Foreign players to enter Dutch pensions administration market

first_imgLohoff & Partner has its origins in IT and administration for large German companies, while TCS Tata is a large IT provider already active in the UK, the US, Australia and Canada.Belgian firm Conac founded Pensions & Co, the Belgian equivalent of the Dutch multi-company pension fund. Three foreign players are to enter the Dutch market for pensions administration, according to a report from pensions adviser Sprenkels & Verschuren.It said Belgian firm Conac, German company Lohoff and TCS – a subsidiary of Indian firm Tata – would start offering their services in the Netherlands.The new foreign parties will not only target pension funds but also insurers and other pensions providers, Sprenkels & Verschuren said.It added that Lohoff and TCS have indicated they will focus on the administration of defined contribution plans.last_img read more

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Additional risk does not pay off over very long term, study shows

first_imgThe PKZH, for example, changed its approach to adjusting the equity allocation in early 2014, no longer linking it solely to the funding ratio but also to market trends.Now the allocation is increased in rising markets and decreased in falling ones to allow the Pensionskasse to participate in bull markets regardless of its funding status.For Scherer, the main problem is that the expected returns have dropped considerably from 5.67% in 2000 to 2.17% in 2014.He said not all trustees had “accepted this changed world yet” and warned that “realistic expectations” on returns would remain relatively low in the coming years, based on several indicators.He added that “the only certain thing about long-term prognoses is that they are uncertain”.Similarly, Heinz Zimmermann, a professor at the University of Basel, said many Swiss pension funds performed their long-term calculations on a “wrong basis”.For longer periods, analysts should use the root mean square (or quadratic mean) and not the arithmetic mean, he said at a recent PPCmetrics conference in Zurich.He said there was no certainty, only “reduced uncertainty” in long-term prognoses with better calculations.He also noted that, with cumulative returns, the volatility increases over time along with the return, and that, while mean reversion exists, it is “too weak to counteract this volatility over time”.Scherer said it was difficult to take mean reversion into account, as it was almost impossible to say what the mean was.According to Zimmermann, the strength of the prognosis is best over a horizon of 5-6 years.The academic predicted an average equity return of 7% over several years, while Scherer said he was convinced the risk premium would remain positive over the long term. The Swiss pension funds with the highest share of so-called “risky” assets – including equities, private equity and other alternatives – also produced the lowest average performance, according to a controversial study by local consultancy PPCmetrics.Among the schemes included in the study were the CHF14.6bn (€11.9bn) pension fund for the city of Zurich (PKZH), the CHF5.2bn multi-employer fund Profond and the CHF8.8bn Aargauische Pensionskasse (APK) for the canton of Aargau.Hansruedi Scherer, a partner at PPCmetrics, told IPE the consultancy’s comparison had been well founded and based on data published by the Pensionskassen themselves between 2008 and September 2014.However, he acknowledged that the data became skewed where Pensionskassen changed their strategies “massively” in recent years or followed ALM strategies “too strictly”.last_img read more

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Shell, Statoil investors vote for climate change disclosure

first_imgShareholders at yesterday’s annual general meetings (AGMs) of oil companies Royal Dutch Shell and Statoil have voted overwhelmingly for resolutions calling for greater disclosure on performance related to climate change.The two identical resolutions – “Strategic resilience for 2035 and beyond” – provide for additional transparency around operational emissions management, asset portfolio resilience against 2035 scenarios, low-carbon energy R&D and investment, executive performance indicators and public policy positions relating to climate change.Support was 98.9% of votes cast at the Shell AGM, and 99.95% at Statoil’s meeting.The boards of both companies previously recommended that shareholders back the resolutions. The resolution at Shell’s AGM was driven by the £170bn (€236bn) Aiming for A investor coalition, led by charity fund manager CCLA, and includes the LAPFF and church investment bodies such as the Church of England Pension Board and the Central Finance Board of the Methodist Church.Other co-filers included European pension funds such as Ilmarinen and Swedish buffer funds AP2, AP3 and AP4, while investors such as Norway’s Government Pension Fund Global and the UK’s Wellcome Trust publicly gave their support. A similar climate change resolution, proposed by the same co-filers, was overwhelmingly passed at BP’s AGM last month.Helen Wildsmith, head of ethical and responsible investment at CCLA, who convened the Aiming for A coalition, said: “What we’ve experienced with BP and Shell indicates that supportive but stretching shareholder resolutions can play a positive stewardship role by amplifying the voice of long-term investors.“They focus attention on an increasingly complex capital-allocation challenge for energy company leaders, their investors and policymakers.“I suspect board-supported shareholder resolutions on climate change will become a global phenomenon during the critical 2016-20 policymaking window, given the need for cross-sectoral collaboration in the wake of the climate negotiations in Paris.”However, at the AGM, board members faced a welter of criticism aimed at Shell’s controversial plans to start drilling off the shores of Alaska.ABP, the Dutch pension fund for civil servants, said it opposed the company’s plans, not only for environmental reasons but also because of the investment risks.Meanwhile, Swedish buffer fund AP2 welcomed the vote in favour of the climate change resolution at Statoil’s AGM, which it co-filed with the AP4 buffer fund.Ulrika Danielson, head of communications at AP2, said: “We are very pleased the resolution was supported by 99.95% at the AGM.“Since oil-related energy companies have challenges ahead in terms of both financial and environmental issues, we see this resolution as a good tool to help Statoil to strengthen its reporting on climate change issues.”last_img read more

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UK FRC blasts IASB ‘wholly inadequate’ prudent accounting standards

first_imgMcLaren continued: “Investors rely on financial reporting to hold management to account – to assess the delivery of the business model and the creation of long-term shareholder value.“By describing prudence merely as taking a cautious approach to accounting, the IASB has missed the point – prudence requires a greater readiness to recognise losses than profits.”She said it was “particularly odd” the IASB acknowledged that this was reflected in current accounting standards yet omitted it from its draft Framework.The IASB launched its project to update and finalise its conceptual framework – the building blocks of its standard-setting activities – in 2011.Since then, it has issued a discussion paper and, more recently, an exposure draft.The framework defines the objective of general purpose financial reporting and details the two fundamental qualitative characteristics of useful financial information – relevance and faithful representation.Sitting below these characteristics are four so-called enhancing qualitative characteristics – comparability, verifiability, timeliness and understandability.The notion of prudence was originally in the 1989 iteration of the framework. The board removed it in 2010 but now proposes to reintroduce due to pressure from some investors.In the UK, an investor coalition that includes the Local Authority Pension Fund Forum, Threadneedle Investments and the UK Shareholders’ Organisation, has demanded that the IASB bring back prudence as an overriding accounting principle.The investor group recently wrote: “Prudence should be restored as the overriding accounting principle so that capital and performance are not overstated. The breakdown of realised and unrealised income should be visible to all.“They [IASB] are developing standards that suit the profession, but they are not setting standards with any consideration as to how they might be audited.“These changes are not just vital for effective stewardship by executives, directors and shareholders – they are necessary to bring the accounting framework back into line with existing legal requirements for capital protection as originally set out in the EU’s second directive.”The IASB tentatively voted to remove prudence from the framework during a May 2005 board meeting when it seemed likely the US would adopt IFRS as the reporting basis for public companies.A staff meeting paper from that meeting read: “Reliability is said, in FASB Concepts Statement 2, to comprise representational faithfulness, verifiability and neutrality, with an overlay of completeness, freedom from bias, precision and uncertainty.“It is said in the IASB Framework to comprise faithful representation, substance over form, neutrality, prudence and completeness.”The staff added that, although “the inclusion of neutrality [was] a non-issue”, it clashed with the accounting traditions of prudence and conservatism.Meanwhile, a decade on, the FRC now wants the IASB to make an explicit reference to “asymmetric prudence” – or a lower threshold for the recognition of liabilities and losses than for assets and gains – in the main framework text.The FRC said: “The effect of these changes is significant. In the 1989 text, the avoidance of understatement of assets, etc, was a check on the exercise of prudence—which naturally we would support.“But, in the text proposed in the Exposure Draft, it is placed as part of prudence itself. The result is that the idea of prudence loses any sense of direction and is indistinguishable from the idea of neutrality.“However, it is perverse to accept that a concept plays a role in accounting standards while omitting a discussion of it from the Conceptual Framework.“To do so is to accept that the Conceptual Framework is incomplete and that the IASB will have recourse to undefined and unspecified ideas in the future development of accounting standards.”This latest hard line from the FRC has left some IASB critics unconvinced.Leading UK accounting academic professor Stella Fearnley told IPE: “We don’t need statements or mantras about neutrality or bias.“A simple definition of prudence is all that is required so that assets are not overstated and liabilities are not understated.“Equally, profits should not be booked until they are realised, and losses should be booked as soon as they are expected.“From a public policy perspective, you have to ask why has it taken the FRC as long as it has to even get this far. We have the second-largest capital market in the world, and yet we seem unable to address this issue.”LAPFF chairman councillor Kieran Quinn added: “The Opinion of George Bompas QC is clear and covers the specific purpose of accounts, for which the correct model of prudence is the appropriate method to get the numbers right.“The standard setters are failing. Until the standard setters get the purpose right, they force an unnecessary debate about different version of ‘prudence’ when we believe there is clarity.” The UK accountancy and audit watchdog, the Financial Reporting Council (FRC), has slammed the International Accounting Standards Board’s (IASB) position on prudent accounting as “wholly inadequate.”Long-standing critics of the UK’s accounting establishment have, however, dismissed this latest salvo in the war of words over the standard setter’s conceptual framework project as mere semantics.In a hard-hitting attack, Melanie McLaren, the FRC’s executive director with responsibility for codes and standards, said: “We have consistently made clear to the IASB that stewardship, prudence and reliability are fundamental to financial reporting.“Although the Exposure Draft goes further than the IASB has previously in recognising their importance, significant further development is essential if we are to be confident that future IFRSs are to be of high quality.”last_img read more

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EIOPA elects Italian regulator as new executive director

first_imgFausto Parente is set to become the second executive director of the European Insurance and Occupational Pensions Authority (EIOPA), while Peter Braumüller has been re-elected alternate chair of the supervisory body.Parente was elected by EIOPA’s board of supervisors following an open selection procedure, with the European Parliament still to confirm his appointment.He will replace Carlos Montalvo Rebuelta, who, as previously reported, did not seek a second term. EIOPA executive directors are elected for a five year term of office, which can be extended once.Parente joins from Istituto di Vigilanza sulle Assicurazioni (IVASS), Italy’s insurance regulator, where he has been head of the supervisory regulation and policy directorate. Peter Braumüller, managing director at the Austrian Financial Market Authority, has been re-elected EIOPA’s alternate chair for a further five years.The appointments come shortly after EIOPA announced the results of its first ever stress test of European occupational pension funds.EIOPA chairman Gabriel Bernardino is currently in his second term of office, having been offered the extension by the board of supervisors last year due to his successes since the institution was founded in 2011.last_img read more

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Report finds lack of cost transparency at Sweden’s AP Funds

first_imgA report by the Swedish Social Insurance Inspectorate on administrative costs in the country’s pension system has found a lack of transparency in these fees, which it said could be problematic if pension savers did not know how much they were paying.The inspectorate, or ISF (Inspektionen för socialförsäkringen), said its report had taken a closer look than before into social security administration costs, productivity and quality.The ISF is an independent supervisory agency for the Swedish social insurance system and an agency of the Ministry of Health and Social Affairs.The report found that some of the administrative costs for both the AP funds and the premium pension providers – for example, the transaction costs and other fees associated with transactions – were difficult to estimate. Magnus Medelberg, one of the authors of the report, said: “It is also not self-evident what should be calculated as administrative costs.”The ISF had one definition in the report, but administrative costs could also be defined in other ways, he said.Asked whether the lack of transparency were a problem, Medelberg said: “It is a problem if pension savers do not know, and cannot easily find out, how much of their pension fees go to their actual pensions and how much goes to different administrative costs.”Among the report’s main findings was the conclusion that administrative expenses for pensions and other benefits to the elderly had increased over the past decade, in absolute terms, and were now higher than the administrative costs of health insurance. The report found that administrative costs for the AP funds 1-4 and 6, the so-called national pension buffer funds, were roughly the same in 2014 as they had been in 2005, the first year of the inspectorate’s study.However, administrative costs for the premium pension funds – AP7 and the private premium pension providers – have increased by 71% over the same period, in real terms, according to the report.Medelberg said the increased costs in the premium pension funds depended to a large degree on the construction of the Swedish pension system. The main reason for the increase was the fact the premium pension system was still rather young, he said.Having been launched in 2000, the amount of capital in the system is increasing year by year, and the total fee paid by pension savers rising along with that, he said.last_img read more

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Deutsche Asset Management head Price takes medical leave

first_imgQuintin Price, head of Deutsche Asset Management, is to take medical leave from the company after only a few months in his role.Price, previously head of alpha strategies at BlackRock, where he was also a member of the global executive committee, only joined Deutsche Bank’s asset manager in January after a management reorganisation that saw the company drop its previous name, Deutsche Asset & Wealth Management (DeAWM).In a note circulated to staff, co-chief executive John Cryan said Price had informed the company last week that he required a period of medical leave.Cryan said the unspecified treatment would “necessitate [Price’s] full-time focus for the foreseeable future”. “Quintin has built a strong executive committee composed of colleagues with many years of experience in serving clients and operating our asset management business,” Cryan added.He said that, in Price’s absence, global COO and regional head for Asia-Pacific at Deutsche Asset Management Jon Eilbeck would take over his managerial responsibilities and sit on the bank’s management board representing the asset management business.Price was hired in September to replace Michele Faissola, DAWM’s inaugural and only head, after the German bank decided to abandon its use of the DAWM “super-brand” to hold the asset management business entities it was unable to sell.DeAWM declined to comment.last_img read more

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Swiss pension association sees reform demands adopted by lower chamber committee

first_imgHowever, it said that the success of the reform package remains a “tricky tightrope walk”, and that “extreme demands” could jeopardise it. It reiterated its appeal for all stakeholders to be prepared to make compromises to ensure that much-needed pension reform is seen through and successful.One of the key aspects of the reform package affecting second pillar pensions is the proposal to lower the conversion rate, the Umwandlungssatz, which is used by occupational pension schemes to calculate pension benefits from accrued assets.The government’s AV2020 proposal envisaged lowering this from 6.8% to 6%, and the Ständerat and most recently the Nationalrat committee have also adopted this proposal.Where there are differences, however, is with respect to the measures to offset the impact of the lower conversion rate: the Ständerat came up with a different model to that of the executive, and the Nationalrat committee’s proposal diverges from the executive’s and the upper chamber’s. The SGK-N described said that the Ständerat’s model was “counterproductive” and would place more burden on future generations without presenting a structural solution.ASIP says that the current second pillar target pension benefit must be maintained in order for the lowering of the minimum conversion rate to be socially acceptable.It welcomed the Nationalrat committee’s proposal for measures for the “transition generation”, which for the SGK-N are those beneficiaries who will be 51 years old by the time the reform enters into force.One of the pension fund association’s key demands has been for a decentralised approach to be taken to finance the measures compensating for a lower conversion rate.The idea is that it would be up to affected individual pension funds to decide how to do this rather than this being dealt with within the state system; many Swiss pension funds already apply a lower conversion rate.The decentralised model being sought by ASIP was adopted by the Nationalrat committee, which ASIP said took into account one of the industry’s concerns.The Ständerat had proposed a centralised financing model, which would involve a central protection fund funding supplementary payments for the transition generation, which in its version counts beneficiaries from the age of 50.The next event influencing the AV2020 reform package’s path is a referendum in September on AHV-plus, a trade union-initiated proposal for a 10% increase in the state pension. It runs counter to the government agenda of controlling costs and could have a bearing on the AV2020 reform drive. Thereafter it will be the turn of the full lower house of chamber to deliberate its committee’s reform package, with a final parliamentary vote needed by the spring to ensure there is sufficient time to hold a subsequent referendum under Switzerland’s direct democracy rules. A parliamentary committee in Switzerland’s lower chamber has adopted its version of Altersvorsorge 2020, a comprehensive pensions reform package, which includes measures having been sought by the country’s pension fund association.The Altersvorsorge 2020 (AV2020) reform package has been making its way through the legislative process after the Swiss executive put forward the proposals in 2014.The upper house of parliament, the Ständerat, deliberated the reform package in September 2015, and last week it was the turn of the lower chamber, with its committee for social security and health (SGK-N) to carry out its second reading of the AV2020 proposals.The committee revealed its reform proposals last Friday afternoon, 19 August, with ASIP, the Swiss pension fund association, noting that the committee departed from the position of the upper house “on crucial points”.last_img read more

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Irish regulator urged to tackle risk of master-trust monopolies

first_imgIt also backed the introduction of a solvency framework to avoid members being required to meet the cost of a disorderly wind-up, and argued master trusts could see assets rise to an “excessive” level.“There is a ‘too big to fail’ risk, but will this engender too cautious an approach?” the association questioned.Its concerns about market dominance were shared by the Pensions Council, a statutory body offering government advice on pension reform while considering the impact on consumers.It echoed the IAPF’s concern that the introduction of master trusts, “without strong pro-competitive flanking measures”, would not “automatically” result in savings for members.“In the longer term, the number of substantial master trusts is likely to be small, with the consequent danger of the emergence of complex monopolies or oligopolies,” the Council’s submission to the Authority said.It suggested master trusts be required to publish all fees and investment options in a way that is comparable, and that cost-free methods of transferring savings between providers be put in place.Furthermore, it proposed the regulator learn from the UK’s approach to master-trust regulation, specifically the voluntary Master Trust Assurance framework, and that the collective approach to saving be replicated when it comes to decumulation by establishing group Approved Retirement Funds (ARFs).The regulator has long backed the introduction of master trusts in Ireland and has also suggested it would be hard to justify the continued existence of more than 100 pension funds in the country in future. Its consultation on the future of pension regulation, which closed earlier this month, attracted more than 60 responses from industry, a spokesman for the regulator told IPE.The Authority still plans to submit its final report to the Department of Social Protection by the end of the year, he added. Trustee qualificationsOverall, the Council and the IAPF were largely positive about the regulator’s reform proposals, and the pension association also backed the regulator’s proposals to improve levels of trustee education.“We particularly welcome the acknowledgement that non-professional or lay trustees can bring a significant amount to their role as a trustee and to the administration of the scheme generally,” it said.“The independence and strong sense of looking after their colleagues’ savings that lay trustees have needs to be preserved as much as possible in the system.”The IAPF previously raised concerns about trustee qualification proposals unveiled by the regulator, questioning how lay trustees would be able to acquire the two years’ experience suggested as a minimum threshold.,WebsitesWe are not responsible for the content of external sitesLink to IAPF consultation responseLink to Pensions Council’s consultation response Master trust regulation must tackle the danger of monopolies or oligopolies emerging, Ireland’s pensions regulator has been told.The Pensions Authority should also ensure trustee boards are independent from master trust providers, and that the potential dominance of a small number of providers does not result in “group think” within the market.Responding to a wide-ranging consultation on the future of Irish pensions regulation, the Irish Association of Pension Funds (IAPF) backed the introduction of master trusts – which have proven successful in a number of markets, including Australia and the UK – but challenged the assumption their introduction alone would improve member outcomes.The association called for lay trustees to have a place on the boards of master trusts and questioned whether the costs borne by members would be fully transparent within a master-trust system.last_img read more

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UK roundup: CWU rejects revised Royal Mail DB replacement scheme

first_imgThe Communications Workers Union (CWU) has rejected the latest proposal Royal Mail has put forward for replacing its current defined benefit (DB) scheme.The Royal Mail Pension Plan’s DB section will close to future accrual at the end of March next year.On Friday the company, which operates the UK’s postal network, said it was offering members a choice between a new DB scheme and a new defined contribution (DC) scheme.The DB plan would be a “cash balance” scheme, providing members with a guaranteed lump sum at retirement. Royal Mail said that under its proposal there would be “less need – or even no need at all – for members to give up [the] annual pension to get a tax-free lump sum” at retirement. The company had already proposed a replacement DB cash balance scheme earlier this year, following an initial proposal from the CWU.It said the total company contribution, at 15.6%, was the same as under its initial proposal, although the contribution to members’ retirement accounts would increase from 12.6% to 13.6%. The remaining 2% would be contributions for other benefits, such as death in service.The company contribution to the proposed new DC scheme would be 13.6% of pensionable pay.The CWU had strongly criticised the initial DB cash balance proposal from Royal Mail, and on Friday it said it rejected the company’s latest offer.Terry Pullinger, deputy general secretary for postal at CWU, said: “It does not meet our aspiration of a wage in retirement pension scheme, but rather still promotes the conventional wisdom of a cash-out arrangement at the point of retirement.”The CWU put forward its own idea for a new replacement scheme in March, and Pullinger said that although Royal Mail’s latest proposal used elements of that, “it would still represent a significant shortfall in the pensions promise and it is not something that we are prepared to recommend to our members”.Unite has said it would hold a consultative ballot on the proposal starting this week, without making any recommendation to its members about accepting or rejecting Royal Mail’s proposal.Brian Scott, Unite officer for the Royal Mail, said the proposals from Royal Mail were an improvement on what the company had initially proposed.Royal Mail said it expected the overall cost of the proposal to be funded within its current £400m (€456m) annual pension contribution budget, and that the risk to the company of the proposed DB scheme would be materially lower than under the current plan.Atomic energy pensioners call for investigationPensioners from the former UK Atomic Energy Authority (AEA) have called for an investigation into the circumstances leading to their pension scheme entering into the Pension Protection Fund (PPF).Prospect, a trade union, is co-ordinating the pensioners’ campaign. It relates to the AEA Technology (AEAT) DB pension scheme, which was set up in 1996 following the privatisation of part of the AEA. Many people transferred their accrued rights to the scheme following privatisation.The pension scheme entered the PPF’s assessment period in 2012 after its liabilities became too large for the sponsor to manage. It was fully transferred to the lifeboat fund in July 2016, with pensions paid based on PPF rules.In a statement, Prospect said this meant pensions of scheme members were not paid in full. The PPF pays 90% of deferred members’ accrued benefits subject to annual cap of £38,505. No indexation is applicable to benefits accrued before April 5, 1997.The union said that more than 3,000 members of the AEAT pension scheme lost on average one-third of their pension entitlement because of “business, government and regulatory failure” that led to the scheme entering the PPF.The campaigners estimate a total shortfall in their pensions of £182m (€208m). They have called on the Parliamentary and Health Service Ombudsman to investigate what happened and recommend compensation.Oliver Letwin, a member of parliament, said in October 2016 that the ombudsman should be able to rule on whether there had been “maladministration” in the way pensioners were informed about the new AEAT scheme.It was noted in response that a complaint regarding information provided to employees about their pension rights would fall within the remit of the Pensions Ombudsman rather than the Parliamentary and Health Service Ombudsman.The pensioners have previously made submissions to the Work and Pensions Select Committee and the Pension Ombudsman and complained to government departments, ministers, scheme trustees, and the PPF, but this had “fallen on deaf ears”, the union’s statement said.  PLSA moves ahead with diversity initiativeThe UK’s trade body has chosen Northern Trust Asset Management as the “headline partner” for its diversity initiative, “Breaking the Mirror Image”, which aims to encourage greater diversity on trustee boards and across the pensions industry as a whole.The Pensions and Lifetime Savings Association launched the initiative in March with the release of a collection of essays, and said that it will work with Northern Trust on a programme of events and training over the next year.This will include a diversity leadership training programme and a one day diversity conference. Hermes research costs Hermes Investment Management is to stop passing on the cost of external analyst research to its clients, a spokesperson confirmed.Under the Markets in Financial Instruments Directive (MIFID II), asset managers will be forced to pay for sell-side investment research and separate the costs for research from transaction costs to achieve full cost transparency for end clients, effective from January 2018.Several asset managers have already said they would absorb external research costs rather than passing these on to clients.last_img read more

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