It also criticised the Cabinet for ignoring signals from the pensions sector that the accrual decrease would fail to achieve the predicted €6bn in savings for the national budget.The opposition in the Senate also poured scorn on the government’s claim the reduced accrual still allowed for an adequate pension of 70% of the average salary.Kees Kok, senator for the Freedom Party (PVV), said: “The government’s assumption that employees keep on working until the official retirement age, and that there would be a full indexation for at least 40 years, is dubious.”The other bill – which provides tax relief on 0.1% of workers’ income of up to €100,000 and 1.85% of income exceeding this amount – gained no traction in the Senate at all.Although the VVD and the PvdA approved the proposal in the Lower House, their senators said they could not support the bill in its current form.VVD senator Willem Bröcker said: “The costs of implementation are too high for this marginal additional scheme.”He said he doubted whether pension providers would be willing to offer such arrangements anyway, “as providers also have a care duty”. The Dutch Cabinet is to review its plans to change tax-friendly pensions accrual after it became clear its two bills on the issue lacked sufficient support in the Senate.Only the coalition parties of VVD and PvdA – which have a slight majority in the Lower House but depend on opposition support in the Senate – expressed support for the bill to decrease tax-facilitated accrual from 2.15% to 1.75%.The PvdA in particular argued that a reduced pensions accrual must lead to lower contributions.However, in the opinion of the opposition, the bill does too little to guarantee that pension funds will lower their premiums.
Additionally, employers and employees will see their social contributions increase over the next four years – by 0.15 percentage points in 2014 and 0.05 percentage points in 2015, 2016 and 2017 – to reach an overall increase of 0.3 percentage points by 2017.The government will also ask companies to finance special accounts for “hardship conditions” at work.Hollande’s government announced a new set of measures to reform the French first-pillar pension system at the end of August, after it received a report from a pensions advisory panel.This government convened the panel after a report from the pension steering committee, the Conseil d’Orientation des Retraites (COR), argued in December last year that the previous pension reform introduced in 2010 would fail to tackle France’s deficit by 2018, as previously expected.In its final report sent to the government in June, the pensions advisory panel recommended a further increase in the period of contributions, tax rises for pensioners and an increase in the level of contributions.Additionally, the panel recommended a limit on the indexation of pensions, which would lead the most wealthy retirees, already paying as much as 6.8% of general social contribution (CSG) in tax, see their pensions fall by 1 percentage point compared with inflation.The CSG, introduced in 1990, aims to fund health insurance family benefits and the Retirement Solidarity Fund (FSV).In May, the European Commission called on France to introduce pensions reform after granting the country a further reprieve in correcting its “excessive” budget deficit.At the time, it said: “New policy measures are urgently needed to remedy this situation while preserving the adequacy of the system.”According to Brussels, such measures could include a further increase in the minimum and the full-pension retirement ages, as well as the contribution period, to obtain a full pension.Additionally, France could adapt indexation rules and review the currently “numerous exemptions” to the general scheme for specific categories of workers.However, the Commission warned against increasing the level of social security contributions, given its negative impact on the cost of labour.After further consideration, the French government decided to ignore all the recommendations made by Brussels. French MPs will vote today on the country’s new pensions reform, which seeks to further extend the length of contributions, increase social contributions and introduce special accounts for “hardship conditions” at work.The new reform – part of president François Hollande’s plan to tackle the budget deficit, which could reach up to €20.7bn by 2020, according to official data – is to be adopted by the Chamber of Deputies today before the pension act is sent to the Senate for final approval.Last week, a minority of deputies already pre-approved the measures announced by the government before the official vote took place this afternoon.Among the measures agreed, one aims to extend the length of contributions from the current 41.5 years to 43 years by 2035.
First has been a lengthened contribution period for receiving a full social security pension.People born after 1973 will have to contribute 43 years compared with 41.5 years for people born in 1956.The minimum contribution time will also be harmonised to 43 years for public employees.Second will be higher contribution rates.Employees and their employers will see the rate of their contribution on wages raised by 0.15 percentage points in 2014, with an additional 0.05 points in 2015, 2016 and 2017 – or 0.3 percentage points by 2017 as a whole.Third will be retirees’ share of the burden.As a “measure of justice”, retirees will pay their part of the French retirement rescue plan.Their pensions’ increase to keep pace with inflation is to be frozen for six months, with the April rise being postponed to an October schedule.Also, the 10% retirement bonus granted to retirees who had three or more children will now be taxed as other pensions are.Fourth will be contributors’ relief and compensation.To compensate for the bad news, the law will help some of the least favoured workers to get a better pension.About 5m people facing hardship in their daily work hardness – working night shifts, heavy lifting, etcetera – should be able to retire up to two years earlier than others thanks to a ‘hardness account’.Part-time workers will also be able to get a full quarter of retirement contribution when they work 150 hours (as opposed to 200 hours now), a measure helping women’s pensions.And fifth will be the government’s increased control over retirement institutions, with a view to “harmonising” the French system.As a first step, it said it would take over CNAVPL – the Caisse nationale d’assurance-vieillesse des professions liberals – one of the independent workers’ schemes, due to a change in its director-designation process. The French National Assembly has approved new pensions reform in the latest of a long line of measures to shore up its beleaguered pay-as-you-go (PAYG) retirement system.The changes to first-pillar social security pensions are “the first left-wing retirement reform in 30 years”, proudly claimed minister of Social Affairs, Marisol Touraine, referring to the popular but costly lowered retirement age from 65 to 60, granted by president Mitterrand after his 1981 election.Since then, at least six basic pensions reforms have followed one after the other: Balladur (1993, lowering pension rights and increasing contribution periods); Fonds de réserve des retraites (1999, creating a buffer fund that never received the promised capital; Fillon (2003, creating an adjustable retirement age according to life expectancy; Woerth (2010, raising minimum retirement age to 62 by 2018 and up to 67 for retirees with incomplete contribution history); and minor changes in December 2012, shortening the horizon for the new 62-67 retirement age bracket to 2017 instead of 2018.The new reform essentially covers five areas.
Investors have reacted positively to the European Union’s call for greater transparency on infrastructure lending.Last week, the European Commission threw its support behind a number of proposals to encourage long-term financing by institutions other than banks.The Commission argued that member states should publish infrastructure investment plans and ensure credit information on infrastructure loans is readily available in a central database.David Cooper, executive director for European debt investments at IFM, welcomed the directive. “It’s absolutely what’s needed in my view,” he said. “Infrastructure debt is a great asset class, but it’s sometimes hard to evidence that statistically.”More data, Cooper said, will help institutional investors understand the sector’s risk/ return profile.From his time in the UK banking sector, Cooper said the exchange of infrastructure loan data had led to greater understanding of the sector’s risk profile among lenders.Produced annually since 1983 by Moody’s, the rating agency’s Default and Recovery Rates for Project Finance Bank Loans sees a consortium of banks pool information on an anonymous basis.The global study reviews data from 4,425 projects, which account for some 54.2% of all project finance transactions originated since 1983.Cooper believes similar measures for the institutional sector would be advantageous.More transparency in the infrastructure loan market has previously been raised by German pension association aba, which in January suggested the European Investment Bank should help in assessing projects.The Commission said it would evaluate the feasibility of “collecting and, where possible, making available comprehensive credit statistics on infrastructure loans and setting up a single-point compilation of project bond issue data”.Macquarie, which was recently awarded a £200m (€241m) mandate by a UK pension scheme for a new inflation-linked debt fund, said it welcomed any initiative that helped “rid barriers to pension fund investment in infrastructure”.Andrew Robertson, head of investor structuring and strategy at Macquarie Infrastructure Debt Investment Solutions (MIDIS), said: “These initiatives, focused on transparency and data quality, together with the launch of pooled fund solutions, will be important enablers for the broader participation of pension funds in the infrastructure debt asset class and ultimately help drive growth across Europe.”Lazard Asset Management’s Global Listed Infrastructure Fund portfolio manager Warryn Robertson said disclosure and transparency across the sector did need improvement.“Infrastructure is where REITs were 20 years ago – so improvements to disclosure and transparency could be made, and it would be good to see more people buying into that,” he said.
Defined benefit pension schemes in the UK that are still open to new members remained so this year, according to official data, putting a halt to the trend towards closure of the sought-after retirement income plans.Figures from the tenth edition of The Purple Book, published by The Pensions Regulator (TPR) and the Pension Protection Fund (PPF), show that the percentage of schemes open to new members fell to 13% in 2015 from 43% in 2006.But the data also showed there had been a “levelling off” of the closure of open DB schemes.A further 51% of DB schemes are still accruing benefits for existing members in 2015, according to the survey of approximately 6,000 DB pension schemes in the UK. Andrew Warwick-Thompson, executive director at TPR, said: “After a decade of dramatic decline, the DB landscape has reached a point of relative stability in terms of scheme status and membership.” However, he said the impact of new pension “freedoms” would not be seen until the next set of data were published next year, adding that those changes may yet shift the landscape again. Andrew McKinnon, CFO at the PPF, said the data showed the UK’s DB pension landscape had seen “seismic shifts” over the past decade and highlighted the need for effective risk management. “It is more important than ever that the PPF exists to ensure that members, of schemes that really are unable to pay what they promised, don’t end up without any pension at all,” he said.Active membership of DB schemes fell by 3.4% in 2015 from the year before, the smallest drop in active members recorded in the Purple Book. At the end of March, the aggregate s179 funding position of the schemes was a £244.2bn (€346bn) deficit — the largest s179 deficit at an end-March date since the PPF was set up, according to the set of DB statistics, which the PPF and TPR say provides the fullest view of risks faced by these schemes.At 84% in 2015, however, the s179 funding ratio had seen lower levels in both 2009 and 2012, according to Purple Book data.Scheme funding was shown to have deteriorated by a further 1.5 percentage points between the end of March 2015 and the end of September.This mainly reflects the impact of lower equity markets and Gilt prices on assets, the PPF and TPR said, which they added had more than offset the effect higher Gilt yields have had on liabilities.Data in the Purple Book is from 31 March and so was gathered before the UK government announced the new “freedoms” granted on pension assets in April.Mark Paxton, senior bulk annuity consultant at Barnett Waddingham, said the Purple Book data showed that, as schemes matured, they were continuing to de-risk, preferring bonds or more sophisticated investment strategies to equities.“We expect that many schemes will have aspirations to buy-in or buyout, particularly where they are closed,” he said.The fall in funding levels revealed by the new official data over 2015 would mean this was a “challenging target”.“But if schemes are prepared, and ready to transact when an opportunity arises, it is not unachievable,” Paxton said.He said that, in particular, the availability of medical underwriting and the ability to insure large-pension members – known as “top-slicing” – meant schemes could now manage their risks more affordably.
The decision followed months of criticism of the proposals from the AP funds themselves and the Swedish central bank and employer groups.But the spokesman for AP6 said his fund still supported the idea of consolidating the system’s unlisted holdings.“AP6 still thinks the proposal regarding investing in private equity and unlisted companies would have been the best solution for the entire AP system, and for Swedish pensioners,” he said. He added that the fund was still in favour of its proposed merger with AP2 “to create a competence centre for unlisted investments”.Karl Svartling, AP6’s managing director, previously came out strongly in favour of the idea of consolidating unlisted assets.In the fund’s response to the government proposals from October, he said such a joint vehicle would be more able to influence the market in a number of areas, including sustainability and transparency.It is unclear whether the remaining four AP funds still favour a joint approach to unlisted assets – first mooted by the former government prior to the 2014 election – as several of them have in recent months announced new real estate joint ventures.AP1 last month formed a jointly owned property company, Secore Fastigheter, with Swedish retail chain ICA.The new entity is set to acquire 13 of ICA’s stores by the end of the year.Meanwhile, AP1 and AP2 in August announced details of a €4bn office property joint venture with TIAA-CREF, seeded with assets from the funds’ previous venture Cityhold Property.AP3 in September formed an office and retail joint venture with Sveafastigheter. AP6 has stood by proposals to consolidate the AP funds’ unlisted assets into a single vehicle, despite Sweden’s government dropping its planned reform of the system.A spokesman for AP6, which manages SEK23.6bn (€2.5bn) in unlisted assets, told IPE it still believed the creation of a “competence centre” for unlisted assets was the best way forward, a goal that would have been achieved under the cross-party proposals through the merger of AP6 with AP2.The proposals published in June suggested AP2 would manage all unlisted assets within the SEK1.2trn buffer fund system, stripping the remaining two funds of the ability to invest directly in asset classes including real estate and infrastructure.A spokesman for AP6 had no comment on the government’s decision to cancel the reforms, announced on Thursday after a meeting of the cross-party Pensionsgruppen – comprising representatives of the four opposition and two government parties – failed to yield consensus following mounting criticism for the changes.
On 23 October 2014, Tesco announced that recent profit overstatements now totalled £263m.The supermarket also issued a third profit downgrade for the current financial year (2014-15), reporting a fall of 92% in pre-tax profits.The reaction from markets was swift, with more than £2bn being wiped off Tesco’s share price.The investors’ lawsuit will allege that Tesco made misleading and untruthful statements and omissions to the market in relation to its profits for recent financial periods.It is being funded by litigation funders Bentham Europe.The case will be filed in the High Court of Justice within the next four weeks, according to Sean Upson, partner in the commercial litigation and investor protection litigation departments at Stewarts Law.Upson, who is leading the action on behalf of the investors, told IPE: “The investors are bringing the action because, when the mis-statements in Tesco’s accounts were revealed, it caused losses. And many investors want to see better corporate governance at Tesco in the future.“One could see this case leading to similar actions because Section 90A has shown the way.”Jeremy Marshall, CIO at Bentham Europe, said: “There is a compelling reason for pension funds to take part in an action like this, if a recovery is achieved without risk of loss, because they have to act in the interests of their members.”Bentham Europe acts on a no-win, no-fee basis.All current and former shareholders that acquired at least 10,000 Tesco shares during the period 17 April 2013 to 22 October 2014, and that had not sold all of those securities prior to market announcements made by Tesco on 29 August, 22 September or 23 October 2014, are eligible to participate in the action.More information is available at https://www.benthameurope.com/tesco-plc-overview.Meanwhile, three former Tesco executives are also facing criminal charges, after an investigation by the Serious Fraud Office. UK and European pension funds are among 60 institutional investors planning to file a milestone lawsuit against Tesco, the UK’s biggest supermarket, for losses of around £150m (€173m) incurred because of accounting irregularities by the company, resulting in overstated earnings.The case is believed to be the first to be brought under Sections 90 and 90A of the UK’s Financial Services and Markets Act.These provisions allow investors to bring a claim against companies that issue prospectuses or publish statements on which the investors intend to rely and that contain false information, causing a loss.On 22 September 2014, Tesco issued a market announcement saying it had previously overstated its expected profits for the half year just ended by £250m.
The UK government must prioritise a strong economy for the benefit of pension schemes, or the “vast majority” of British people will suffer in retirement, the sector’s trade body has said.The Pensions and Lifetime Savings Association (PLSA) has warned that the sustainability of UK pension funds depends on the strength of the country’s economy, its regulatory regime and its financial services sector – all of which could be under threat as the UK negotiates its exit from the EU.Graham Vidler, director of external affairs at the PLSA, said: “A successful Brexit matters to the 20m workers, savers and pensioners served by our pension schemes. If the economy weakens, it will make it harder for sponsoring employers to keep defined benefit [DB] schemes open and reduce the funds individuals can afford to put into defined contribution [DC] pensions – but these risks can be reduced if the government addresses the points we raise.”DC schemes also face significant challenges, the PLSA said in a commentary, especially if a weak economy translates into poor wage growth. “Current levels of contributions to these pensions are too low to provide adequate retirement incomes for Britain’s savers,” the industry group said.“Therefore, it is essential contributions increase in the near future. If the OBR’s forecast of faltering wage growth proves correct, it will be difficult for employers and employees to increase contributions.“The vast majority of the population would then have to expect a poorer retirement.”Prime minister Theresa May yesterday morning gave her most detailed speech yet on the subject of Brexit.She stated that any deal reached “cannot mean membership of the single market” because the caveats that come with it would mean “to all intents and purposes … not leaving the EU at all”.She added: “We do not seek membership of the single market. Instead, we seek the greatest possible access to it through a new, comprehensive, bold and ambitious free-trade agreement.”However, she said a new deal “may take in elements of current single-market arrangements” in areas such as financial services, “as it makes no sense to start again from scratch when Britain and the remaining member states have adhered to the same rules for so many years”.Free trade or no trade?The PLSA’s commentary stated that a “successful outcome” for Brexit would include “replication of both the current UK/EU framework for free trade in goods and existing EU free-trade agreements with third countries”, in order to support pension scheme sponsors.It added: “Pension schemes need full access to global markets and to the world-class expertise currently available from the UK’s successful financial services sector. Any dilution of the City of London’s strength would have a negative effect on pension saving.”Failure to reach a Brexit deal within the two years scheduled for negotiations could mean the UK defaults to trading rules set by the World Trade Organisation (WTO).The PLSA said this would cause “major disruption”, adding: “On no account could the pension fund industry support a regime based only on WTO rules.“This would be likely to cause economic harm, create regulatory barriers and undermine essential pensions support services.”Regulatory carve-outThe PLSA, despite its demand for open access to Europe’s markets, urged the government to protect UK schemes from any future EU rules – particularly the holistic balance sheet concept.The idea was abandoned by EIOPA after long-running battles with national bodies, but the PLSA claimed a similar plan remains possible and wants protection from any future solvency rules.“During the negotiation of IORP II, the UK was successful in warding off the threat of an EU solvency regime for pensions, which could have resulted in a bill for British business of up to €650bn,” the PLSA said.“While we believe high levels of access to the single market are very important, it is also essential that any future moves by the EU to propose a new solvency regime should not apply to defined benefit schemes in the UK, unless they also operate outside the UK.”The IORP Directive is due to be implemented in January 2019, while the deadline for Brexit negotiations is likely to be March 2019.Theresa May’s speech in full
Denmark’s ATP has signalled it will shift some of its listed equities exposure to Europe and emerging markets this year at the expense of its US equities holdings, after making its highest quarterly return in five years.The giant statutory pension fund reported a 7.8% return on its investment portfolio in the first three months of this year, largely due to strong returns on all types of equities.Christian Hyldahl, ATP’s chief executive, told IPE: “We’ve had a nice run on Danish equities and also on international equities and credit, and it’s interesting to see all the asset classes have produced positive returns – except long-term hedging strategies and a small minus for commodities.”He indicated ATP would shift its international equities focus towards Europe and emerging markets. US equities looked slightly overvalued compared to the rest of the world, Hyldahl said. “Within equities there is now relative value to be had in Europe and emerging markets compared to the US,” he said.Hyldahl, who took up his new role at ATP at the beginning of January, said he was very pleased with the first quarter return.“But we should not be measured on our short-term returns,” he added.The investment portfolio – which makes up roughly one-seventh of its total assets and consists of the statutory pension fund’s bonus reserves – grew to DKK106.9bn (€14.4bn) at the end of March, from DKK100.4bn at the end of December.In its interim financial figures, ATP said listed Danish equities made a DKK2.26bn profit, international listed equities generated DKK1.48bn and private equity produced DKK1.46bn in returns.“It was a strong quarter in general on the Danish [equities] market, but we have had also a well-composed portfolio,” Hyldahl said.Noting that as a small market, the Danish stock market is more idiosyncratic than some larger ones, he said success here was more about picking the right stocks than sector plays.“We have been positive on the international side and on financials over the last year, and that paid off well,” he added.In absolute terms the investment return in the January-to-March period was DKK7.85bn, significantly more than the DKK418m profit ATP made on its investment portfolio in the first quarter of 2016.Total assets, including the much larger hedging portfolio designed to back pension promises, slipped to DKK753.2bn from DKK759.2bn, with the hedging portfolio itself contracting to DKK646.3bn from DKK658.8bn.Data published today on ATP’s average risk allocation in its investment portfolio showed a shift towards the interest-rate factor and away from the inflation factor and “other factors” category in the first quarter of this year, when compared to 2016.Interest-rate factor risk allocation rose to 30% from 22%, while inflation-risk factor allocation diminished to 8% from 11%. “Other factors” fell to 13% from 18%. Equity factor risk allocation, meanwhile, was unchanged at 49%.Asked if this meant ATP had changed its view on the future course of interest rates, Hyldahl said the change was one that had been started last year in order to balance the portfolio better and make it more robust.“We are not scared about sudden interest-rate hikes in Europe, and believe the outlook is still lower for longer,” he said. “But rates have been artificially low for some time because of ECB policy, and over a longer period of time, say several years, we do believe rates will rise.”Meanwhile ATP might continue to expand its interest-rate factor exposure, he said.
Sweden’s AP2 has invested $50m (€44m) in a social and environmental impact fund.Gothenburg-based national pension fund has invested in the Rise Fund, a private equity vehicle aimed at producing positive social and environmental effects that can be measured, as well as competitive financial returns.The fund is managed by TPG Growth, the international growth equity and middle market buyout platform of alternative asset firm TPG.Eva Halvarsson, chief executive of AP2, said: “The idea of impact investing is not new, but what is new and unique about this strategy is that the Rise Fund is relying on independent research to measure the positive outcomes in financial terms.” She said the investment was in keeping with its mandate to both maximise returns and take ethical and environmental criteria into consideration.The Rise Fund measures how much tangible impact a potential investment is expected to have during its investment life cycle, focusing on the impact outcomes defined by the UN Sustainable Development Goals.“Through our sustainable development activities and the investments we make, the fund contributes in various ways towards to the UN’s Sustainable Development Goals and we try to be actively involved in these goals,” Halvarsson said.UK public sector funds eye ‘new era’ for climate risk engagementA group of UK public sector pension funds is partnering with the 50/50 Climate Project in a bid to ratchet up its engagement with companies on climate risks and their potential impact on shareholder value.The Local Authority Pension Fund Forum (LAPFF), which is a voluntary association of pension funds with combined assets of around £200bn (€230bn), said the partnership “is set to enhance LAPFF’s established position as a leading investor voice on climate change risk”.The 50/50 Climate Project is a non-profit organisation that aims to help large institutional investors “bring climate competence to corporate boards”. Its mission is to engage with the 50 public companies with the largest carbon footprint.Kieran Quinn, LAPFF chairman, said it “marks a new era in the forum’s efforts to safeguard shareholder value against climate-change risk.”Specifically, the arrangement with the organisation will provide LAPFF with research on company risks and opportunities, analysis of climate competencies on corporate boards, and involvement in campaigns to “refresh” boardrooms as well as support the development of a pipeline of credible “climate-literate” director candidates.KLP blacklists 10 companiesNorwegian municipal pensions firm KLP has excluded 10 companies from its investment universe on ESG grounds following a semi-annual review of investments.The NOK596bn (€62.6bn) institutional investor said it decided to exclude PetroChina Co and Bharat Heavy Electricals because of the risks of, respectively, gross corruption and serious environmental damage.It is also banishing a further eight coal companies from its range of potential investments and is altering the basis for exclusion for two companies.The coal companies to be newly excluded are CEZ, Eneva, Great River Energy, Huadian Energy, Malakoff Corp, Otter Tail Corp, PGE Polska Grupa Energetyczna and SDIC Power Holdings.KLP was invested in two of these firms before the decision to exclude them – CEZ and PGE Polska Grupa Energetyczna.In addition, KLP has decided to reintroduce Singapore Technologies Engineering into its investment universe.The business had been excluded by the Norwegian pension fund for 16 years because of the production of anti-personnel land mines, but last year Singapore Technologies Engineering confirmed it had stopped making this type of weapon, KLP said.Leonardo SpA, which had been excluded since 2006 because of nuclear weapons production, is now excluded because of an unacceptable risk of gross corruption.Meanwhile, the reason for AES’ exclusion by KLP has changed to coal activity from human rights violations in connection with a steam project in Panama.The company’s involvement with that project has now stopped, KLP said.