Solvency levels at Finland’s employee pension insurance companies strengthened between July and September 2014, but investment risks also increased in the period, according to the Finnish financial supervisory authority (FIN-FSA).In its latest quarterly release of data on the capital position of the Finnish banking and insurance sector, the regulator said the solvency ratio of the country’s employee pension insurers rose to 31.1% at the end of September from 30.5% at the end of June.But while it said that the average risk-bearing capacity of employee pension institutions could be considered strong, the risk level had continued on a slight upward trend, as the share of hedge funds and shares of the investments increased.Anneli Tuominen, director general at FIN-FSA, said: “In the insurance sector, the main vulnerabilities are related to rapid adverse developments on stock and bond markets combined with the very low level of interest rates.” Separately, the Ministry of Social Affairs and Health said new Finnish solvency rules for pension institutions had now been put before Parliament, and included the stipulation that providers would have to identify risks linked to each investment separately when calculating their solvency limit.Provisions concerning the coverage of technical provisions would be abolished, the ministry said, because they would be superfluous under the new system.The new rules will apply to employee pension insurance companies, pension funds and the Seafarers’ Pension Fund and partially to the Farmers’ Social Insurance Institution.In other news, Danish pensions administrator PKA said the move to merge the pension funds it runs into just three had reduced costs by 15% in two years.It said its 265,000-strong membership would each pay on average DKK450 (€47.5) in 2015 in administration costs, down DKK85 since 2013 – corresponding to a fall of 15%.PKA said mergers and efficiency were the key reasons for the fall in costs.Peter Damgaard Jensen, managing director at PKA, said: “In 2014, we merged four pension funds into two, so there are now three pension funds within PKA.”Just over three years ago, he added, there had been eight pension funds within PKA.Meanwhile, Danish pensions and insurance industry association Forsikring & Pension (F&P) said an official indicator pension funds use to calculate expected future pensions was being revised down in the short-term because of very low interest rates.Long-term expectations, however, remained unchanged, it said.The indicator – known as the social assumptions (Samfundsforudsætningerne) – is agreed by F&P and the Bankers’ Association (Finansrådet), as part of the Danish FSA’s (Finanstilsynet) guidance on pension projections.Due to extraordinarily low interest rates, F&P said the indicator was now being divided into two parts – a short-term portion (2015-18) and a long-term portion (2019 onwards).“In the short term, interest rate and yield assumptions are lower than previously, while the conditions are maintained in the long term,” the association said.Meanwhile, labour-market pension fund PensionDanmark has appointed Hermes EOS to help implement its responsible investment policies and continue with its active ownership approach.It said Hermes EOS would provide its “full spectrum of stewardship services” on the pension fund’s foreign-listed equity portfolio of around €6.5bn, as well as help the fund manage risks and add long-term value to its investments.Jens-Christian Stougaard, director at PensionDanmark, said: “Alongside our obligation to pursue high risk-adjusted investment returns, we also have a fiduciary duty to tackle social, ethical and environmental issues.”Hermes EOS said PensionDanmark was the fourth Nordic client the company had taken on, after Unipension, PKA and Industriens Pension.
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Aer Lingus and the Irish state may be facing a €174m High Court case over the decision to reduce pensioner benefits paid by the Irish Airlines Superannuation Scheme (IASS).The Retired Aviation Staff Association (RASA), representing pensioners affected by the changes to the IASS, met earlier this week and were unanimous in their support for a legal challenge, according to a statement.The RASA said pensions in payment had been cut after the Pensions Authority accepted the funding proposal put forward by the IASS trustee board, submitted after years of negotiation over the €715m deficit.The IASS – a multi-employer fund sponsored by the Irish flag carrier and the Dublin Airport Authority – cut benefits by an estimated €174m as part of the proposal, with the RASA alleging that the liability had been transferred to pensioners. In its statement, the association only said that the probable High Court case would be brought “against a number of potential defendants”, which could include the sponsoring companies and the government.Both the RASA and L K Shields, the law firm representing the IASS pensioners, declined to comment further.Cuts to pensions in payment were made possible after the Department of Social Protection changed the priority order of assets on wind-up, which previously offered complete protection to a pensioner’s accrued rights.The previous regime was considered inequitable by many critics, including parliamentarians, as it would necessitate deeper cuts to active and deferred members’ pensions where a scheme was in deficit on wind-up. In other news, the Irish Stock Exchange (ISE) has implemented a new web-based fund information portal aimed at institutional investors.The portal, named ISE FundHub, offers detailed information on funds listed on the ISE.It displays the current net asset values (NAVs) and NAV histories of each listed fund, as well as key fund documents, and provides profiles of investment managers.Other functionalities are categorisation of funds, comparisons versus peers and analytics.At the launch of the platform in November last year, 20 investment managers had agreed to use the service.Among the fund managers already using the service are J O Hambro, Neuberger Berman and Dragon Capital.The ISE is currently in discussions with other fund managers that already list their funds on the exchange, including Goldman Sachs and US money manager Lord Abbett.It hopes to have 100 fund managers using the service by the end of this year.The ISE Fund Hub was developed in partnership with FundConnect, the Danish fund infrastructure provider.Rose Ward, vice-president for international primary markets at the ISE, said: “A consistent theme was that both investors and managers wanted more information on funds. By providing NAV histories, peer comparisons, access to key fund documents and investment manager profiles, we are addressing that requirement.”For more on the DC reforms facing the Irish pensions industry, see the current issue of IPE magazine
According to the regulator, a “small number” of schemes said they would fail to achieve the minimum required funding of 104% within five years.In this event, they will need to apply a rights discount within this period.The regulator said the projected recovery was driven largely by surplus returns, with anticipated returns of 4.7% on average. On average, premiums did not contribute to improvement. DNB said it was concerned about the application of the maximum allowed return assumptions, plans for “possibly premature” indexation or combinations of these factors. It said it would begin to engage with potentially vulnerable pension funds, adding that it would also factor in feasibility checks, which need to be submitted before 1 October.The recovery plans were drawn at the start of the year and do not take into account the impact on funding of the reduction of the ultimate forward rate (UFR) for discounting liabilities. The UFR – cut from 4.2% to 3.3% – directly reduced pension funds’ coverage by 3 percentage points on average, according to the regulator.It estimated the subsequent impact over the course of the recovery period would be an additional 5 percentage points.This would be the case if current interest rates remained stable, which would lead to a decreasing UFR, it said. The average recovery plan is based on a funding of 100.7%, including the UFR, at the start of 2015 and 104.5% at year-end.According to pensions adviser Aon Hewitt, the coverage ratio of Dutch pension funds was 102% on average, as of the end of August.Next spring, the recovery plans will be assessed in light of the pension funds’ position at year-end. Dutch regulator De Nederlandsche Bank (DNB) has approved all but one of the 155 recovery plans submitted by underfunded pension funds. However, it also noted that a number of pension funds – “mostly the larger ones” – had factored in the highest allowed return assumptions, and warned that proposed premiums failed to contribute to general improvement.None of the recovery plans provides for rights discounts.Some months ago, a rights cut appeared to be in the offing for a single pension fund, but it submitted a plan that will enable it to recover within 12 years without cuts, according to the regulator.
Legal & General Asset Management (LGIM) has called on UK pension funds to consider alternative de-risking strategies, as Gilt yields dipped into negative territory.The UK’s largest asset manager said, in light of the Bank of England’s quantitative easing programme, it was likely the prevailing low yields, and the occasional negative yields seen on short-term paper on 10 August, could last for even longer than expected.As a consequence, it urged schemes to use real assets and corporate bonds for de-risking rather than rely solely on Gilts.LGIM’s head of institutional distribution Mike Walsh said that such alternative de-risking assets should be considered by gradually maturing defined benefit (DB) funds. “Adopting cashflow-matching techniques can assist schemes as they mature and become increasingly cashflow negative, thereby avoiding the need to be a forced seller of assets at a time when potentially a scheme can least afford it,” he said.“Market dynamics since the Brexit vote have reminded us that different types of real assets can diverge wildly in response to market events.”Walsh added that UK-quoted infrastructure and utilities had performed well since the UK’s vote in June to leave the European Union.“On the other hand,” he added, “we saw significant falls in the prices of UK REITs in the immediate aftermath of the vote, as well as some unit price reductions and suspensions from the managers of physical property funds.”Aberdeen Asset Management, Standard Life Investors, M&G and Aviva Investors all announced either suspension of trades on their property funds or introduced a discount on redemptions in the wake of the vote.“Although there are some signs the market is now becoming less pessimistic about the prospects for UK property,” Welsh said, “such short-term volatility can represent opportunities for longer-term investors such as pension schemes.”Pension funds will potentially be forced to rely on alternatives to Gilts in the wake of the UK central bank’s stimulus programme, which has seen the bank struggle to find sellers of UK debt.
The firm said in its report that it had changed its investment strategy before the start of this year to take account of the more volatile markets and the very low levels of interest rates.“This has meant a reduction in risk within the portfolio by bringing down the equities exposure, as well as an increase in the more stabilising asset classes such as property,” it said.As a consequence, all PFA customers came through the first half without negative returns, in spite of the negative market movements.PFA Group’s total assets rose to DKK584bn at the end of June from DKK545bn at the end of December.Meanwhile, the three pension funds run by Unipension – MP Pension (MP) for Danish M.A.s and M.Sc.s, the Architects’ Pension Fund (AP) and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) – reported first half pre-tax investment returns of 3%, 2.8% and 3.4% respectively.This compares with full-year 2015 returns of 4.4%, 5.1% and 4.7% for the three funds.All three pension funds said their half-year results included extra costs due to their ongoing separation from the Unipension cooperation they have worked within for the last few years.But administrative expenses were lower than had been expected, the pension funds said. MP Pension’s figures showed Danish equities to be its poorest-performing asset class in the six-month month period, making a 3.8% loss, while gilt-edged bonds were the strongest performers, with a 7.5% return.The pension funds announced in December that the Unipension name would disappear by the end of 2016, after AP and PJD decided to move their schemes to labour-market pensions provider Sampension, with MP Pension continuing alone.In other news, Engineers’ pension fund ISP, which is outsourced to commercial mutual provider AP Pension, saw the return on its guaranteed pension product surge to 12% in the first half of this year from 0.4% for the whole of 2015.Announcing interim results, the pension fund said the high return on the product was due in particular to the fall in interest rates in the period, which produced bond-price rises, as well as gains on its interest-rate hedging.However, the low level of prevailing interest rates also meant ISP had to put more money aside to be able to live up to its guarantees, the pension fund said.Yields on market-rate pensions were between 1.1% and 3.5% in the first half, depending on risk profile, compared with a range of 1.1% to 2.4% for the whole of 2015.Karin Elbæk Nielsen, director at ISP, said: “It was an area of focus for the board to maintain the positive development in returns, which was not as good in 2015.” Denmark’s largest commercial pension provider PFA Pension reported a fall in investment returns in the first half of this year but said steps it had taken to cut risk had kept profits positive despite negative markets.The return on PFA’s average interest rate product fell to 1.9% in January to June from 3.2% in the same period last year, while the return related to market-rate products fell to 2% from 6.6%.In absolute terms, however, PFA’s total investment return for the six-month period was DKK21bn (€2.8bn), up from DKK8bn.Allan Polack, chief executive at PFA, said: “I am very pleased with the return of DKK21bn, most of all on behalf of our customers because, in spite of a very challenging investment environment in the first half year – with low oil prices, Brexit, negative yields and other significant moments of instability – they can see a positive return on their pension assets.”
Klijnsma, however, said the regulator had concluded that, by extending the recovery period by one year, 24 pension funds would have to implement a 0.4% discount on average for 2m participants, including 190,000 pensioners next year.Under a 12-year improvement term, the necessary discount could be reduced to 0.4% at no more than 17 schemes.In her letter, Klijnsma took pains to emphasise the importance of the social partners, which, she suggested, could affect recovery conditions by adjusting pensions targets or by raising contributions.If, by the end of December, a Dutch pension fund’s coverage ratio has fallen so low it is unlikely to recover within 10 years, it must begin cutting rights immediately.The critical funding level can vary, depending on a scheme’s investment portfolio, but it generally stands at 90-95%.According to Aon Hewitt, on average, pension funds’ coverage stood at 100% last week.The nFTK calls for a minimum funding of 105% .Pension funds with a coverage between the critical level and the required minimum, however, can start implementing cuts later, as long as they are able to improve within the set 10-year period.The Dutch Bureau for Economic Policy Analysis (CPB), in a report that was also submitted to parliament, said longer recovery terms would be particularly beneficial for older workers at pension funds less than 100% funded. Jetta Klijnsma, state secretary at the Dutch Social Affairs Ministry, has confirmed that the government plans to decide early next year whether to extend the 10-year recovery term for the country’s beleaguered pension funds.In a letter to parliament, she said the decision would depend on schemes’ financial position at year-end, which is the criterion for rights cuts, as set out in the new financial assessment framework (nFTK).Klijnsma warned that, based on the regulator’s Q3 funding estimates, 30 pension funds would be forced to discount pension rights – by more than 0.7 percentage points on average – for more than 2.1m participants and pensioners next year.Current recovery rules dictate that pension funds must cut pension rights by a equal percentage annually over the next 10 years, with a view to achieving the required funding level of 125%.
That meant the re-labeling of assets was used to ensure spending stayed below the credit threshold for the local government.According to the ruling, the local government now either has to dissolve the fund or change it to fit within the constitutional framework.In the parliamentary debate following the verdict, the conservative opposition party in Rheinland-Pfalz, CDU, called the fund a “pension lie” told by the left-wing government SPD.“It is not a retirement provision as suggested”, said CDU MP Julia Klöckner. “It is merely a calculation trick to lower the debt level.”In response, SPD MP Alexander Schweitzer pointed out the provincial government had achieved the first budget surplus since 1969: “Our response to the increasing pension liabilities is a responsible budget policy.”Doris Ahnen, a member of the Rheinland-Pfalz government, promised the authorities will act on the court’s decision.“We will amend the labeling of the debt investments by the Pensionsfonds immediately,” she told MPs, “but we will take time to carefully prepare further changes to the legal framework of the fund.”Ahnen also promised a legal draft “before the summer”.Initially the fund had been set up with the intention of fully financing the local government’s pension liabilities. This was changed in 2016 when the fund was reduced to a mere reserve vehicle into which €70m annually had to be paid by the government.This annual sum is also part of the double budget for 2017/18, for which the government in Rheinland-Pfalz is currently trying to get a majority in the local parliament.Within the Pensionsfonds but in a separate portfolio, individual savings for civil servants are collected – but these were not contested by the judges. Conservative politicians in the German regional parliament of Rheinland-Pfalz called the province’s €5bn Pensionsfonds a “pension lie”.The government has been accused of using a reserve fund for civil servants to buy more local government debt.In a heated debate in Mainz on Wednesday, MPs discussed the ramifications of a recent verdict by the province’s constitutional court that these investments were “unconstitutional”.Since 2006, money going into the Pensionsfonds from the budget had been invested almost solely in regional government debt, the court found. However, within the public accounts these purchases of local debt are qualified as investments rather than government debt.
Record Currency Management was the first manager to sign up on this basis, IPE understands. The foreign exchange specialist announced this week that it saw the code as “as an important factor in the LGPS being perceived as a value led and innovative scheme”.The LGPS introduced the disclosure template in May 2017. Its current template, available on the Advisory Board’s website, is designed to collate all costs connected with investments in listed equities and fixed income.This morning the LGPS Advisory Board announced that “most” of its major asset managers had signed up to the code, covering more than £150bn of its total assets.LGPS funds and the emerging asset pools have started including compliance with the cost code as a prerequisite for being considered for new mandates. LGPS Central, which aims to combine £43bn of assets from 10 local authority pension funds, has done this for a recent global equity tender.Private equity code progressThe Local Government Association – the representative body for UK’s regional public sector organisations – has been working with private equity managers and the UK regulator’s Institutional Disclosure Working Group (IDWG) to finalise a version of the template suitable for the private equity sector.HarbourVest, Adams Street Partners, Pantheon Ventures, Partners Group are among the top managers running illiquid or unlisted assets for the LGPS system, and all confirmed to IPE they were participating in discussions. GCM Grosvenor, a US-based alternatives manager, has also taken an active role in discussions.A spokeswoman for Pantheon added that the parties aimed to have a version ready for the end of the current financial year (5 April for local government finances).Other asset managers falling into lineA number of leading LGPS providers have indicated to IPE that they would sign up to the code in the coming weeks.Aberdeen Standard Investments will sign up in the next two weeks, according to a spokesman. According to annual reports, Aberdeen Asset Management and Standard Life Investments together ran money for at least 44 of the 89 LGPS funds prior to the companies’ merger.M&G, Jupiter Asset Management, Kames Capital and JP Morgan Asset Management all told IPE they were in discussions with the LGPS to confirm compliance.Industry consensus building on disclosure templateThe UK regulator, the Financial Conduct Authority, set up the IDWG last year in the wake of its Asset Management Market Study. Managers of private equity and other alternative assets are preparing to sign up to the cost transparency code established last year by the UK’s Local Government Pension Scheme (LGPS).The Advisory Board of the £261bn (€292bn) public sector system agreed last week to allow managers of unlisted assets to sign up to its code, despite there not being a finalised template for disclosure for asset classes outside of listed equities and bonds.Companies including real estate specialist CBRE and unlisted asset giant Pantheon have indicated to IPE they would sign up to the voluntary code in the next few weeks following the board’s decision.Last week’s agreement means managers can signal their intention to supply clients with all requested data related to investment and trading. Chris SierChaired by Chris Sier, who helped develop the LGPS disclosure model, the group aims to build a disclosure template for use by all institutional investors and asset managers, collating all costs connected with investments in listed equities and fixed income.Templates for private equity and other asset classes are also in the pipeline.Speaking at the Pensions and Lifetime Savings Association’s investment conference yesterday, Sier said the standard had gained strong support from institutional investors and asset managers.The group aims to have a first version of its template ready for publication for the end of the current financial year (5 April), Sier said.“There isn’t a single asset manager that can’t get that data with a bit of effort,” he added.The LGPS has indicated that it will transition its own code towards the IDWG’s model once it is in place. Roger PhillipsRoger Phillips, chair of the Advisory Board, said in a statement: “The board is very pleased with the success of its Transparency Code and continues to support industry developments in this area.“Once work on the IDWG template is complete, the board will be working with its signatory managers in its adoption, building on what is already in place with the LGPS.”
The UK’s pension fund industry body will be working with representatives of entities across the investment chain to produce guidance aimed at helping schemes get to grips with new reporting deadlines and duties related to stewardship and ESG investing.Launched by the Pensions & Lifetime Savings Association (PLSA), the cross-industry group includes scheme investors, professional trustees, investment consultants, asset managers, and legal advisers.Its establishment comes ahead of new requirements kicking in in October 2020 following amendments to investment regulations for occupational pension schemes in 2018 and 2019. These build on a requirement for schemes to document, by October last year, their approach to environmental, social and governance (ESG) factors.Laura Myers, member of the PLSA policy board and head of DC at consultancy LCP, will chair the working group. Laura Myers will chair the ‘voting and implementation statement’ working groupShe said: “Many schemes are at the start of their journey when it comes to ESG and stewardship issues and after taking the time last year to document their policies they may now feel confused by the reporting requirements and how this applies to their scheme.“Providing clear support and guidance will give a helping hand to both DC and DB trustees who are also currently grappling with the challenges of COVID-19,” she added.“ESG issues are rising up the political and social agenda and I’m delighted that our group can help trustees be on the front foot to help improve standards across the industry and provide members with transparency on how their trustees have implemented these policies.”Asset manager voting behaviour templateThe PLSA said the new working group would produce two documents in time for trustee meetings this summer.Firstly, it would be producing a template and “pack” for asset managers to fill out to provide trustees with “clear and consistent” information about managers’ voting and engagement behaviour.In addition, the initiative will produce practical guidance to help pension schemes achieve “good practice” with regard to communicating how they have implemented their responsible investment and stewardship approaches.From the beginning of October, trustees of defined contribution schemes have to publish statements explaining how they have implemented their stated investment principles, including with regard to stewardship and environmental, social and governance (ESG) factors, as well as provide further information on their asset manager arrangements, including in relation to engagement with investee companies.Defined benefit schemes, in turn, will have to publish their statement of investment principles online by 1 October, and report annually on the implementation of their policies on voting and stewardship behaviour from 1 October 2021.Caroline Escott, policy lead on investment and stewardship at the PLSA, said the association had been “delighted” with the response from industry to the project so far.She added: “We believe that working with members from across the investment chain will ensure we produce practical, accessible guidance for schemes which supports them in producing meaningful, high-quality communications on their ESG, stewardship and voting practices.”A stakeholder group made up of key industry organisations, government departments and regulators will be supporting the work.Read moreMoving towards an ESG crescendoSackers’ Sam Dalling sets out some of the burning issues trustees should be considering in the run-up to new ESG reporting requirements kicking in
The home at 40 Junior Tce, Northgate, sold for $825,000.THIS family home at Northgate has sold for $825,000.According to CoreLogic data, the median house price for the suburb was $708,000.Ray White Banyo principal Renee Rennie said the home at 40 Junior Tce sold to a young couple, with the property settling late last month.“They’re a delightful young couple and they are so in love with the home,” Ms Rennie said. “It is going to be their family home and they will be there for a long time.”Ms Rennie said the home was recently renovated, and she had still been receiving inquiries on it until settlement.More from newsFor under $10m you can buy a luxurious home with a two-lane bowling alley5 Apr 2017Military and railway history come together on bush block24 Apr 2019Inside 40 Junior Tce, Northgate.“It was a renovated property with beautiful flow,” she said.The agent said the location of Northgate is what drew most buyers to the area, with it being within 10km of the CBD and close to the airport.Further north, 596 Flinders Pde at Brighton sold before auction for $1,475,000.Ray White New Farm agent Christine Rudolph said the buyers were desperate to purchase the home before heading overseas.“It’s the waterfront dream and they absolutely fell in love with it,” she said.“They’re eventually going to retire at that property.”Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 7:28Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -7:28 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels576p576p480p480p256p256p228p228pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenPrestige property with Liz Tilley07:29