The European Insurance and Occupational Pensions Authority (EIOPA) may not be able to publish its proposals for a holistic balance sheet (HBS) before 2015, according to chairman Gabriel Bernardino.Speaking at the EIOPA conference in Frankfurt, the chairman also said there was an obligation for second and third pillar pensions to draw up a key investor document (KID) for their clients.“We are all waiting for the proposal on a revised IORP Directive, which will be a fundamental step going forward,” Bernadino noted.But he added of proposals for the HBS, included in the Directive’s first pillar and later postponed by internal markets commissioner Michel Barnier: “There had been a clear word from the commission welcoming further work on the pillar I elements and that is our work programme for next year.” According to the EIOPA chairman the number of options for the HBS “will be narrowed down” from the current number of proposals.However, he said that this would be counteracted by a fleshing out of the proposals, such as which discount rate to apply to long-term investments, questions on how to value sponsor support, but also how national regulators would respond to an HBS approach.“For example will a supervisor immediately push for additional funding – that is not how we intended it,” Bernadino pointed out.He expects a proposal to be delivered late next year or “possibly in 2015”. On the question of further information and transparency requirements for pension providers, Bernadino reiterated EIOPA’s position set out in its advice to the commission on the IORP that “we want key investor documents (KID) for pensions, specifically for DC pensions within the second pillar” and “for personal pensions of course we need to have it”.This afternoon the European Parliament is voting on the PRIPs Directive on information requirements for investment products, which German pension association aba has warned could also end up covering second pillar pensions.Bernadino said whether further information disclosure requirements for pensions were introduced “in one or the other piece of legislation is not my concern”.The chairman said: “We need to have progress in this area, we need KID which in both pillars deliver better, not more information.”
Month: September 2020
In total, prosecutors speculate Sopaf may have profited €7.6m from the sale.The other alleged victims of Sopaf’s fraud were Enpam, the doctors’ fund, and CNPR, the accountants’ fund.Camporese, who is also chairman of Adepp (Associazione degli Enti Previdenzali Privati), the umbrella association for casse di previdenza, has denied any wrongdoing, saying the operation was run in a fully transparent way, and pointing out that the investment had performed well.The investigation will try to determine whether the profit generated for Sopaf within the operation was actually illicit. Meanwhile, Italian media have begun unveiling details on the matter, pointing out that, for two years, Camporese held a consulting role at Adenium Sgr, an asset management company controlled by Sopaf.Also, last week it was announced that Paolo Saltarelli, former chairman of the accountants’ cassa di previdenza, CNPR, had been arrested for receiving a bribe from Sopaf.The company is accused of embezzling €52m of CNPR assets. The chairman of the Italian first-pillar fund for journalists, Istituto Nazionale di Previdenza dei Giornalisti Italiani (INPGI), is under investigation by Italian authorities as part of an inquiry concerning Sopaf, an investment company accused of defrauding three casse di previdenza.Italian prosecutors are tyring to establish whether Andrea Camporese, chairman of the €1.5bn journalists’ cassa di previdenza, was involved in a deal that allegedly saw Sopaf make an “illicit profit” from the sale to INPGI of stakes in Fondo Immobiliari Pubblici (FIP), a state-backed real estate fund.At the beginning of 2009, INPGI made a €30m investment in FIP, with a price of €133,333 per share, a significant discount on the fund’s NAV at the time.The mechanism of the alleged fraud is yet to be made clear, although, according to Italian media, Sopaf may have reached an agreement on the price of the sale of FIP stakes to INPGI before actually buying the securities from another provider.
“Oil price movements will have less of an impact on renewables than many fear due to the longevity of climate change as an investment driver relative to the short-term fluctuations in commodity prices,” S&P said.It noted that many green bond proceeds were used not only for renewable energy projects but to tackle pollution, and fund housing and water projects unaffected by commodity-price volatility.The rating agency’s report argued that market growth would come from corporate and municipal green bond issuance but said the Chinese market’s embrace of the concept would be a “game changer”.It said there were several reasons China would have an interest in growing the diversity of the local bond market – including the government’s stated aim of reducing carbon emissions.But it added that green bonds could be a means of encouraging Chinese companies to issue debt, thus relieving the credit risk concentrated within the country’s banking system.Its prediction came the same day as the Climate Bonds Initiative and the International Institute for Sustainable Development launched a report in Beijing to promote the growth of green bonds in China by setting up a green bond market development committee to review market standards, among other things.The promotion of such standards, either through the private or public sector, is allowing green bonds to “take root”, according to S&P, although it added that the onus of ensuring individual bonds are compliant is still on investors.The European Commission recently indicated it would support market solutions over new regulation for green bonds as it seeks to establish the Capital Markets Union.Jonathan Hill, commissioner for financial stability, told IPE new legislation would not always be the most effective or proportionate approach.“In many cases, the onus will be on the market to deliver solutions,” he said. The recent decline in oil prices is unlikely to harm the green bond market due to the longevity of climate change as an investment topic, Standard & Poor’s has predicted.According to the rating agency, 2015 would be a test for the viability and durability of the green bond concept due to changes to energy markets.The report, ‘Corporate bond market shows its green shoots’, questioned whether recent market growth had in fact been the result of “exceptionally benign” capital markets conditions.But it concluded that the market would continue to grow despite falling oil prices.
It will now consult on any amendments required to the regulatory framework and conduct any cost-benefit analysis on its proposals.In other news, The Pensions Regulator (TPR) has said that, despite awareness for auto-enrolment being high among SMEs, many of those staging later this year are yet to prepare for enrolling staff into a pension scheme.Some 20% of those expected to stage between June and November lack any firm plans to undergo auto-enrolment, TPR said.The regulator welcomed the near complete awareness of auto-enrolment legislation (97%) among smaller medium-sized employers. However, only 86% of small employers were aware and 65% of micro.This comes as the National Employment Savings Trust (NEST), the government-backed master trust for auto-enrolment, announced it has reached 2m membersNEST has been active for just over two and a half years when auto-enrolment started in October 2012, and is safely the UK’s largest defined contribution platform.The scheme has a public service obligation to accept all eligible employers wishing to use the platform for auto-enrolment.NEST now accounts for some 40% of new members saving for a pension via the policy.Finally, RSA, a think tank, has suggested the UK government implement a policy where self-employed workers are prompted to join a workplace pension scheme, in order to increase savings coverage.Only 26% of self-employed workers contribute to a pension compared with 49% of employees, RSA said.The think tank said a policy akin to auto-enrolment for self-employed workers would not be feasible because of issues around volatile earnings, administrative burdens and a preference to save more flexibly.However, RSA said if the government supported a reminder about joining a workplace pension when filing tax-returns, the level of savings coverage could be increased.NEST currently accepts self-employed workers in its scheme but so far has only enrolled 700, according to RSA. The Financial Conduct Authority (FCA) has said it will work to create a ‘pensions dashboard’ that will allow savers to track all their pensions savings in one place.The UK’s financial services regulator made the decision as it concluded its study on the retirement income market.The quasi-government body will now work with HM Treasury to create the pensions dashboard in the longer term, it said.Other recommendations included forcing annuity providers to demonstrate how competitive their quote is compared with peers, allowing consumers to identify whether a better deal is available elsewhere.
The Superannuation Arrangements of the University of London (SAUL) is consulting with members to end its final salary defined benefit (DB) link and instead calculate benefits on a career-average salary basis.The £2.3bn (€3.3bn) pension scheme for employers associated with the University of London – a collection of institutions – is set to reveal a £310m deficit in its 2015 financial statement, leaving it 88% funded.A 12-person board, split evenly between sponsoring employers and union members, set about creating a deficit-reduction plan and tackle funding pressures on universities in the UK.The proposals recommend breaking the final salary link from April 2016 and shifting all future accrual to a career-average basis. They also freeze contribution levels for members at 6% and increase them for employers to 16% from 13%.The proposals are now out for consultation with members after receiving backing from the Unison and Unite trade unions, employers and the trustees of the scheme.The scheme already has close to 6,000 of its 38,000 members in a career-average scheme.However, 8,280 active members will be affected by the expected closure next year.Overall, it has 13,500 active members across final salary and career-average schemes, with close to 16,000 deferred.SAUL becomes the second multi-employer university pension fund to make such changes after the UK’s largest scheme, the Universities Superannuation Scheme (USS), introduced similar reforms.The USS benefit change was subject to a dispute between members and employers after the latter tried to change the scheme to career-average and cap the salary for DB benefits.The £42bn scheme is set to become a hybrid career-average DB and defined contribution (DC) scheme, as members went to vote on proposals in January, after trade unions backed the final recommendations.USS will cap DB entitlements at £55,000, with contributions taken from salaries above this being placed into a new DC scheme.Contributions from employers will be 18%, members 8%, with employers providing 12% of the 18% for members earning more than the salary threshold in the DC section.In the financial year to the end of March 2014, USS reported a deficit of £7.2bn as it began a triennial valuation, which is expected to reveal a substantially higher figure.
He said a separate category for infrastructure would allow Pensionskassen to increase investments in sustainable projects in Switzerland and thereby provide the government with a “private financing partner”.The MP also argued that infrastructure’s low correlation with other asset classes would help Pensionskassen achieve the necessary returns.If average third-quarter results are any indication, new sources of return would be welcome at most Swiss Pensionskassen.According to the UBS’s quarterly performance “barometer” for the second-pillar system, Swiss schemes lost more than 1.4% over the period.Credit Suisse’s Pensionskassen index showed a similar average loss of 1.47%.Both estimates were well below the legal minimum for mandatory pension fund contributions, currently at 1.75% but set to drop to 1.25% from next year. Year to date, the portfolios surveyed by UBS showed positive results from domestic bonds, real estate and hedge funds only.According to Credit Suisse, equities, both foreign and domestic, were the worst performers over the period.Liquidity positions also fared badly, due to the devaluation of the Swiss franc compared with foreign currencies, which triggered FX hedges. Green MP Thomas Weibel, in a motion put forward to the Swiss government, has called for the introduction in the regulatory framework of a separate asset class for infrastructure.He said a separate category should be introduced into the BVV2 investment regulation, instead of including the asset class within the “alternatives” category.Together with 11 other MPs, Weibel proposed a 10% cap for infrastructure investments without altering the caps for other investments.This change, he said, would remove the alternatives “stigma” from infrastructure, particularly with respect to supposedly high costs or lack of transparency.
Companies and workers in the Dutch hairdressing industry have called on the regulator to relax pension-liability discounting rules for pension funds with relatively young participants.In a letter to Parliament, social partners for Kappers, the hairdressers’ pension fund, claimed the lowering of the ultimate forward rate (UFR) last summer had a disproportionate effect on so-called “green schemes”. They said the reduction of the UFR from 4.2% to 3.3% caused Kappers’s coverage ratio to fall by 7.6 percentage points.By comparison, funding at other Dutch schemes fell by just 3 percentage points on average, they said. They added that they expected this difference to increase to 12% by the year 2025.Willem Kruithof of union CNV Vakmensen said: “We should be allowed to apply a fixed UFR or a fixed discount rate.”Kruithof argued that pension funds with younger populations would have more time than older schemes to recover from economic “headwinds”.“The supervisor and politicians base their policy too much on averages – the impact on specific categories can be very different,” he said.“It is impossible to explain to participants, aged between 18 and 31, that their contribution is to increase while their pension rights will fall – following a postponed indexation, for example.”Katinka Boekhorst, policy adviser at employer organisation ANKO, agreed that young pension funds were disproportionally affected.René Lahoye, employers chairman at Kappers, said the current rules would hit pensioners in particular, “as they are facing a long period without inflation compensation”.He added: “It would be reasonable to offer this group the chance to receive indexation through a slightly higher discount rate.”As of the end of October, the pension fund’s coverage ratio stood at 97.4%.The scheme, however, has ruled out a rights cut in 2016, following the rules of the new financial assessment framework (nFTK). In 2013 and 2014, it had to apply rights discounts of 7% and 2.8%, respectively, to improve its financial position.
The London borough of Islington’s pension fund is overhauling its emerging and frontier market exposure while dropping its passive equity managers for the region.The changes come as the £1.1bn (€1.5bn) fund implements its amended strategic asset allocation (SAA), which will see it reduce exposure to emerging markets to 6%, down from its 7% target.In a tender notice, the council said the new actively managed mandates would be worth a combined £60m.The future manager will be expected to build up “significant” exposure to frontier markets. “At this stage,” the mandate adds, “applications will be accepted from managers that manage equity, bond, multi-asset or other mandates from these markets.”The pension fund said it would not consider standalone products exposed only to either frontier or emerging markets.Parties interested in the mandate – which could run for an initial five years and be renewed for a further three – should contact the council by 20 June.The search for an emerging market manager comes as Islington shifts some of its assets to sub-funds managed by the London CIV, the local pension scheme asset pool that last year appointed four managers to oversee £6bn in London borough equity mandates.Among the nine sub-funds launched at the time, however, only two are actively managed, and both are for global equity strategies.The emerging market sub-funds offered by the CIV, managed by Legal & General Investment Management (LGIM) and BlackRock, respectively, are both passively managed.LGIM is Islington’s current source of passive emerging market exposure.However, Islington has shifted some of its equity investments to a CIV-launched sub-fund and now invests in an Allianz Global Investors-managed equity sub-fund commissioned by the pool rather than directly with AGI.
According to the AODP’s analysis, insurers lag behind pension funds when it comes to climate risk management, engagement and low-carbon investment.Julian Poulter, chief executive at AODP, said climate change posed “a double threat” to the insurance industry.“Insurers face mounting costs from claims relating to the impacts of climate change, and the investment portfolios that enable them to meet those claims are exposed to climate risks as the transition to a low-carbon economy accelerates,” he said.The AODP said there was a risk of “systemic failure”, with potential catastrophic effects on the wider economy given “the relatively few insurers currently taking action” on climate risk. In the not-for-profit organisation’s recent Global Climate 500 Index, 26 pension funds were rated A+ on managing climate risk but only one insurer, the UK’s Aviva.The next highest rated insurers were France’s AXA, rated BBB, and Germany’s Allianz, rated B.The AODP said that, across the index, one in eight insurers were taking tangible action to manage climate risk in their portfolios, compared with one in four pension funds.However, more insurers than pension funds recognise climate risk as an issue, and there are big regional differences, the AODP added.“European insurers are setting the standard when it comes to managing the risks of climate change in their investments,” it said.Nearly one in four insurers in the EMEA* region, with 41% of regional insurance assets, are taking tangible action on climate risk. Half recognise climate risk but are taking little action, according to the AODP. One-quarter of European insurers “do nothing”, providing no evidence of addressing the issue.Overall, the AODP considers that insurers are exposed more to climate risk than pension funds because a greater proportion of the former’s investments are in fixed income.This, according to the AODP, means they are dependent on rating agencies, “who are only starting to reassess this risk”.*One of the insurers in this region in AODP’s analysis is in South Africa, the others are European European insurance companies lead the industry when it comes to tackling climate risk in investments, although, overall, the insurance industry lags “way behind” pension funds on this, according to the Asset Owners Disclosure Project (AODP).It came to this view on the basis of its annual index rating the world’s 500 largest asset owners on how they tackle climate risk in their portfolios, and a special study that compared insurers with pension funds.Specifically, this insurance sector analysis compared 116 insurers, with $15.3trn (€13.9trn) of assets under management, (AUM) with 324 pension funds with $15.9trn of investments.This comparison covered 80% of the $38trn of assets covered by the AODP’s annual index of the top 500 asset owners globally.
The market value of the GPFG grew only slightly in relative terms during the year. NBIM said the strength of the Norwegian currency had been a key factor, with the krone’s rise knocking NOK306bn off the fund’s value during the year.Equities produced an 8.7% return for the GPFG and fixed income generated 4.3% in 2016.NBIM managed to beat the return on its benchmark index by 15 basis points, NBIM said.Øystein Olsen, chairman of the executive board of Norges Bank – Norway’s central bank and NBIM’s parent – said the board was satisfied that the return produced for the fund had been good last year, as well as over a longer period.“The board is also satisfied that management costs have been kept at low levels despite the gradual expansion of investments into new markets,” he said.Management costs amounted to 0.05% of the fund’s capital in 2016, he said.This is 0.01 of a percentage point behind the average cost level over the last five years, according to NBIM’s figures.Net withdrawals by the Norwegian government from the fund totalled NOK101bn during the year, following the first withdrawal ever from the fund in January 2016, when the state took out NOK25bn.The first deposit to the sovereign wealth fund, which exists to manage Norway’s petroleum wealth, was made back in May 1996.Slyngstad told a news conference in Oslo that while investments in emerging markets had remained relatively stable over the last five years at around 10%, and were expected to remain so, a “major shift” had happened into US investments and out of European assets.“What has happened in our portfolio in the fund over the last few years is that we have gradually got a larger proportion of investments in the US,” he said, adding that US investments were now at a record high level for the fund.The fund’s North American assets grew to account for 42.3% of the fund’s total portfolio at the end of December from 40% at the end of 2015, while European assets reduced to 36% from 38.1%. Norway’s NOK7.5trn (€846bn) former oil fund made a 6.9% return last year, led by equities bouncing back from January losses.However, the Government Pension Fund Global’s (GPFG) real estate allocation contributed less than 1% to the overall result, compared to a 10% gain in 2015.Yngve Slyngstad, chief executive of Norges Bank Investment Management (NBIM), which oversees the fund, said: “All of the fund’s asset classes generated positive returns, but it was the strong equity return in the second half of the year that drove the fund’s results.”In 2015, the fund made a 2.7% return on investments after management costs.