Danish government considers launch of pensions commission

first_imgØstergaard was responding to calls from experts including chief economic adviser Hans Jørgen Whitta-Jacobsen, Nina Smith — academic and member of the welfare commission — and pensions industry representatives, the ministry said.They had recently called for a spring cleaning of the pension system, it said.“It makes an impression when a chief economic adviser and one of the most respected economists say what they they have said,” Østergaard said.“And of course we in the government will consider what is the best way to conduct such an analysis,” he said.But the analysis would have to be thorough in order to avoid rushing into changes without having a clear overview of the consequences, he said.PFA, Denmark’s largest commercial pensions provider, said it welcomed the fact the minister was open to having a pension commission to “clear up the pensions jungle.”Lars Ellehave-Andersen, group director, said the company had been concerned for some time about Danish pensions model, which was often described as the world’s best – most recently in the Melbourne Mercer Global Pensions Index. “This is also the background to us asking the government at the beginning of March to set up a working group to chart the extend to which overall tax burden and offset rules were eroding Danes’ motivation to save for a pension,” he said. In the Børsen article, Smith said it was becoming increasingly clear that although there was a great pension system in Denmark, there were some “colossal problems with incentives”. She also says system should be made more transparent.Smith said it was lucky people did not understand the pension system, because if they did, there would be a serious problem since there many extremely high marginal taxes. The Danish government has said the country’s pension system needs to be analysed and that it is open to setting up a pensions commission to look into issues such as tax and insufficient coverage.The minister for taxation Morten Østergaard, said: “It is paradoxical that we have a system in which people first pay a high level of tax and afterwards get a series of benefits and rebates which depend on how old you are.“It is complex and needs to be thoroughly analysed to make all these questions fall into place,” he told the business daily Børsen.A spokesman for the ministry confirmed the comments and said the minister had said he was open to the idea of setting up a pensions commission.last_img read more

UK watchdog aiming to push guidance agenda, assert position in Europe

first_imgThe UK Pensions Regulator (TPR) has set out its vision for a changing regulatory landscape, voicing its determination to assert its influence at the European level.The watchdog also confirmed it would publish new guidance on defined benefit (DB) and defined contribution (DC) pension funds early next year, after 2014 saw significant changes to both approaches.TPR’s new chairman, Mark Boyle, who took the reins earlier this year, said once the UK government provided details on announced DC reforms, the regulator would work quickly to publish guidance for trustees.Speaking at the National Association of Pension Funds (NAPF) Annual Conference in Liverpool, Boyle said the regulator was working with the government and other regulatory bodies to facilitate the reform. Earlier in the conference, the government was criticised over a lack of clarity on what the reforms meant for the industry despite a fast-approaching deadline.“What this means in practice is providing the government with an idea of what the implementation of these policies might look like from a regulatory perspective,” Boyle said.“I am acutely aware of the amount of change the industry is dealing with. For our part, we will be providing guidance to trustees in the new year to help trustees once the detail of the new provisions is certain.”In the interim, the regulator will continue to work off its existing DC Code of Practice, unveiled only last year.Boyle also said TPR would be working to ensure changes in the DB landscape translated into meaningful regulation, particularly around its new Funding Code finalised in June.“The new code strengthens what schemes are already doing,” he said. “We are aware some schemes take inappropriate risk while some take too little.“Our case teams have undergone extensive training so the Code and its principles are translated into consistent working practices.”Regarding the IORP II Directive’s effect on UK pension schemes, Boyle said it was much too early to assess any potential impact, but he did say TPR would work with the government to support any negotiation decisions.“As an active member of European Insurance and Occupational Pensions Authority (EIOPA), we should be in a position to provide direct input and technical expertise reflective of the UK pensions regime,” he said.However, on the holistic balance sheet consultation launched on Monday, Boyle was more determined about the UK’s involvement in discussions.“We want to work as closely with EIOPA as we can and sitting round the table when these issues are being discussed,” he said.“We want to know where these ideas are coming from and their implications on UK pension schemes.”last_img read more

EFSI names board, backs projects financed by Danish schemes

first_imgA former head of France’s debt management office has been named to the board of the European Fund for Strategic Investments (EFSI) as the European Commission confirmed projects backed by Danish pension funds would be offered a investment guarantee. Ambroise Fayolle, vice-president for innovation at the European Investment Bank (EIB), is one of four members of the EFSI’s steering board, set to oversee the fund’s investment activities. Fayolle, who spent two years as chief executive at Agence France Trésor and has also acted as the French representative to the IMF and World Bank boards, will be joined by Maarten Verwey, a board member for the European Investment Fund. Verwey is also a former deputy director-general of the directorate-general for economic and financial affairs and has held a number of roles within the Dutch Ministry of Finance, including head of credit export finance.  Gerassimos Thomas and Irmfried Schwimann from the directorates-general energy and competition will also sit on the board. Their appointments come as the Commission said it would guarantee investments made by a new fund launched by Copenhagen Infrastructure Partners.The latest fund is among a series of infrastructure investment programmes and projects to be guaranteed by the European Union.Copenhagen Infrastructure II, financed by a number of Danish pension funds, is one of eight entities to be given a guarantee under the €350bn EFSI, which will be active by “early autumn”, the European Commission said.EFSI, part of EC president Jean-Claude Juncker’s mobilising Investment Plan for Europe, will guarantee the Abengoa research, development and innovation II project; energy efficiency in residential buildings; Grifols Bioscience R&D; the Äänekoski bio-product mill; Redexis Gas Transmission and Distribution; the Arvedi Modernisation Programme; and PPP primary healthcare centres in Ireland.PensionDanmark invested DKK4bn (€536m) in Copenhagen Infrastructure II, which has a total commitment of DKK14.7bn and is investing in large energy-related investments – including offshore wind, biomass and transmission schemes – through mezzanine and equity.The new fund is focusing on energy infrastructure in Northern and Western Europe, as well as North America. The fund has invested in a biomass power plant in England and two offshore wind projects in Scotland and Germany.The EIB recently provided equity-type financing of up to €75m to Copenhagen Infrastructure II. The financing was proposed for backing by EFSI. In February, Germany said it would contribute €8bn to the investment plan through government-owned development bank KfW.Spain’s Instituto de Crédito Oficial also gave its backing with €1.5bn, as did France’s Caisse des Dépôts and Bpifrance (BPI), with €8bn.Italy’s Cassa Depositi e Prestiti (CDP) contributed €8bn, while the UK has contributed £6bn (€8.5bn).In all, nine member states have so far backed the plan.Read more on the investment plan herelast_img read more

​KPMG survey sees UK DB schemes facing battle over deficits

first_imgPersistently low yields and growth have dogged efforts by UK defined benefit (DB) schemes to improve their funding position, a new survey by KPMG has shown.According to the consultancy’s 2016 Pensions Accounting Survey, sponsors are continuing to grapple with major balance-sheet deficits, having made little progress to plug the funding gap during 2015.The report’s lead author, Narayan Peralta, told IPE: “Accounting numbers are fairly stable at the moment, but the underlying position with cash outflows is starting to emerge.“It may not be a pretty picture unless a scheme has been quite well hedged against rate movements,” Peralta added. The survey looked at trends in best-estimate assumptions among around 250 of KPMG’s clients with UK defined-benefit schemes at 31 December 2015.The schemes featured in the study report under International Financial Reporting Standards (IFRS), UK and US generally accepted accounting principles (GAAP) found broadly static assumptions and flat yields have offered little respite to pension schemes over the past year.Peralta said 2015 only saw a small increase in discount rates, and that investment returns were “fairly flat” across main asset classes.“The extent to which deficit contributions are being paid into a pension scheme, and in particular the extent to which these exceed interest cost on the liabilities, will have a big influence on the change in the pension balance sheet over the year,” Peralta added.One other key finding to emerge from the survey is the potential variance between accounting outcomes and funding valuations.Peralta expected deficits for companies who carried out a valuation in 2015 to be significantly higher than at the previous valuation cycle in 2012.“Between 5 April 2012 and 5 April 2015, 20-year gilt yields fell by around 1 percentage point, which in itself would increase a typical scheme’s liability measure by 20 percent for a gilts based discount rate.“So whilst the balance sheet may be fairly benign,” he added, “some corporates will be revealing significant funding deficits over the course of 2016 interim and year end reporting, as they complete 2015 valuation negotiations.”Meanwhile, the question of IFRIC 14, the IASB’s asset-ceiling guidance, continues to weigh heavily on UK DB sponsors.In June 2015, the IFRS Interpretations Committee issued an exposure draft proposing changes to the way sponsors account for trustee powers to vary benefits.Despite pausing the project while the board considered its future work on pensions accounting as part of its agenda consultation, the proposed changes have drawn interest.That interest spiked when lender Royal Bank of Scotland stunned the markets in January with the announcement that the change would “result in the accelerated recognition of £4.2bn (€5.3bn) of already committed future contributions in respect of past service.”RBS said the IFRC 14 ED had “provided additional clarity on the role of trustees’ rights in an assessment of the recoverability of a surplus in an employee pension fund.”The move followed the announcement in November by the UK financial reporting watchdog, the FRC, that it expected UK-listed companies to pay heed to the IFRIC 14 proposals in the run-up to the year’s annual reporting season.The move raised eyebrows among some in the advisory community who noted that the IFRS IC had yet to finalise the changes in its exposure draft.Many corporates last analysed their IFRIC 14 position in 2007/8 when the interpretation first emerged.Since then, auditor views have developed, while actions by the FRC and the Financial Reporting Review Panel have clarified that a recovery plan is a minimum funding commitment.Paralta said: “A lot of schemes will have had rule amendments in the meantime, which may be of no consequence, but still need to be considered as part of a fresh analysis. Clients may also have changed auditor.”,WebsitesWe are not responsible for the content of external sitesLink to ‘KPMG Pensions Accounting Survey’last_img read more

Bank of Ireland sees deficit increase by €460m on back of Brexit

first_imgThe Bank of Ireland’s pension fund has seen a significant increase in its pension deficit as a result of the UK’s vote to leave the European Union, disclosing a shortfall €460m higher than in December.The defined benefit (DB) scheme’s deficit increased to €1.2bn at the end of June, the bank said in an announcement to the Irish stock exchange, ahead of its half-year results set to be published at the end of July.The Irish scheme joins UK DB funds struggling in the aftermath of the country’s referendum.The most authoritative source of deficit figures, the PPF 7800 Index, recorded an £89bn (€105bn) increase in the days after the vote.  In the statement, the bank said: “The outcome of the EU referendum in the UK has impacted, amongst other factors, foreign exchange rates and interest rates including AA corporate bond yields, which, under IAS 19 accounting requirements, are used to discount the liabilities in the group’s sponsored defined benefit pension schemes.”The bank said that, as a consequence, the deficit had risen from €470m at the end of December to around €1.2bn.The scheme, closed to new members in 2007 and closed to accrual in 2014, reported assets of €6.8bn at the end of last year.While the company applied a discount rate of 2.3% at the end of December, and assumed inflation of 1.6% – both measures were up by 10 basis points over the end of 2014 – it calculated a 0.25% drop in the discount rate would increase the deficit by €328m.The marked increase in the scheme’s deficit comes after several years of fluctuating shortfalls for Bank of Ireland.Over the course of 2012, it saw an even steeper increase in the shortfall, from €413m to €1.1bn.last_img read more

Initiative develops shareholder-engagement guidelines for Germany

first_imgA taskforce has developed guidelines for dialogue between investors and the supervisory boards of listed companies in a move designed to modernise shareholder engagement in Germany.The guidelines are the work of a Developing Shareholder Communication initiative, spearheaded by Hermes EOS and Ernst & Young.They are significant because of the specificity of Germany’s corporate governance model, company law in the country, and what has been the dominant practice in this regard, despite some changes in recent years.   Germany has a two-tier corporate governance model, with employee co-determination. Under German company law, the supervisory board (comprising non-executive directors) has a right to a dialogue with investors but only pertaining to topics that fall within its remit, with responsibility for communication with investors remaining with the management board for all other matters.Hans-Christoph Hirt, co-head at Hermes EOS, told IPE: “If you just look at the law, it isn’t envisaged that non-executive directors in the German two-tier system speak with investors, and it also certainly hasn’t been common practice.“Unlike in the UK, where it’s sort of part of the job description of non-executive directors to speak to investors, in Germany, it’s not in the tradition, and if you strictly interpret the law, you may come to the conclusion it’s not aligned with or even prohibited by the law.”The guidelines were produced by a small working group, crucially including some of the top legal authorities in Germany, with input from a stakeholder advisory group.Investor representatives included Claudia Kruse, managing director of sustainability and governance at APG Asset Management; Ingo Speich, head of sustainability and engagement at Union Investment; and Henning Gebhardt, global head of equities at Deutsche Asset & Wealth Management.Thomas Richter, CEO of BVI, the German investment fund association, welcomed the work of the taskforce, including as a response to the EU shareholder rights directive; this foresees institutional investors playing a more active role in corporate governance.  “The eight guiding principles are a great way for both German and international investors to establish a more formal dialogue with the supervisory board,” he said. “We have noticed increasing demand especially from institutional investors to speak to the supervisory board and not only the management board.”Richter was also involved in the stakeholder group.The guidelines are intended to serve as a practical tool but also to “establish a framework for the communication of listed companies and to contribute to good dialogue practices”, according to the group behind the principles.They also have a wider purpose, according to Hirt.“This initiative was also about putting the issue firmly on the table and having a bit of a discussion around the current legal framework,” he said.“The view of the working group and the stakeholder group was that it is perfectly possible under the current legal framework to have this dialogue, provided you recognise there are certain boundaries.”Pushback is expected but also welcome.“We expect a very fierce, particularly academic legal discussion around this issue,” said Hirt.“The politicians are on board, but there are strong pockets of practising lawyers and particular academic lawyers who I think will take issue even with the starting point that you can have a dialogue if you stick to certain rules.”The government commission for Germany’s corporate governance code, in what is understood to be a departure from its previous position, has indicated that it intends to consult on a proposal to amend the code with respect to the topic of communication between supervisory boards and investors.The head of the government commission, Manfred Gentz, was a member of the stakeholder group advising the Hermes/E&Y initiative.Two other members of the stakeholder advisory group are also on the government commission: APG’s Kruse and Joachim Faber, head of the supervisory board at Deutsche Börse and on the board of directors of HSBC.last_img read more

Royal Mail strikes deal with union for CDC scheme

first_imgRoyal Mail could become the first UK company to introduce a collective defined contribution (CDC) scheme after reaching an agreement “in principle” with the Communication Workers Union (CWU).The two parties have been locked in discussions for months following Royal Mail’s decision in April 2017 to close the Royal Mail Pension Plan (RMPP), a defined benefit scheme. The company confirmed today that RMPP will close to future accrual from 31 March 2018.Under the proposals made public by the company today, a CDC fund would replace RMPP, with a “defined benefit cash balance scheme” alongside it. Royal Mail said it would contribute 13.6% of of members’ pensionable pay, with members paying 6%. The scheme would target a level of income in retirement similar to that of RMPP, but this would not be guaranteed.The cash balance section would fund the payment of guaranteed lump sums to members upon retirement, with discretionary increases applied depending on investment performance. Until a CDC scheme is launched at Royal Mail, employees will save into the company’s existing defined contribution plan and the new cash balance fund.CWU members will now vote on the proposal and have been encouraged by the union to accept the deal.Moya Greene, Royal Mail’s CEO, said the new pension arrangement was “an affordable and sustainable solution that enables us to continue to innovate and grow and to meet the intense competition with confidence”.Speaking earlier this week in a video posted to the CWU’s website, Terry Pullinger, deputy general secretary for postal, said: “I absolutely believe that we have now with this agreement laid the foundation for the right attitude and approach to the future of our business… When you consider where we started, I hope you will agree that this will be seen as an excellent achievement by this trade union.” The birth of UK CDCThe CWU and Royal Mail plan to lobby the UK government to allow the establishment of CDC schemes – also known as ‘defined ambition’. The UK passed primary legislation to allow such schemes in 2015, but the government subsequently abandoned the idea and has not introduced the secondary legislation required to make them possible.In November, the Work and Pensions Select Committee of the UK’s parliament launched an inquiry as to how the schemes would work.Frank Field, chair of the committee, said: “What the Select Committee is aiming for is to retain some of the best features of company schemes in a different age when employers are no longer willing or able to sustain the burden of final salary promises to employees, who could club together and pool the risk themselves.”The committee’s call for evidence closed yesterday with 19 responses so far made public. Respondents include academics, consultants, trade bodies and pension funds, including master trust NEST and Dutch civil service scheme APG.center_img Royal Mail and the CWU will lobby government to make the necessary legislative and regulatory changes so a CDC scheme can be established. Royal Mail said the ongoing annual cost of the new arrangement would be roughly £400m (€457m), in line with the current cost of its existing arrangements. Last year the company warned that its annual payments were likely to hit £1bn if RMPP was not changed.last_img read more

UK roundup: TPR pipes up over inter-DC transfers; ‘Cross-country’ PRT deal

first_imgThe Pensions Regulator (TPR) has updated its COVID-19-related guidance to tell trustees they must continue to prioritise transfers between defined contribution (DC) schemes during the pandemic and stay alert to scams.At the end of March trustees of defined benefit (DB) schemes were told they could delay new member requests for quotations for transfers to DC schemes by up to three months to review their transfer basis, but TPR today said “this is not the case for transfers between DC schemes where the valuation of benefits is less complex”.David Fairs, TPR’s executive director of policy, said: “Our latest guidance should help trustees of DC schemes prioritise what’s most important – such as ensuring DC to DC transfers are completed in a reasonable time, so savers don’t lose out.“As well as carrying out their due diligence on transfers, trustees should help protect members by highlighting the risk from scammers in their own communications,” he added. Last month TPR published guidance asking trustees to write to DB members looking to move retirement funds to warn them of the risks during the pandemic and urging them to consider their decisions carefully.IHS Markit syncs UK, US pension risk transferLegal & General has simultaneously agreed pension risk transfer transactions for IHS Markit US and UK pension plans, the first time the insurer struck a “cross-country” deal.The UK transaction was for £37.8m (€42m) and covered around 150 members in the IHS (Global) Ltd. Pension and Life Assurance Scheme. The US transaction was for $97.2m, covering around 1,200 members in the IHS Retirement Income Plan.Stafford Napier, chair of the UK plan trustees, said: “This transaction is a key step in our plans to de-risk the provision of pension benefits for our members in the UK. We had been discussing the opportunities for de-risking with our sponsoring employer for a number of years.“With the support of the company, our advisers and Legal & General we were able to complete the transaction efficiently and on time even in the face of the challenging financial circumstances surrounding the coronavirus emergency.”Recent market volatility, in particular wider credit spreads, has however led to some attractive pricing in the UK bulk annuity market.“We would anticipate a global approach to de-risking being one of the key levers that sponsors with UK and US obligations look to utilise going forwards.”Greg Robertson, transactions specialist at Willis Towers WatsonGreg Robertson, transactions specialist at Willis Towers Watson, which advised on both deals, said the co-ordinated transaction “further demonstrates the value of innovation in the bulk annuity market.“With demand for transactions still high, it remains important for schemes to differentiate themselves in order to maximise insurer engagement and to secure attractive pricing.“One of those differentiators might now be a global approach to de-risking. We would anticipate this being one of the key levers that sponsors with UK and US obligations look to utilise going forwards.”IHS Markit is a global provider of research, market intelligence and analysis. L&G noted that it has been a client of its asset manager LGIM for more than 15 years.Pace de-risks again with AvivaPace, the Co-operative Pension Scheme, has insured the defined benefit liabilities of an additional 2,300 members after striking a £350m buy-in with Aviva.The deal was completed using a pre-agreed “umbrella contract”, and comes on top of £1bn deal between the two parties announced in January. The Pace pension fund has also struck a £1bn buy-in with the Pension Insurance Corporation.The process to select an insurer, in this case Aviva, and negotiate terms was led by Aon on behalf of the trustee. Legal advice was provided by Linklaters and investment advice by Mercer.Chris Martin, of Independent Trustee Services Limited and Pace trustee chair, said: “The trustee board is delighted to have been able to take this further step in enhancing the security of our members’ benefits.“The ability to transact this quickly and efficiently is testament to all of the hard work from our colleagues in the Co-op Pensions Department in getting Pace to a position where such security enhancing options are possible. Thanks also go to all of our advisers for their work in exceptionally challenging circumstances in making this outcome possible”.Tom Scott, principal consultant in Aon’s risk settlement group, said: “By leveraging the previous buy-in transaction with Aviva, we were able to capture a short-term pricing opportunity on behalf of the trustee.“Swift execution was required in the circumstances, which was made possible by the scheme being well-prepared and having efficient and nimble governance processes in place.”Looking for IPE’s latest magazine? Read the digital edition here.last_img read more

ATP says ‘free riders’ in Danish pension system end up with more

first_imgBut for the philosophy to work, ATP said it was crucial that everyone who could save up for their own retirement actually did so.“That is not the case today,” it said.“Therefore, those who are obliged to save for retirement end up both financing their own pensions and co-financing, via tax, the higher public pensions of those who do not save up but who could – the so-called free riders,” the fund said.ATP said that over a lifetime, someone with an annual income of DKK350,000 and an annual contribution of 12% into a labour-market pension would have about DKK312,000 less to live on than someone with the same income who did not save for a pension.ATP said the “remaining group” of people who did not save for a second-pillar pension was mainly composed of people who had spent long periods on welfare, self employed people and employees outside labour-market pension agreements.Although the new “Mandatory Pension Scheme” (OP), which started this year and is run by ATP, would help reduce this remaining group, the scheme was only expected to trim it 1.4 percentage points to 28.6% of the population, the pension fund said.“The reasons why the remaining group is not reduced very much, are because the contribution is relatively modest and that only benefit recipients are covered by the scheme,” ATP said.In its research publication, ATP quoted Michael Svarer, professor of economics at Aarhus University and former chair of the Secretariat of the Danish Economic Councils about how the problem could be solved.“There may be several ways to address the free-rider problem,” he said.One was to extend the wealth basis offset against the state pension to include housing assets etc, Svarer said, adding that another idea was to introduce mandatory savings for employees in the remaining group.“Both the Welfare Commission and the Presidency of the Economic Councils have already proposed models for compulsory pension savings, so it could be relevant to expand the terms of reference of the forthcoming Pension Commission to shed light on models for reducing the free-rider problem too,” he said.Looking for IPE’s latest magazine? Read the digital edition here. Danish statutory pension fund ATP said people who do not save for a second pillar pension – but could – are ending up with more money over their lifetimes than those who do.The DKK918bn (€123bn) pension fund published research exposing the paradox resulting from the interaction of the Danish tax, benefits and pension systems, and quoted an academic who suggested the new Pension Commission’s remit could be expanded to solve the problem.ATP said: “The Danish welfare system is built around the philosophy that the widest shoulders carry the heaviest load.”Within the pension system, this happened by reducing public pensions as private pensions increased, it said.last_img read more

Gold Coast mega mansion passed in at $3 million

first_imgInside the luxury residence. The pool. 14 Sandyoke Court, Mudgeeraba was passed in at auction for $3 million.A SPRAWLING Gold Coast mega mansion that failed to sell under the hammer on Wednesday was passed in with a vendor bid of $3 million.The Mudgeeraba property first hit the market in February and was taken to auction in March where it was also passed in. At Wednesday’s auction, a potential buyer registered to bid moments before the auction kicked off.“We had multiple registered bidders but unfortunately the property passed in,” Katrina Walsh of Harcourts Coastal said.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“We are dealing with one of those bidders now who hasn’t even seen the house.“They registered at 11am for the auction and then got on a plane at 11.50am — they are coming back to inspect the property tomorrow.“I’m confident it will sell in coming weeks.” The staircase alone took six months to make, while the Master Builders Queensland judges spent more than 30 minutes admiring it.Ms Walsh holds the sales record for Jabiru Estate after she took a resort-style tropical hideaway at 11 Jarema Drive to auction earlier this year.That property sold for $3.7 million under the hammer. Retractable screens around the pool. The award-winning four-bedroom house in gated Jabiru Estate has a raft of luxury features including a custom curved Victorian Ash Tasmanian Oak staircase, stone and limestone feature walls, floor to ceiling windows, a fireplace and heated pool.The design and build of the house took two years with the product completed in March, 2016. Designed by BDA Architecture and built by Mark Underwood, the residence won the 2017 Master Builder Qld Gold Coast award for an individual build and the Ron McMaster Memorial Award for excellence in craftsmanship.last_img read more