UK pension funds may soon be forced to disclose details of contracts with asset managers, after the government said there was “merit” in proposals to increase transparency tabled by a member of the upper house of Parliament.Michael German, a Liberal Democrat peer in the UK upper house, tabled an amendment to the current Pension Scheme Bill – legislating for the introduction of defined ambition schemes – to allow members of trust schemes to request details of voting behaviour and the “selection, appointment and monitoring” of asset managers.Nick Bourne, government whip in the Lords, said the amendments would go much further than currently proposed increases to scheme transparency, but that there was nonetheless merit in further examining all ideas tabled by German.“However, we consider that greater transparency in relation to costs and charges, as well as about how schemes manage their investments, go hand in hand,” he said. “As such, they would be better considered together as part of the same well-established transparency work programme, which is already under way and we are committed to consult on later this year.”He said legislating for German’s proposals before the other changes surrounding fee disclosure came into force in April would risk introducing transparency in a “piecemeal and uncoordinated way”.“Introducing these requirements through the amendment would remove the opportunity to consult all relevant stakeholders,” he said.Instead, Bourne said the government would include the proposals in a forthcoming consultation planned by the Department for Work and Pensions, and could then potentially enact any changes as regulation.ShareAction, which had been working with German on the amendment, welcomed the government’s commitment.The responsible investment charity’s chief executive Catherine Howarth said: “We warmly welcome the government’s commitment to action that will give UK pension savers long overdue rights to information about what happens to their money.“We urge pensions minister Steve Webb to move swiftly to set a consultation timetable to make these rights a reality in 2015.”
The French asset management association is calling for the creation of an individual pensions product consistent with the pan-European personal pension (PEPP) being explored in the EU, and for the creation of cross-border pension funds.The proposals were made by the Association Française de la Gestion financiére (AFG) in a white paper published last week on expanding retirement savings in France.It housed its call for cross-border pension funds under the heading of strengthening occupational pensions in France, especially collective company pension savings schemes.These go by the acronym PERCO (plan d’épargne retraite collectif). The AFG said a European pillar should be added to the PERCO to allow companies to manage pension plans from France for all European employees.It said this required creating a vehicle compatible with the EU pension fund legislation, the IORP Directive, and that this could be achieved under the Sapin II law.Laure Delahousse, deputy director general at AFG, told IPE the idea was to create a new type of IORP-compliant pension vehicle asset managers could use to offer their clients a way to manage defined contribution plans more effectively in different European countries in a single pension fund.“The Sapin law provides for the creation of such a pension fund via ministerial order, so no new law would be needed,” she said.The lack of a universal pensions saving product for multinational companies with a mobile workforce and employees across Europe has also been remarked on by Jean Eyraud, president of the French institutional investor association Af2i.Around 85 cross-border pension funds already exist, mainly set up by multinational companies, but financial institutions like asset managers are also turning their attention to the vehicles.For example, French asset manager Amundi has a pan-European pensions vehicle in Luxembourg and recently said it had already attracted 10 multinational companies to use it. The AFG’s white paper also sets out other measures to promote the PERCO, such as a cut in employer taxes on contributions and opening the plans to civil servants and certain public employees. PEPPing up personal pensionsAnother major aspect of the AFG’s blueprint is the proposal for a new personal pensions product, which the association already flagged in its “roadmap” for the French asset management industry in November.The association said it was important not to rely exclusively on occupational pensions when it came to retirement saving.“It is necessary to develop individual products,” it said, adding that existing personal pension products were not equipped to meet the needs of a large number of people.The association said the envisaged new product was “largely inspired” by the pan-European personal pension (PEPP) product being prepared at the EU level.Delahousse said: “We want to create the same thing in France, which could be subscribed to by individuals all over Europe but is mainly for French citizens.“We strongly support the PEPP initiative, and we are calling on the government to create a new product that is consistent with the PEPP with an appropriate tax treatment”.The question of the tax treatment was one of the issues discussed during a European Commission hearing on the PEPP in Brussels in October last year. In the AFG’s mind, the product it envisages would appeal to a larger client base than the main existing personal product, the PERP, in particular because it would give individuals choice over how they use their retirement pot.Under the PERP, individuals must buy an annuity when they reach retirement.According to the AFG, the new product should be available to a broad range of individuals, including the self-employed, civil servants and mobile employees working in Europe.Other aspects include that contribution amounts should be flexible up to a ceiling, access to the retirement savings pot blocked until retirement except in exceptional circumstances, and that individuals be free to choose what to do with their savings at retirement date, such as opting for a capital lump sum, an annuity, or free or progressive withdrawals.The individual would be able to choose between three investment management options: life cycle, self-select or delegated management.The default option would be the life cycle strategy, as is the case for the PERCO at the moment.The other main pillar of AFG’s white paper is a call to improve the information available to individuals about their pension. Transforming retirement saving into a source of long-term capital to finance the French and European economy is a central theme running through the association’s proposals.
UK politicians have also entered the fray. Frank Field, chair of the work and pensions committee of the parliament’s lower house, wrote to PSA and the pension scheme’s trustees to ascertain whether the scheme was given sufficient consideration during the transaction. He has also asked TPR to clarify its role.The sale of Vauxhall, which is GM’s only business in the UK, would effectively mean the Vauxhall schemes’ sponsor would have no assets with which to back it. It would require the regulator to secure a guarantee from GM in the US to continue to fund the scheme.While declining to comment on the specifics of the Vauxhall case, the TPR spokesman said: “In situations where significant change is expected for the position of the sponsoring employer to a scheme, including where the business may be sold, we would expect the trustees to be actively engaged to understand the potential for these changes to impact on the scheme and to ensure that the scheme’s position is appropriately recognised. Where they have concerns, we would expect the trustees to raise these with the Pensions Regulator.”In a press release detailing the transaction, GM said it was transferring its German Actives Plan and “selected” smaller pension arrangements to PSA. It will pay €3bn to cover shortfalls in these schemes.Companies in the UK can apply for clearance from TPR to proceed with a transaction such as a merger or acquisition without the regulator intervening on behalf of the pension scheme. However, the regulator has emphasised that providing clearance did not mean it approved of any business transaction, and it can still intervene after the transaction to secure the right outcome for members.Reports in the weeks building up to the deal’s conclusion speculated that GM’s European pension liabilities could scupper the planned transaction – just as a lack of consensus over the future of the British Steel Pension Scheme (BSPS) has hampered Tata Steel’s attempts to sell its UK operations.Tata Steel announced yesterday that it had agreed to close BSPS to future accrual from 31 March, after unions voted in favour. Existing employees will enter into a defined contribution scheme from 1 April.However, the long-term future of BSPS has yet to be decided, with Tata Steel in negotiations with the trustees, TPR, and the Pension Protection Fund about options for spinning the scheme off from the company.In a statement announcing the closure of the scheme, the company said: “Tata Steel continues to be deeply engaged with the pension scheme trustee, the trade unions, and relevant regulatory and government bodies to identify the best prospects for the future sustainability of its UK operations and a fair and practical outcome for the members of the British Steel Pension Scheme.“The company believes that finding a structural solution to address the risks from the pension scheme to the viability of the business is a crucial part of its ongoing UK transformation plan.” The Pensions Regulator (TPR) is in talks with General Motors (GM) and the trustees of Vauxhall’s UK pension schemes to secure funding as GM seeks to sell the company.The US car giant has agreed to sell its Opel and Vauxhall businesses to PSA, another car manufacturer that owns Peugeot and Citroën, in a deal worth €2.2bn.As part of the deal, GM said it would pay €3bn to PSA as part of a deal to transfer European pension funds connected to the two businesses it is selling. Larger schemes connected to Opel and Vauxhall – including the latter’s UK defined benefit plans – will remain with the US car giant, according to the statement.A spokesman for TPR said it was engaging with trustees and GM’s UK business, which is the sponsor of the UK scheme, but declined to comment further on the case.
Publica, one of Switzerland’s largest pension funds, will reduce pension promises for future retirees with effect from January 2019.The CHF38bn (€35bn) pension fund for federal employees in Switzerland yesterday announced that it would cut its technical rate and conversion rate with effect from 1 January 2019.In doing so, it followed moves made by other Swiss pension funds seeking to shore up their long-term financial stability in the face of the country’s ultra-low interest rate environment.Publica said it would cut the technical rate (technischer Zinssatz), which is applied to active members’ accrued assets, from 2.75% to 2% for its open pension schemes, and from 2.5% to 1.25% for closed schemes. Publica is a collective institution comprising 20 schemes, seven of which are closed and 13 open.The conversion rate (Umwandlungssatz), which is used to calculate members’ pension payout levels, would be lowered from 5.65% to 5.09%, Publica announced.The pension fund said it took the decision with a view to securing benefits over the long term, and that “realistic” technical parameters were part of the measures the fund was focussing on to respond to the continued low interest rate environment and declining return expectations.It said it would specify by the middle of the year how the benefit cuts associated with the new technical parameters should at a minimum be “cushioned”. It is up to the open schemes’ decision-making bodies – comprising employee and employer representatives – to decide which measures can be implemented to offset the effect of the lower conversion rate for their respective members.Under the intensely contested “Altersvorsorge 2020” (AV2020) pensions reform that was recently agreed in parliament, the minimum conversion rate is due to be lowered from 6.8% to 6% for those assets accrued based on the absolute minimum contribution required under the second pillar law.The question of how this should be offset was one of the most hotly debated aspects of the reform.Publica announced the future technical parameters in the context of its official annual results.These largely confirmed preliminary figures released in January, with Publica saying that its industrialised and emerging market investments were the main drivers of its strong performance in 2016, and that Swiss real estate was one of the successful asset classes as its holdings gained 10%.
A unit of German private bank Metzler is in the process of setting up a Pensionsfonds geared towards implementing the new “defined ambition” pension plans that have been made possible under this year’s major reform law in Germany.Other providers have also been positioning themselves to run such plans, although it is still unclear when – and perhaps even whether – they will be introduced.Speaking at the annual conference of Germany’s occupational pension association in Berlin earlier this month, Christian Remke, head of Metzler Pension Management, said could take some time before the first plan emerged.“We’ll see something by the end of 2019,” he said. Heribert KarchHeribert Karch, chairman of the German pension industry association aba, had earlier delivered an impassioned plea to the country’s employer representatives and trade unions to make the most of the new opportunities presented to them by the pension reform.“Many people have placed their hopes in you,” he said.He urged employers to use their new powers to get involved in what was a new phase of pension design as otherwise the state would intervene. Trade unions, meanwhile, should not be like “a rabbit staring at a snake” by focusing on the question of employers’ liability.The new pension plans were a responsible form of contribution-based scheme that was “completely different” from what was internationally known as defined contribution, said Karch.Trade unions should focus on the unprecedented opportunity to take part in the country’s productive wealth.“Use aba, use this opportunity – that is my appeal to you, the social partners,” he said.The pension reform law that came into effect in January – known as BRSG in German – for the first time allows occupational pension plans without guarantees, which would free employers from the obligation to top up plans. The defined ambition plans can only be established by employer associations and trade unions – the social partners. Metzler has a Pensionsfonds that it set up in 2014, but has but decided it was important to establish a separate fund for the new social partner model, according to Remke. This was for several reasons, including providing clear separation of assets, risk management, and digitalisation needs, he said.Metzler had hoped to have already completed the licencing process for the new Pensionsfonds, but it had underestimated how complex this would be, Remke added.It first informed the regulator, BaFin, of its plans last October, assuming the process would take three to six months. Its next meeting with the regulator is on 16 May.The new Pensionsfonds is being set up by Metzler Pension Management, which was recently spun out from Metzler Asset Management as a separate company.‘An unprecedented opportunity’
The UK government will aim to convince the European Union to agree to an “expanded” equivalence arrangement for financial services after the country’s exit from the EU, it revealed yesterday.This is at the heart of its proposal for “new economic and regulatory arrangements for financial services” that it set out in its white paper on the future relationship between the UK and the EU.It said these would preserve “the mutual benefits of integrated markets” and protect financial stability, but could not replicate the EU’s passporting regimes. The UK’s and EU’s current levels of access to each other’s markets would not be maintained, it said.The bid for a financial services deal to be based on a wider equivalence arrangement was official confirmation the government had abandoned the pursuit of a deal based on mutual recognition, which the UK financial sector has been pushing for. Miles Celic, chief executive officer of lobby group TheCityUK, said it was “regrettable and frustrating that this approach has been dropped before even making it to the negotiating table”.Chris Cummings, chief executive of the Investment Association, said it was disappointing the government had ruled out mutual recognition as their preferred approach, but expressed optimism about the stance it had taken.“We believe that a solution based on enhanced equivalence can deliver a deal that works for savers in the UK and across Europe, and for the asset management industry that supports them,” he said.He also said the white paper brought “much-needed clarity”. Mark Boleat, senior associate at think-tank the Centre for European Reform and former chairman of the City of London’s policy and resources committee, told IPE the white paper did not contain any surprises.“It’s been clear for some time that what the industry was asking for, in effect mutual recognition of regulatory systems, was never going to be achieved,” he said.“Now this is the first time the government has admitted that. So there is a welcome realism.”The European Commission’s and European Parliament’s Brexit negotiators delivered initial responses to the white paper on Twitter. Guy Verhofstadt welcomed the proposal that the overall future EU-UK relationship should take the form of an “association agreement”. ‘Expanded’ equivalenceIn the white paper, the UK government said existing EU equivalence regimes on financial services with non-members “are not sufficient to deal with a third country whose financial markets are as deeply interconnected with the EU’s as those of the UK are”.Equivalence as it existed today was “not sufficient in scope for the breadth” of this interconnectedness, it said.Areas currently not covered by equivalence include bank lending and insurance, according to Boleat.The government has also argued for a “structured withdrawal process”, where equivalence could not be withdrawn without a consultation being held on possible solutions to maintain it.Currently equivalence can be withdrawn by the Commission with 30 days’ notice.Celic at TheCityUK said the current form of equivalence “does not meet any requirements for success”.Boleat said: “It’s clear what Britain would like. I don’t think people are under any illusions this would be easy to achieve”.
Source: Pixabay Credit: Rodrigo Achá Egypt (top) and Bolivia are among 27 countries dropped from PMT’s new emerging market debt indexCountries such as Venezuela and Iraq dropped out of the benchmark as they posed too much risk, while government debt issued by Angola and Azerbaijan failed the test because of corruption risk.Nigeria, Pakistan and Bolivia were also excluded because of perceived vulnerability to global warming, combined with their respective governments’ lack of action in tackling climate change.Elsewhere, Egypt, Lebanon and Oman didn’t meet MN and PMT’s criterion of competitiveness, and therefore posed a default risk. Liersch and Van Dort added that exercising ownership rights was another problem in Egypt, as this could hold back potential investments.Investable areasInstead, Thailand, South Africa, Mexico and Indonesia were given as examples of large countries in which the metal industry scheme was willing to invest.According to PMT, the advantage of its bespoke index was that it didn’t run the risk of lending to countries that didn’t meet its investment criteria as a result of unexpected adjustments made to the benchmark.At the start of this year, JP Morgan updated a popular emerging market index with the inclusions of Saudi Arabia and Bahrain, countries that didn’t tick the boxes for PMT’s benchmark.PMT has previously developed a tailor-made benchmark for its €16bn allocation to passively managed developed-market equities, aimed at achieving a surplus return of 3%. Dutch metalworkers’ pension scheme PMT has removed 40% of the countries in its emerging market debt index after developing its own tailor-made benchmark in co-operation with its asset manager MN.Writing for CFA Society’s industry newsletter, Hartwig Liersch, PMT’s CIO, and Lars van Dort, senior client manager at MN, said the pension fund wanted its own standard, focused on its criteria for sustainability and its risk-return profile.The new index is based on the MSCI World fixed income universe, and is based on a combination of ESG and financial data.Sustainability criteria were based on a survey of the €77bn pension fund’s membership, they said, which largely consists of workers from the metal and mechanical engineering industries. Liersch and Van Dort said that some countries – including Poland, Chile, Malaysia and Slovakia – were too similar to developed markets to fit the criteria for the new benchmark. In addition, they had failed to deliver the required 2.5% surplus returns relative to liabilities.The countries paid investors a premium ranging from 30 to 150 bps relative to US government bonds, but this fell short of PMT’s long-term target, they said.
“Margin analytics is becoming more and more important for our business and OpenGamma provides the necessary tools for us to do these analytics,” he said.The margin software vendor said this was a “pivotal time” for the derivatives industry with voluntary OTC clearing on the increase, in anticipation of the funding challenges that non-centrally cleared derivatives margin requirements would present over the next 22 months.There had been a trend recently, it said, for buy-side derivatives users to proactively establish funding, liquidity and optimisation capabilities across their cleared and uncleared derivatives portfolios.Joe Midmore, chief commercial officer of OpenGamma, said: “These are transformational times for buy-side participants trading OTC derivatives and our recent traction in the Nordic market reflects the growing need for innovative margin analytics that meet the needs of large, sophisticated pension schemes and other asset owners.” Denmark’s two largest pension funds have decided to buy in cleared and uncleared derivatives analytical services from the same software vendor, as they prepare for incoming regulations on the capital derivatives users must hold.Labour-market supplementary fund ATP and PFA – the country’s biggest commercial pension provider – have both appointed the firm OpenGamma to provide the analytics ahead of the final implementation phases in 2020 and 2021 of the bilateral margin rules from the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO).Lars Dreier, senior portfolio manager at ATP, said: “This new solution provides us with the ability to proactively manage our derivatives book as efficiently as possible.’’Meanwhile, Thomas Kolling, senior portfolio manager at PFA, described the service as “a natural add-on” to the partnership the pension fund had had with the firm on cleared derivatives for almost two years.
But in June 2019, AkademikerPension then lifted those investment restrictions, declaring itself satisfied the bank disapproved of its own prior behaviour, had not been involved in similar cases since then and had revised its tax policy to prohibit speculation on dividend tax payments.According to the new report by DR, a department at the bank worked in 2011 and 2012 to deliberately design a model to make it possible to reclaim tax several times from the same Danish share dividends.Macquarie staff are currently being investigated in Germany in connection with historical cases of refunds of dividend withholding tax.Jens Munch Holst, chief executive officer of AkademikerPension, said: “The information provided by Børsen and DR indicates that Macquarie in 2012 was looking for a model to be able to cheat with dividend tax against the Danish state.“This is new information for us, and if the information is correct, we will of course take a firm distance,” he said. Jens Munch Holst, AkademikerPensionFor now, Munch Holst said the pension fund was asking Macquarie’s management for an explanation, and quarantining the stock until it received this.AkademikerPension said it currently had DKK52m invested in Macquarie equities, as well as more than DKK800m in infrastructure investments managed by the bank.Anders Schelde, the pension fund’s CIO, told IPE the quarantine meant it could not enter into new unlisted infrastructure investments with Macquarie, but that it would keep existing unlisted investments and let them run off.“Even if we had excluded Macquarie we would have kept the unlisted investments until run off, as it is too costly to sell them in the secondary market,” he said.Meanwhile, ATP, Denmark’s largest pension fund, told IPE its policy regarding Macquarie had not changed since 2018 when allegations against the bank relating to the Cum-Ex scandal had been highlighted in Denmark.“It remains our policy not to make any new investments in Macquarie or enter into business cooperation with them,” said a spokesman for the fund.However, the pension fund is still involved with Macquarie as a business partner within the TDC investment.The ATP spokesman said revelations in the latest investigative reports did not change anything for ATP.“But it does show that it was right to stop further engagements with the bank,” he added.He said ATP had decided at the end of last year to put a stop to the critical dialogue it had been conducting with Macquarie over the issue, because the pension fund had been unable to get the answers it wanted.PFA told Børsen last week that the new information in its report was worrying and that it would include it in the critical dialogue it was already having with Macquarie about the bank’s involvement in dividend tax cases.“Macquarie is on our watch list and we will not enter into any new cooperation with them until we have been assured that they have provided all available information and that they are no longer in any way involved in cases of unjustified recovery of dividend tax,” the pension provider told the Danish paper.“It remains our policy not to make any new investments in Macquarie or enter into business cooperation with them”ATPAt PensionDanmark, CIO Claus Stampe told IPE the pension fund had a small investment in an infrastructure fund managed by Macquarie, which was now in the process of unwinding its holdings.“There are no plans to enter into new business arrangements with Macquarie,” he said.Labour-market pension fund Sampension said it had almost DKK6.5m invested in Macquarie shares, but was closely monitoring the company regarding its tax practices.“If we find that they are resuming any unwanted behaviour, the road to exclusion is very short,” the fund’s head of equities Philip Jagd told IPE. “So far, however, we are holding on to our position,” he said.Danica Pension told IPE it had sold all its investments in Macquarie.When asked for comment, Macquarie declined to respond to AkademikerPension’s quarantine decision, but provided IPE with the response it had previously given Børsen in relation to its news investigation.In that response, Macquarie said the memo cited by Børsen had been “consistent with market practice at the time, whereby many banks were seeking opinions on dividend trading strategies.”“Macquarie has previously stated that it only conducted these types of strategies on the basis of confirmatory legal advice. No such strategy was authorised by Macquarie in relation to Denmark,” the bank said.“Where we get things wrong or when rules or expectations change, we are always willing to resolve any problems and change our approach. Macquarie regrets our historical involvement and we have taken steps to ensure that this type of activity no longer happens,” the bank said in the response.Looking for IPE’s latest magazine? Read the digital edition here. New revelations about controversial dividend arbitrage practices at Macquarie have prompted another move by a Danish pension fund to distance itself from the Australian bank – while ATP said the latest reports vindicate its two-year-old policy of not investing in the bank.Akademiker Pension, which recently changed its name from MP Pension, announced it is putting Macquarie back into investment quarantine – a status which precludes new investments for six months – following recent disclosures by financial daily Børsen and national broadcaster DR about the bank’s role in a long-running international dividend tax scandal.The pension fund already quarantined the Australian bank in 2018 when the furore over its historical role in the Cum-Ex scandal originally gripped Denmark.Danes had been particularly outraged because Macquarie was a major shareholder in the former national telecoms company TDC through its investment partnership with Danish pension funds ATP, PFA and PKA.
The villas have an estimated rental return of $156,000.The Sydney prize has an estimated rental return of $62,400 and was not made available for viewing. The Sydney draw which closes at 8pm this evening (July 3) is a new build two-storey, three-bedroom home 5km from Sydney’s CBD with two off-street car parks and city skyline views. The median price of properties there was $1.7m. The Sydney townhouse embraces open plan living and indoor-outdoor flow.The Queensland prize closes 8pm on July 31 with the instant property millionaire to be drawn at 10am on August 8. FOLLOW SOPHIE FOSTER ON FACEBOOK More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours agoTwo absolute beachfront villas in Queensland’s southern end of the Gold Coast are part of RSL Art Union’s Draw 357 where the prize is worth $3.7m.The villas have 180-degree views of the ocean from the second and third floors and have been filled with $232,500 worth of furniture and electrical items.The property has gourmet chef’s kitchens and entertainment decks and is just 20 metres from the patrolled beach, according to organisers. The draw for the luxury $2m townhouse in Lilyfield, 5km from the Sydney CBD, closes at 8pm this evening.The Queensland beachfront villas are in a tightly held corner of the Gold Coast on the site of a large 1,012 sqm block that last sold in 2014 for $2.3m.Two triple-storey townhouses were built on the site of an outdated 1950s four bedroom house. Post build the site now has an estimated rental return of $156,000 a year — which is over three times as much as it previously commanded in rent. The second and third floors of the Gold Coast beachfront villas have sea views.Located at 230 Pacific Parade, Bilinga, the beach villas are open for display from 9am to 5pm every day this month. Record Brisbane block sold for ‘Sydney price’ First homebuyer delays expected State’s mega-millions sales the height of luxury Two absolute beachfront villas in Queensland’s southern end of the Gold Coast are part of RSL Art Union’s Draw 357 where the prize is worth $3.7 million.TWO luxury beachfront villas in Queensland’s southern end of the Gold Coast are the latest prize homes set to make someone an instant property millionaire.The $3.737,250 prize pool is a significant ramping up for the RSL Art Union given its latest property prize — an inner city Sydney townhouse draw which closes this evening — is worth $2m.