pensions paid to individuals who have worked outside Spain.In its statement, the government said: “The aim is to respond to public mistrust and guarantee adequate pensions for the pensioners of today and tomorrow, with similar patterns of behaviour in the level of pensions.”The sustainability factor, which is based on retirement age and links the level of pensions to life expectancy, will apply from 2019.It will be used to establish the initial level of pension for those about to retire.Every five years, the factor to apply to new pensioners will be revised.Two control mechanisms have been established to assess the effect of the measures.The Spanish government will present an evaluation report to the Congress of Deputies and social partners every five years to confirm that the level of pensions is sufficient.The government is also setting up an Independent Authority for Fiscal Responsibility to supervise the stability and sustainability of government budgets as a whole.As part of this role, the authority will give an opinion on the level of pensions calculated by the Ministry of Employment and Social Security, as well as the determination of the pensions revaluation index applicable each year, and the sustainability factor.Jon Aldecoa, consultant at Novaster, said: “This is a strong mechanism to control spending, and it will have a big effect on medium and long-term pension levels.“People under 50 will have to supplement their pensions with occupational or personal pensions. But right now there is a big private pensions coverage gap.”Aldecoa added: “These mechanisms will heavily reduce the replacement ratio of the pension, compared with final salary, over 15 or 20 years. So adequacy is not guaranteed in the medium term.”Jaume Jardon, pensions manager at Deloitte in Barcelona, said: “Ironically, the effect of the new revaluation index for this first year seems to be contrary to that expected, since the increase in pensions will be 0.25%, while inflation will be around zero.“However, as long as the new rules are applied year by year, they will be more successful than the previous framework in containing costs.”But he added: “The formula is not easy for workers and pensioners to understand, so there is scope for confusion.”last_img read more

Strong equities bolster Irish pension scheme funding

first_imgIrish pension schemes saw their funding positions improve over the course of last month as equities produced strong gains, according to consultancy data. LCP said the funding level of a typical defined benefit (DB) scheme in Ireland had increased by about 1.4% in May, as assets grew faster than liabilities. While liabilities increased by 1.2% in the month for sample DB schemes in LCP’s study, assets grew over the same period by 2.6%, the firm said. Meanwhile, Aon Hewitt said its Managed Fund Index – which includes traditional Irish pension managed funds – increased by 2.72% in May, while the index has returned 6.05% since the start of the year.  Cathal Fehily, investment consultant at Aon Hewitt, said: “Irish defined benefit pension schemes will have seen their liabilities rise again in May given the fall in core euro-zone government bond yields.”But strong asset performance in the month should compensate for this increase in liabilities, Fehily said, with schemes generally seeing a small improvement in their funding levels.LCP said the best pension fund performers in the month were defined contribution (DC) schemes with a high allocation to growth assets.Pension fund investments in global equities increased by almost 4% last month, it reported.Long-dated euro-zone bonds with AAA ratings also rose in price in May, it said, with bond yields falling for the fifth month in a row.Aon Hewitt said global equity markets rose in May, with the FTSE All World Index up 3.9% in euro terms. Japan was the best performing region in euro terms, while the FTSE Japan Index returned 5.8%.Fehily said equity markets strengthened on the expectation the European Central Bank would loosen monetary policy further following its meeting on the 5 June, as it tried to spur higher inflation in the region. “Euro-zone government bonds also benefited from this expected policy, as government bond yields moved even lower over the month,” he added.last_img read more

Lehmans scheme insured in £675m deal with Rothesay after TPR action

first_imgA settlement between the pension scheme and Lehman Brothers International Europe (LBIE) funded the deal.After the US bank collapsed in 2008, prompting administration for its international operations, the UK pension fund entered assessment for The Pension Protection Fund (PPF).However, the £2bn scheme was left with a significant deficit, leading TPR – supported by trustees and the PPF –to launch legal challenges, demanding funding from subsidiary organisations undergoing administration.In August last year, the case was finally settled.The LBIE agreed to fund the scheme to secure a full insurance bulk annuity buyout, with members now also receiving back pay on restricted benefits, and the PPF avoiding the burden.Gamester expressed his gratitude to the scheme’s advisers and LBIE for securing member benefits in full.“Since the bankruptcy of Lehman Brothers in 2008, the trustees have been striving to secure the pension benefits promised to members of the scheme,” he said.This is the first major public bulk annuity deal in 2015 after last year saw a record £12bn of pensions liabilities absorbed by insurers.It is estimated there has been around £2.5bn of bulk annuity deals so far in 2015, with two buy-in deals worth more than £500m in addition to the Lehmans scheme.This year has been noticeably quieter than 2014, which saw £4.3bn written in Q1 and £2.5bn in Q2 last year.Legal & General (L&G) – which dominated the 2014 market, with a 45% market share – today announced £655m of new premiums for Q1 2015, £2.4bn down on last year after it took on £3bn from the ICI Pension Fund.Rothesay wrote no business in Q1 on the build-up to the Lehmans deal but has now surpassed its performance for the first half of 2014 where it wrote only £556m.It wrote a total of £1.7bn in 2014, as it struggled to keep pace with rivals L&G, Pension Insurance Corporation (PIC).PIC is also seeing a quieter 2015, with expectations of new Q1 premiums around £100m compared with £148m in 2014, finishing the year on £2.5bn, some £1.2bn down on 2013.Research from L&G showed nearly half of UK pension funds are set to use insurance products to underpin liabilities by 2020, as more than one-third of schemes aim for self-sufficiency using a buy-in contract.Analysis by consultancy LCP showed that, if half of UK schemes insured half their liabilities by 2020, the bulk annuity market would require annual capacity of £25bn – double that seen in 2014. Bulk annuity provider Rothesay Life has insured the UK Lehman Brothers Pension Scheme after The Pensions Regulator (TPR) secured funding from subsidiary groups for the abandoned defined benefit (DB) scheme.The £675m (€916m) deal, the largest in 2015, has seen the pension scheme transfer all risks to the insurer, with an end to restricted benefits after legal wrangling between TPR and the US bank’s administrators.Rothesay is owned by US bank Goldman Sachs, Singaporean sovereign wealth fund GIC, asset manager Blackstone and Massachusetts Mutual Life Insurance.Peter Gamester, chair of trustees for the scheme, said the deal secured full benefits for members – something the board had been working for since the bank’s insolvency in 2008.last_img read more

FRC to ‘expedite’ pension fund accounting-disclosure changes

first_imgThe Financial Reporting Council (FRC) has confirmed it will press ahead as a matter of urgency with finalising its proposed changes to its pension fund Statement of Recommended Practice.An FRC spokesperson told IPE: “We have received very positive responses with those FRS 102 preparers that will be affected by the amendment – namely financial institutions and users of their financial statements, highlighting the benefits it will bring.”He added: “We are in the process of finalising the amendment, with the aim of issuing it in its final form in the first quarter of 2016.”The decision ends a period of uncertainty for pension funds and their advisers as they attempt to finalise their first set of year-end scheme accounts for 2015 under the new UK GAAP regime. Aon Hewitt consultant actuary Martin Lowes told IPE: “It’s reassuring to know they are expecting to proceed quickly. Knowing early that the changes will proceed will avoid a lot of unnecessary work on the part of preparers.“It means, if you have two changes, you have to work out what you’re doing twice, and you end up having to restate for the prior year twice as well, in addition to getting your head around both changes.”The FRC issued an exposure draft (ED) of its now finalised SORP in August 2014.The ED proposed a number of changes to the 2007 version of the SORP.The FRC’s decision to consolidate UK GAAP into a single accounting standard, FRS 102, was the driving force behind the need to update the SORP.FRS 102 is a modified version of the International Financial Reporting Standard for Small and Medium-sized Entities.It represents a root-and-branch reform of financial reporting in the UK and the Republic of Ireland.Among the areas of accounting it addresses is accounting by pension funds. The SORP provides a layer of recommended practice on top of those requirements.Since the last update to the SORP in 2007, the UK pensions landscape has seen both the introduction of auto-enrolment and a growing number of pension schemes entering the Pension Protection Fund.The new SORP broadly addresses three areas of pension fund accounting.It scraps the exemption that allowed pension schemes to report an annuity’s value at nil, it introduces a new valuation hierarchy based on IFRS 13, Fair-value Measurement, and it sets out new investment-risk disclosure requirements.The FRC’s move will increase the pressure on scheme trustees to make sure they are able to comply with the new reporting requirements.Towers Watson consultant Andrew Mandley said: “There are still some schemes that are not completely ready for this. It is important trustees be clear who is actually putting these new investment disclosures together.“It would be easy to think someone else is doing it when in fact they are not. The qualitative disclosures link back to strategic decisions made by the scheme trustees, and the success of the exercise depends on relating the quantitative financial risk data to those decisions.”He stressed that it would be a mistake for trustees to think they could leave everything to their investment managers.Philip Briggs, audit director at RSM’s pensions group, painted a similar picture.“The new investment disclosure requirements remain an area where I am not seeing pension scheme accountants producing many examples,” he said.“Responsibility is being passed between pension scheme accountants and investment advisers, and this risks delays in providing draft disclosures for trustees to consider.”Mandley added: “It seems as though some investment managers and custodians are being more helpful than others.“Different providers will provide the necessary information in different formats, so there is still quite a task to compile this into a picture of the whole portfolio.”Meanwhile, the Department for Work and Pensions has yet to finalise the outcome of its recently ended consultation on removing various pension-scheme disclosure requirements.The disclosures were rendered largely redundant with the introduction of FRS 102.Lowes said: “It is just a question of going ahead with the changes to the regulations sooner to avoid any overlap.“I don’t think the extra information will add anything for the user. If anything, it will just confuse them.”last_img read more

IPE publishers create JV to develop Pension Fund Perception Programme

first_imgInsticube is a joint venture is with Carsten Eckert, of AssetMetrix, a European provider of high-end analytics and tailored asset servicing for private capital investors.Eckert has more than 25 years of experience in the institutional markets.Insticube will be a privately held German company owned by IPE International Publishers, Asset Metrix, Eckert and management, together with a group of individual private investors.Insticube will acquire the assets of the PFPP Research Programme from IPE International Publishers in a transaction due to complete early next year. It will start operations in early 2017.The joint venture will be based in Munich, Germany, with planned operations in the UK, France, Italy, Sweden, and The Netherlands. The idea of operating from these centres is to work more closely with the asset owners involved in the platform, according to Brown. The publisher of IPE has formed a joint venture, Insticube, to take over and further develop the Pension Fund Perception Programme (PFPP) Research Programme.The programme was founded by IPE in 2012 as a source of information about the overall performance in service by asset managers for institutional clients.Announcing the joint venture at the IPE annual conference in Berlin today, Tim Brown, director of the PFPP research programme, said the aim was to bring all the largest institutional asset owners in each region into the programme – up to 2,000 asset owners in six regions.He said Insticube aimed to help asset managers achieve “exceptional client centricity”.last_img read more

Bavarian foundation seeks equity fund managers via IPE Quest

first_imgA Bavarian-based foundation has, via a consultant, tendered two equity mandates of up to €10m apiece using IPE Quest.One of the mandates is for long/short equities, and the other is for a market-neutral approach. Both can be global, regional or country-focused.According to search QN-2296 and search QN-2297, the consultant’s client wants to select one to two asset managers for each mandate, which could be split into tranches of €2m-€4m.The managers should in each case offer non-leveraged UCITs funds “in euro hedged and possibly distributing institutional share classes”. The process should be active and the benchmark should be the HFRX Equity Hedge Index.Applicants should have at least €250m of assets under management for the asset class and a minimum track record of two years, although three is preferred.The minimum tracking error expected is 0.5% for each mandate, with a maximum of 5% for the long/short equities mandate and 4% for the market neutral mandate.Interested parties have until 27 April to apply.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email [email protected]last_img read more

Principles for Responsible Investment hires first head of China

first_imgThe Principles for Responsible Investment (PRI) have appointed the investor organisation’s first head of China, Nan Luo.According to the PRI, Luo will work closely with Chinese institutional investors on responsible investment initiatives, including green finance, and continuing to raise awareness of the PRI and its activities.She will also work with a number of external bodies, such as the Asset Management Association of China and the Green Finance Committee, which is chaired by Ma Jun, formerly chief economist of the People’s Bank of China.Luo will be part of the PRI’s global networks and outreach team, and report to that team’s head and co-director, Lorenzo Saa. Luo’s most recent role recent role was with the Department of International Trade at the British Embassy in Beijing, where she was head of institutional infrastructure investment, leading on attracting Chinese capital investment into UK energy and infrastructure activities, with particular focus on renewable energy.Before that she spent five years working in the climate change and energy section of the British Embassy in Beijing, focusing on green finance strategies and policy-oriented projects to address global climate change and support China’s low carbon transition.The PRI’s Saa said: “Obviously, China is of huge strategic importance with considerable institutional investor clout. But in order to maximise our existing relationships in China and to continue building awareness of the importance of ESG issues, we have realised that we need a presence on the ground.“This appointment also aligns to our three-year strategic plan of having a greater presence in Asia.”South Korea, Malaysia and Singapore are priority countries in Asia for the PRI in addition to China.Commenting on her new role, Luo said: “Working with a large global organisation like the PRI will provide a unique opportunity to engage with Chinese asset owners and investment managers on ESG issues and for expanding PRI’s signatory base across China.”Nan Luo will start at the PRI on 9 October and will be based in Beijing.last_img read more

UK pension dashboard petition gains momentum [updated]

first_imgA petition urging the UK government not to scrap plans for a pension dashboard has gained attention for the amount of signatures it has garnered. The petition, addressed to Esther McVey, state secretary for work and pensions, has been signed by more than 100,000 people on the campaigning platform 38 Degrees.The threshold is a critical one for petitions filed on a government platform, but a spokesman for the DWP said that, on a procedural note, the 38 Degrees website “was not the correct channel to get something debated in parliament”.Feasibility work on the dashboard was ongoing and a report would be published in due course, he added. Some media outlets had suggested the support for the petition would mean it would be debated in parliament.According to a government webpage on petitions, petitions filed via the government petitions service will be considered for debate if they garner 100,000 signatures. Petitions with this much support are almost always debated, the webpage states.The 38 Degrees-hosted petition was created last month after a UK newspaper reported that McVey was considering abandoning the DWP’s work on the pension dashboard, which would collate all an individual’s pension savings and entitlements.The UK pensions sector quickly rallied behind the dashboard in response to the July development and reports today of the 38 Degrees petition’s momentum triggered a similar reaction.“The dashboard really needs to happen if the government wants people to save enough for a decent retirement income,” said Anna Rogers, partner at ARC Pensions Law.“We can’t stop pensions being confusing and a turn off but we can make it easier to get all the information in one place and that would surely help.”Someone needed to start a petition on the dashboard through official channels, she added, with the petition on the 38 Degrees platform seeming to be “eminently suitable” to be debated in parliament.  Kate Smith, head of pensions at Aegon, said the 38 Degrees-hosted petition – whether it was the right channel or not to trigger a parliamentary debate – had generated welcome publicity for the dashboard.“It’s raised awareness about the need for the pension dashboard, what it does, and not just kept it within the industry,” she said.The pensions industry was eagerly awaiting the feasibility study, which had been “delayed and delayed,” added Smith.Late last month Baroness Buscombe, parliamentary under-secretary for work and pensions, said the feasibility work was nearing completion but that it had been raising many questions. The 38-degrees hosted petition had been signed by more than 128,000 people at the time of writing. “A huge petition signed by thousands of us will show the government we expect them to keep their promises and continue to roll out the pensions dashboard,” it reads.[This article was updated to clarify that the 38 Degrees-hosted petition is not eligible for being debated in parliament]last_img read more

PRI signatories must report climate change risks from 2020

first_imgThe specific indicators of risk are those outlined by the Task Force on Climate-related Financial Disclosures (TCFD) and pertain to strategy and governance around climate change. The PRI said using them was high priority as they provided a global framework for translating information about climate into financial metrics.It follows moves by several international bodies to formulate a way of measuring and monitoring how investors account for and consider climate change risks in their portfolios.The European Union is in the process of creating a taxonomy that investors can use to demonstrate how they and their fund management providers rationalise such risks within their investments, along with other sustainable elements.The TCFD was established by the globally recognised Financial Stability Board, led by Bank of England governor Mark Carney. Since 2018, the PRI has asked its members to consider the risk indicators that are aligned to its reporting framework on a voluntary basis.   Fiona Reynolds, PRIReynolds at the PRI said: “TCFD provides the best available framework for systematically including climate-related risks and opportunities into investment strategy.”Despite the current lack of obligation by the PRI, more than 480 investors representing $42trn opted to complete the indicators and submit responses. In 2019, the climate indicators will be voluntary but will become mandatory in 2020.From then, signatories of the PRI will have the choice to keep their reports confidential to the UN body itself.Further readingA responsible investment wishlist for 2019 Leading investors and campaign groups – including Norges Bank, USS, APG, and the PRI – speak to IPE about what they want to see this yearWho’s doing what in ESG? Susanna Rust explores the investor coalitions, campaign groups and organisations leading responsible investment efforts around the world The UN Principles for Responsible Investment (PRI) will require its entire book of 2,250 signatories – including asset owners, investment managers and service providers – to report how they have considered specific climate change risks in their portfolios from 2020.The body, created by the United Nations to encourage investors to take a responsible and sustainable approach to managing assets, announced the tough new reporting measures for its members yesterday.Fiona Reynolds, chief executive officer of the PRI, said: “It is increasingly important for investors to incorporate emerging mega-risks such as climate change into their view of the future.”The PRI’s signatories together represent more than $83trn (€73trn) of assets.last_img read more

​Danish pension funds silent on €40bn Nykredit-Sparinvest merger

first_imgTwo Danish asset managers backed by major pension funds are to join forces to create a €40bn financial services group.Nykredit and Sparinvest made a joint announcement on Friday regarding a conditional agreement to merge. Under the plan, Nykredit will buy a 75% stake in the Sparinvest from Sparinvest Holdings for DKK2.2bn (€301bn), leaving Sparinvest’s other shareholders with a 25% ownership interest.As part of the deal, the owners will also receive DKK155m as dividend for 2018, the two parties to the deal said.In November 2017, a group of five Danish pension funds led by PFA Pension bought a 16.9% stake in Nykredit for DKK11.6bn, putting paid to the lender’s plans for a stock market listing. Jørgen Søgaard-Andersen, SparinvestMeanwhile, Sparinvest chief executive Jørgen Søgaard-Andersen said the firm had high ambitions for its retail and institutional asset management business areas.“Joining our strengths will improve our capacity even further to meet future needs and requirements from customers – also in the long run,” he said. “By joining forces, we can support this development and provide enhanced customer experiences at both Sparinvest and Nykredit”Michael Rasmussen, NykreditThese insurance and pension firms appear to be exiting Sparinvest’s ownership circle. In Friday’s announcement, Nykredit and Sparinvest said the 49 banks – which together own more than 90% of the share capital – intended to remain as co-owners of the business, with their combined holding shrinking to 25%.Sparinvest, Denmark’s largest provider of index-linked investments, declined to identify the seven insurance and pension companies mentioned.The merger deal is subject to ongoing due diligence and regulatory approval, and is also dependent on approval at Sparinvest Holdings’ general meeting.Michael Rasmussen, Nykredit’s group chief executive, said the business plan was to form a partnership with the banks that distribute products from its mortgage lending subsidiary Totalkredit in order to offer investment products. Nykredit is Denmark’s biggest mortgage lender.Both Sparinvest and Nykredit had seen growth in managed assets in recent years, Rasmussen said.“By joining forces, we can support this development and provide enhanced customer experiences at both Sparinvest and Nykredit,” he added.center_img Spokespeople for PKA, PFA and PensionDanmark declined to comment on the transaction, while AP Pension and MP Pension had not responded by the time of publication.Sparinvest also has significant pension fund ownership. The DKK83bn asset manager is owned by a number of investors, including 49 banks and seven Danish insurance and pension companies.last_img read more