JLT Employee Benefits – Hugh Nolan has been appointed chief actuary. Nolan will represent the company in its engagement with the Pensions Regulator and trade bodies such as the Society of Pension Consultants and the Association of Consulting Actuaries. Pictet Asset Management, Ignis Asset Management, First State Investments, JLT Employee BenefitsPictet Asset Management – Roger Price-Haworth has been appointed head of institutional business development for Ireland and the UK. He joins from BNP Paribas Investment Partners, where he was head of UK institutional business. He has more than 30 years’ experience in financial services and has previously headed UK institutional business development teams at Pioneer Global Investments and Insight Investments. Separately, Anahita Firouzbakht has been appointed consultant relations manager in the Global Consultant Relations team, joining from Partners Group.Ignis Asset Management – Eric Stobart and David Watts have been appointed non-executive directors. Stobart will chair the Audit and Risk Committee, while Watts will chair the Investment Committee. Stobart currently holds non-executive roles at Throgmorton Trust, Utilico Investments and Capita Managing Agency and senior trustee positions on the pension schemes of Lloyds Banking Group, Anglian Water, Dixons Store Group and Lloyd’s of London. Watts is currently a non-executive director at JP Morgan Fleming Income & Growth Investment Trust and has previously held non-executive directorships at Martin Currie Investment Management, Investec High Income Trust, Merchant Navy Ratings Pension Fund, Key Asset Management and AXA UK.First State Investments – FSI has made three hires to its European Direct Infrastructure team in London. Volker Häussermann joins as a director from Deutsche Asset & Wealth Management Infrastructure Europe, where most recently he was a vice-president. Batiste Ogier has been appointed as a senior executive, joining from KPMG Corporate Finance, while Mats Hope joins as an executive from UBS Investment Bank.
PWRI, the €6bn pension fund for disabled workers in the Netherlands, has claimed new legislation aimed at directly employing handicapped workers in regular companies would cause it “considerable” financial damage.It argued that the introduction of the Participation Act as of 1 January 2015 would mean an end to the influx of new participants into the pension fund. During the reading of the bill in Parliament last week, Jetta Klijnsma, state secretary for Social Affairs, said she would not increase her initial offer for an annual €10m payment as of 2018 to compensate the scheme for increased costs.As the age of its 100,000 active participants is already 47 on average, the lack of new participants will lead to a contribution increase from 28.2% of the pensionable salary to more than 40% in 2050, the scheme said. It has calculated that the ageing effect on its population will require an additional €490m for cost-covering premiums until 2060, when the last participants pay their contributions.PWRI suggested these extra costs would lower its coverage ratio by 8 percentage points.Currently, the scheme’s funding is 108.2%.According to Xander den Uyl, the scheme’s chairman, the government’s promised compensation, apart from being too little, will arrive three years too late.“Our shortfall would still be €200m,” he said.Frans Prins, the pension fund’s director, pointed out that Klijnsma would only pay the compensation if the social partners of employers and unions found a way to fill in the remaining shortfall. He confirmed that the developments did not pose an immediate threat to the pension fund’s existence of the pension fund, adding that any rights cut would not be on the cards for some time.He said the pension fund wanted to maintain its independence, as it provides tailor-made services – including with respect to communication – to its participants, who live four year less, on average, than the average Dutch worker.PWRI has 100,000 active participants, 40,000 pensioners and 70,000 deferred members, affiliated with more than 100 workshops.
France’s public service supplementary pension scheme ERAFP has appointed three local managers to credit mandates worth €2.5bn.The €21bn fund said each of the three selected managers – Amundi, La Banque Postale Asset Management and Natixis Asset Management – would be granted at least €400m in assets but did not disclose the complete size of each euro-denominated mandate.The tendering process, which got underway in June last year alongside a tender for three Asia-Pacific equity managers, has also seen two additional firms selected as part of a framework agreement, allowing ERAFP to call on the services of Candriam and Groupama Asset Management without the need for an additional tender.The managers have been asked to implement a buy-and-hold strategy, following ERAFP’s wishes for a ‘best in class’ screening approach to investments in line with its socially responsible investment (SRI) charter. In addition to investment-grade bonds, the managers will also be allowed to invest in non-investment-grade European private placements and other European securitisation products, potentially allowing ERAFP to participate in the securitisation market should the European Commission succeed in its attempts to kick-start growth.The fund recently overhauled its SRI charter, placing a greater emphasis on companies being fully transparent about their financial arrangements and tax affairs, and setting itself a goal of discussing shareholder resolutions for 60 of its listed holdings. Read ERAFP chief executive Philippe Defossés’ thoughts on dealing with manager underperformance
Frank Field, a former UK minister and outspoken supporter of pension reform, has been elected chairman of the parliamentary committee on work and pensions.Field, a Labour MP since 1979, was minister for welfare reform within the now-defunct Department of Social Security in former prime minister Tony Blair’s first Cabinet in 1997.He replaces Anne Begg, who lost her seat at the recent election.It remains unclear whether he will champion any of the previous committee’s more recent recommendations to review the rollout of auto-enrolment. While campaigning for the chairmanship of the committee, which scrutinises the work of the Department for Work & Pensions (DWP), he argued that his job would be to ensure pension savers would not harmed by the new freedoms to draw down their pension from 55, which were “safely delivered” in April.“But there is now a real danger that groups, similar to those who have already ripped off pension savers so consistently over the latter post-war years, will be at it again,” he said.The committee has previously called for a number of significant reforms to the pensions sector, including the abolition of the Pensions Regulator and a regular review of the current 0.75% charge cap on auto-enrolment default funds.During his brief tenure as junior minister, Field was seen as a radical reformer and pushed for workers to provide for their own pension “when they are in a position to do so” – seen at the time as an ultimately failed push for mandatory pension savings.However, Field resigned in 1998, laying the blame at the feet of then-chancellor of the exchequer Gordon Brown, implying he did not enjoy the support of the full Cabinet for his pension proposals.He subsequently founded the Pension Reform Group, campaigning for the reform of the state pension similar to the now-implemented flat-rate state pension.In 2003, he urged the government to introduce a system of pension protection in the years before the launch of the Pension Protection Fund.After the Pensions Commission proposed the launch of auto-enrolment and creation of the National Pension Savings Scheme – which eventually became the National Employment Savings Trust – he argued that critics of the idea should be ignored, as they were “just vested interests scared stiff” of the idea they would lose business.
Defined contribution (DC) master trust The People’s Pension has dropped Legal & General Investment Management (LGIM) in favour of State Street Global Advisors (SSgA) as its investment platform provider.The auto-enrolment DC scheme, having been with LGIM since October 2012, said appointing SSgA was necessary due to the UK’s new pension freedoms.It will now use SSgA for investment-management services, as well as the asset manager’s platform to allow its 1.6m members to select funds.The People’s Pension offers members fund-selection options but also an ethical option, as well as default funds based on risk tolerance. SSgA’s platform can be adapted to include other investment managers than itself, which B&CE, owner of the The People’s Pension, said would be reviewed over time.Patrick Heath-Lay, chief executive at B&CE, said: “We have been working with the trustee board in undertaking a wide-ranging review of investment and at-retirement options.“We have some exciting plans for the future, and the move is the first step in bringing those plans to life.”In other news, Aon Hewitt has urged UK pension schemes to tread lightly when updating mortality assumptions based on increasing death rates in the UK.The consultancy said official UK statistics data showed 2015 had been heavy for mortality compared with a year earlier.However, Aon Hewitt said this needed to be treated carefully.The Continuous Mortality Investigation (CMI), part of the Institute and Faculty of Actuaries that conducts research into longevity expectations, updated its projections based on figures from the Office for National Statistics (ONS).Aon Hewitt said schemes should treat the revised CMI with caution and remain focused on longer-term trends.Martin Lowes, a partner at the consultancy, said the ONS data showed that mortality was higher in the previous three years leading up to 2015 compared with the expected long-term trend.Pension funds, however, need to consider how much weight to put on recent fluctuations, he said. “[Schemes] should not allow their projections to over-react to annual changes in the numbers of deaths, as these may be caused by one-off factors rather than being part of a long-term trend,” he said.“Life expectancy is still increasing, just perhaps not quite so rapidly as before. We will need to see what happens to mortality rates over the next few years to help us judge the extent of this slowdown.”
The Association of Liberal Profession Pension Funds (ADEPP), which represents Italy’s casse di previdenza, has agreed to support a new fund to help rescue the country’s struggling banks.Atlante 2 will be created as a fund to invest in the banks’ bad loans, buying them at below book value but for more than would be paid by distressed debt specialists.The initial contribution from ADEPP members will be €500m.The new fund will allow undercapitalised banks to be supported without breaking European Union state aid rules. The first beneficiary is likely to be Monte dei Paschi di Siena, one of the country’s biggest lenders, which is expected to have performed poorly in stress tests carried out by the European Banking Authority (EBA).The EBA will publish the results later this week.Alberto Oliveti, president at the ADEPP, announced the deal to back Atlante 2 after a meeting with government officials yesterday.Oliveti told the ANSA news agency: “We are aware it will not be the most profitable of investments, but, on behalf of our members, we are trying to protect against future country risks, which could cost us much more than we might lose through this investment.“There is now a great focus on the development of our country and its economic framework because it is from this our members derive their jobs, earnings and the expectation of a pension.”The contribution will have to be agreed by ADEPP members, but Oliveti said the vast majority were in favour.Italian pension funds were previously encouraged to invest in Fondo Atlante, a similar fund now backed by investors to the tune of €4bn, promising a 6% return.However, many pension funds considered that this return was not worth the risk.Claudio Pinna, managing director at Aon Hewitt in Rome, told IPE: “The implications for pension funds investing in Atlante 2 depend on whether they are defined contribution (DC) or defined benefit (DB) funds.“However, based on the expected level of risk and return, it would be difficult to see how it could be interesting for a DC pension fund.“It could probably be interesting for a DB pension fund, but for a very limited component of the accrued assets.”He also said there might be implications if investment in the fund could put pressure on the government to introduce a more favourable fiscal regime for pension funds.
The agreement is for passive investment management including the tracking of “a broad range of generic, non-proprietary, traditional and alternatively weighted equity and bond indices”.The deadline for receipt of tenders or requests to participate is 7 October.In other news, the Norwegian municipality of Bærum has put out a tender notice seeking consultancy services to help it assess the quality of pensions provision for its employees.The winner of the contract will help Bærum with an “impartial quality assurance of pensions” from Bærum kommunale pensjonskasse, Statens pensjonskasse (SPK) and KLP.The municipality has a pension scheme for staff managed across these three providers, with teachers covered by Statens pensjonskasse, nurses by KLP and other employees by Bærum kommunale pensjonskasse. The contract is to start on 1 January 2017 and run until the beginning of 2022.The deadline for receipt of tenders or requests to participate is 10 October. Norfolk County Council has formally put a contract out to tender seeking managers for a framework agreement to provide passive investment management services, primarily intended to be for the local government pension schemes (LGPS), including emerging asset pools.According to the tender announcement, the contract – to be made with several operators, the council says – has an estimated value in terms of fees and charges of between £20m and £140m (€24m-166m) over the whole 48-month duration of the agreement.Norfolk County Council, which has been overseeing the National LGPS Frameworks, announced in mid-June that it was soon to launch a procurement exercise for passive management.Norfolk put out the the tender on its own behalf and that of five other local authorities and local authority pension funds – Essex Pension Fund, Hampshire, Kent, Northamptonshire and Suffolk County Council, although the framework might also be used by other parties, including any administering authority within the LGPS, the Pension Protection Fund or any other public sector pension scheme. It is also open to the asset pools that are being set up by the LGPS.
Six months after the rights issue, in October 2008, the bank – by then on the brink of collapse – was bailed out by the UK government, which still owns a majority share.The claimants asserted that the bankruptcy had been caused by the bank’s aggressive expansion into structured credit markets, an inability to manage its capital requirements, and its “reckless and highly damaging” acquisition of Dutch bank ABN AMRO the previous year.All this had made RBS exceptionally vulnerable to the liquidity crisis which by then was engulfing global financial markets.The claimants maintain that had the truth about RBS’s financial position, and about the insufficiency of its proposed capital raising, been disclosed in the prospectus, the rights issue would not have gone ahead, or at least, not on the terms it took place.As it was, by January 2009, the price of RBS shares sold via the rights issue had fallen to 11.6p each.Three of the five groups have now settled with RBS.The remaining two – led by Signature Litigation and the RBS Shareholder Action Group, and representing individual shareholders – are still pursuing legal action, with proceedings set to start in March 2017.Were these parties to settle as well, the £800m would be shared between all five groups. The overall claim for all groups is £4bn.Michael Vos, APG spokesman, told IPE: “APG decided to join the lawsuit because we were seeking redress regarding the 2008 rights issue. We are pleased that an agreement has now been reached.”The claim for the group that included APG and over 300 other institutions was brought by litigation-only law firm Stewarts Law.Clive Zietman, partner and head of commercial litigation, Stewarts Law, said: “Pension funds in the UK are understandably cautious and conservative when it comes to litigating. That said, they have a duty to act in the best interests of their policyholders and many consider that they have a duty to at least consider potential law suits, bearing in mind other factors such as costs and reputation.”He concluded: “I do expect to see more cases of this kind in the UK and Europe.”The Stewarts Law action was backed financially by US lawyers Grant & Eisenhofer and included after the event (ATE) insurance against adverse costs.Zietman said: “Funding and ATE insurance help create a risk-free litigation environment which institutions such as pension funds naturally find much more palatable than the alternative.” Dutch pension fund manager APG, Denmark’s Sampension KP Livsforsikring, and Sweden’s AP1 are among hundreds of institutions worldwide who have agreed a settlement potentially worth £800m (€939m) with The Royal Bank of Scotland (RBS), over losses incurred after they invested in a £12bn rights issue shortly before the bank went bust.The shareholders who have chosen to settle also include BP Pension Fund, Railpen, and the Transport for London (TfL) Pension Fund, plus UK local government pension funds for authorities such as Greater Manchester, Strathclyde, South Yorkshire, Kent and Lancashire.Retirement funds for teachers, fire service and local government employees across the USA are also among the claimants, while asset managers include BlackRock and State Street.Five separate shareholder groups had sued RBS in the Chancery Division of the UK’s High Court, claiming that shares sold for £2 each in the bank’s April 2008 rights issue were in fact either worthless, or worth at most a fraction of the price they had paid.
#*#*Show Fullscreen*#*# The six largest Canadian pension funds have increased their leverage by five percentage points since 2009 on an aggregated average – placing a potentially greater strain on their sponsors, according to Moody’s.The analysis looked at funds including the Canada Pension Plan, Ontario Teachers’ Pension Plan (OTPP), and Caisse de dépôt et placement du Québec.Over the past several years the funds have developed into new asset classes such as short-term commercial paper and medium-term notes, equity short-selling and secured real estate mortgage investment strategies to diversify funding sources, enhance fund liquidity and increase return, the rating agency said in a note on Canadian pension funds last week.“The combination of higher leverage and less-liquid investments raises risks for pension funds, increasing future return volatility,” Moody’s analysts said. This magnified losses as well as gains, increasing funds’ sensitivity to interest rate increases, and adding counterparty credit risk for transactions that were not centrally cleared. The rating agency continued: “Although Canada’s six largest pension plans have nearly doubled in size, on a combined basis, in the past five years, which gives them more negotiating power to lower transaction costs and participate in larger investment opportunities, efficiencies have only partially offset lower returns.”Ontario Municipal Employees Retirement System held a large portfolio of real estate assets, financing it with secured term debt, while OTPP and the Healthcare of Ontario Pension Plan both held a large proportion of fixed income to support repo and derivative leverage strategies, the rating agency said.In addition to taking on more leverage, Canadian pension funds have been allocating to higher-yielding, less-liquid asset classes to offset cash flow pressure an ageing membership base.The rating agency said increased leverage and higher model risk – from increased allocations to less liquid assets – were “credit negative” for the connected entities it rated (including the provinces of Ontario and Quebec and the Canadian government) but also tended to have constructive rationale in that they were designed to reduce funding risk and ensure plan sustainability.“Diversification of leverage sources improves funds’ liquidity, helping them weather market downturns and take advantage of investment opportunities without the need to immediately sell other investments,” said the Moody’s analysts. “As well, investment returns of private assets are typically higher because of a liquidity risk premium.”However, Moody’s also warned that “should a prolonged decline in investment values materialise, higher interest costs and lower liquidity would further strain fund cash flows”.It added: “This could result in cuts to retiree benefits and/or increases to contribution rates from employees, and employers would commensurately reduce liabilities and/or bolster pension plan asset positions.”#*#*Show Fullscreen*#*#
The €403bn Dutch civil service scheme ABP is to provide all its 1m active participants an overview of their accrued pension rights as well as their estimated final accrual at retirement if they stay with the pension fund.Nicole Beuken, ABP’s director, said the “pensions pot” was a communication concept to visualise how much the individual participants have saved up so far.She emphasised that the approach was separate from the possible introduction of individual pensions accrual in the new pensions system that is currently being hammered out. It was not a plea for the introduction of individual pension arrangements either, she added.Beuken said that the concept had been proven to work and would be introduced from next year. An example of ABP’s visualisation toolSource: ABPThe visualisation takes the form of a graph, starting with current pension savings and continuing to the expected accrued assets at retirement.Each stage shows which part of the capital has been paid by the participant, which part by the employer, and what has been contributed through the pension fund’s return on investments.The forecasted return is based on the result on risk-free investments, as is also used in the uniform pensions statement (UPO), a standard document issued to all pension members across the Netherlands. However, the graph of the pensions pot doesn’t show the percentage used to calculate accrual through investments.Beuken noted that such an inexact and simple illustration initially triggered resistance from legal experts and actuaries, but she said they were eventually convinced “as the concept was very easy to explain to participants”.Raoul Willms, programme director at APG, ABP’s pensions provider, said that the visualisation concept was meant to prompt participants into action and increase their confidence in the pension fund.“Tests have showed that this works, as half of the participants visited their pensions portal at ABP to seek additional information,” Willms said. “Their answers also made clear that their faith in the pension fund has increased as a result of the information.”Beuken said that other pension funds were allowed to use the concept developed by ABP and APG.“They could also adjust it to their specific situation, although I hope that the resulting setups aren’t too much different, as this would not be in the interest of the participants,” she said.Beuken added that additional testing would continue into the first quarter of 2018. Beuken explained: “An important reason for the overview of accrued pension rights is that we wanted to remove incorrect impressions among participants.“Some [people] wonder whether they will ever receive their contribution in benefits, or even think there won’t be any benefits left at all at retirement.”During this year, ABP extensively tested the pensions pot among 3,000 participants.Beuken said the testing had revealed that participants preferred a simple reflection of their accrued pension, and that they didn’t appreciate additional information, such as various scenarios.