Borgdorff said he was collecting his award on behalf of PFZW’s members – workers within the health and welfare sector – and stressed the importance of working on behalf of the beneficiaries.Balfe, meanwhile, said he was “very surprised and deeply honoured” to be collecting his Outstanding Industry Contribution Award.“My principle in all the things I’ve done in pensions over the years has been to remember that the basic duty of pension funds is to pay pensions to pensioners,” he told attendees at the dinner.“We must never forget that, were it not for the pensioners, we would have no job left at all.”British Steel Pension Fund landed the final Gold Award for Best Long-Term Investment Strategy.Other big winners on the night included the Belgacom Pension Fund, which won the Silver Award for Best Corporate Pension Fund and the Country Award for Belgium.The SEB Pension won the Bronze Award for Fixed Income and the Country Award for Denmark, while the Merchant Navy Officers Pension Fund in the UK won the Bronze Award for Alternatives and the Themed Award for Specialist Managers.Finland’s Etera Mutual Pension Insurance Company won Themed Awards for Emerging Markets and In-House Investment Team.The remaining Silver Awards went to Denmark’s Industriens Pension, which won Best Industry-wide Pension Fund, and Italy’s Fondo Pensione per gli Agenti Professionisti di Assicurazione, which won Best Small Pension Fund.NEST Corporation landed both the DC/Hybrid Strategy Award and the Risk Management Award.The final Bronze Award, for Equities Investment, went to Switzerland’s CERN Pension Fund. The UK’s Pension Protection Fund was the standout winner at the 2013 IPE Awards in Noordwijk, the Netherlands, taking home the Gold Award for the Best European Pension Fund, the Silver Award for the Best Public Pension Fund and the Country Award for the UK.Accepting the Gold Award for the Best European Pension Fund, the PPF’s executive director of financial risk Martin Clarke said the win was a “fantastic and tremendous” endorsement of the UK lifeboat fund’s work.“It’s great to recognise the asset owners of this industry, the ones who make the decisions, place the money and provide that link between the markets and the beneficiaries,” he added.Peter Borgdorff, director at PFZW and a veteran of the Dutch pensions industry, won the Gold Award for Pension Fund Personality of the Year, while Richard Balfe, chairman of the MEP Pension Fund for European parliamentarians, won the Outstanding Industry Contribution Award. Themed Awards Active Management: Bosch Pensionsfonds AGCommodities: Empleados de Telefónica de EspañaDC/Hybrid Strategy: NEST CorporationEmerging Markets: Etera Mutual Pension Insurance CompanyESG: IrcantecIn-house Team: Etera Mutual Pension Insurance CompanyInnovation: Danica PensionLDI: PKAPortfolio Construction: Fonditel AlfaReal Estate: PensionDanmarkRisk Management: NEST CorporationSmart Beta: Environment Agency Pension FundSpecialist Managers: Merchant Navy Officers Pension Fund Silver Awards Best Corporate Fund: Belgacom Pension FundBest Industry-wide Fund: Industriens PensionBest Public Fund: Pension Protection FundBest Small Fund: Fondo Pensione per gli Agenti Professionisti di Assicurazione The full winners list for the 2013 IPE AwardsGold AwardsBest Long-Term Investment Strategy: British Steel Pension FundPension Fund Personality of the Year: Peter BorgdorffOutstanding Industry Contribution: Richard BalfeBest European Pension Fund: Pension Protection Fund Bronze Awards Alternatives: Merchant Navy Officers Pension FundEquities: CERN Pension FundFixed Income: SEB Pension Country Awards Austria: fair-finance Vorsorgekasse AGBelgium: Belgacom Pension FundCEE: Swedbank Pension Investment Plan DinamikaDenmark: SEB PensionFinland: The State Pension Fund (VER)France: ERAFPGermany: Bosch Pensionsfonds AG and Ärzteversorgung Westfalen-LippeIreland: Accenture Defined Contribution Pension PlanItaly: LaborfondsNetherlands: PMTNorway: Oslo PensjonsforsikringPortugal: BPI Vida e PensõesSmall Countries: Frjálsi Pension Fund (Iceland)Spain: Caixa 30, FPSweden: SPK – Sparinstitutens PensionskassaSwitzerland: Lombard Odier Pension FundUK: Pension Protection Fund
Among the most heated debates during this year’s Swiss second pillar pension conference “Fachmesse 2. Säule” was the one on flexible pension pay-outs.Swiss union representative Doris Bianchi called this model “a curse” not only for members but also for pension funds themselves, as administrative efforts and costs were increased.“It is a curse for all current employees who will have to accept not knowing the level of their pension pay-out in future and for pension funds because of legal uncertainties,” she noted in a debate at the conference referring to possible problems in evaluating such schemes and transferring members to other Pensionskassen.However, the two pension funds which already introduced this model said they had no such problems: Already in 2005, the pension fund of accountancy PwC in Switzerland pioneered in introducing a “bonus pension” model in which the level of rents is calculated every three years. “We need less than an hour to set the new benchmarks every three years and adjusting the pension pay-outs is no big deal either,” Josef Bachmann, managing director at the PwC pension fund told IPE.He confirmed that it had taken some time and resources to develop the model – “especially as we were the first” – but he stressed the positive effect this flexibilisation has on the pension fund fully justifies the costs.Over the last years, many Swiss pension funds had to adjust their technical parameters like the discount and the conversion rate in order to ensure that no money from active members had to be transferred for paying out pensions to retired members.However, lowering the technical parameters only helps so far and other solutions have to be found to ensure sustainability of the second pillar.One solution could be flexible pension pay-outs where only the legal minimum is guaranteed and this year, the energy sector Pensionskasse PKE introduced a similar model.Ronald Schnurrenberger, managing director at the PKE, confirmed the administrative effort was minimal after the initial costs for setting up a new IT system.“Our system has been set up to ensure simple administration: The system only has five steps (90,95,100 which is the target pension, 105 and 110%),” he explained.Those steps depend on the certified funding level as per year-end with the target pension being paid out if the funding level is between 100% and 120%.This target pay-out level is also used for assessing the value of the pension fund in the company’s accounts and for possible transfers of members to other pension funds.Schnurrenberger stressed his members have understood the need for this measure and those active members on the trustee board have voted in favour of the introduction fully knowing they will be receiving only a minimum guarantee on their pension in the future.Bianchi had argued the model helped employers save on second pillar costs as in case of underfunding retirees were covering a part of the deficit while currently it was only the employer and the employee chipping in.At the conference, Christoph Ryter, president of the Swiss pension federation Asip, stressed “every additional room for manoeuvering” given to the trustee boards “is a good thing”.He mentioned when the mandatory second pillar was set up in the 1980s many Pensionskassen had introduced a legal clause to cut pensions if necessary which they had to revoke after the first revision of the law governing mandatory occupational pensions in Switzerland, the BVG.“This increased the ‘de-solitarisation’ between active members and retirees – with the introduction of a flexible pension pay-out this would be amended to a certain extent,” said Ryter.He stressed, however, that a flexibilisation should never be introduced for pay-outs below a legal minimum.For his fund, the Migros Pensionskasse (MPK), a flexible pension pay-out model was “no option” at the moment as “financial security is very high” and in fact the MPK remains one of the few funds to still be run as a defined benefit scheme.Meanwhile, the Pensionskasse of Swiss railways SBB is still discussing whether or not to introduce flexible pension pay-outs and managing director Markus Hübscher expects a decision by the board of trustees this year.
Under the first approach, a scheme sponsor would book the swap as a plan asset and measure it at fair value.Following an alternative accounting approach, however, a sponsor would treat the swap as a qualifying insurance policy and book the premiums as a liability.A longevity swap transfers the risk of pension scheme members living longer than expected from pension schemes to an external party.This external party is usually an insurer or a bank.The effect of a swap transaction is to freeze or settle the DB plan sponsor’s obligations to the scheme members.Longevity risk is one of the biggest risks faced by DB pension schemes.It can lead to schemes paying out higher pension payments than expected and, as such, push a fund into deficit.A DB pension obligation is accounted for under IFRSs by following the requirements of International Accounting Standard 19, Employee Benefits (IAS 19).A separate accounting standard, IFRS 13, Fair Value Measurement, deals separately with fair-value issues.Both standards are updated and maintained by the International Accounting Standards Board.The IFRS IC is charged by the board with developing interpretive guidance on those standards.The committee can also propose amendments to IFRSs such as IAS 19.In support of their recommendation against adding the issue to the committee’s agenda, staff argued that the issue was “not currently widespread” and “material diversity in practice is not observed.”Committee member Reinhard Dotzlaw questioned this assessment, however.Dotzlaw argued that, although in Canada “we don’t see longevity swaps”, they were nonetheless “not uncommon in certain other jurisdictions like the UK”.London-based consultant actuary Simon Robinson told IPE: “Swap transactions the moment are rather complicated and only suit a small number of schemes.“Typically, again in the UK, it has tended to be the bigger pensions plans with the more sophisticated trustees that have gone down this route.”Interested parties have until 20 January 2015 to comment on the committee’s tentative decision.The IFRS IC expects to finalise the agenda decision during its March 2015 meeting.Separately, during their 11 November meeting, committee members retreated back from the possibility of requiring DB sponsors to remeasure a DB liability to account for significant market fluctuations.The issue arose out of the committee’s project to propose an amendment to IAS 19 dealing with remeasurement of the net DBL in the event of a plan amendment or curtailment.Given that the issue is proceeding as an annual improvement to IAS 19, the issue will go forward to a future meeting of the IASB. The International Financial Reporting Standards (IFRS) Interpretations Committee has tentatively ruled that defined benefit (DB) plan sponsors must account for longevity swaps as single-instrument plan assets held at fair value.Details of the tentative decision, reached during the committee’s 11 November meeting, are set out in the latest edition of IFRIC Update.The IFRS IC, which is responsible for interpreting international accounting standards, received a request in August to clear up confusion around the accounting for longevity swaps held by a DB plan.The anonymous submitter, tipped by sources to be a ‘Big Four’ audit firm, noted that there were two possible approaches to the problem.
Dutch pension funds should improve their assessment procedure for potential breaches of integrity, such as corruption, conflicts of interest and fraud, watchdog De Nederlandsche Bank (DNB) has suggested. After assessing a number of risk analyses submitted by pension funds, DNB concluded that much was “open to improvement”, according to financial daily Het Financieele Dagblad (FD).“It is obvious that risk analyses are largely limited to a small number of integrity risks and are lacking depth,” the DNB said.The FD further quoted a DNB spokesman as saying that the findings were serious, as “integrity should not depend on documents, but should be embedded in an organisation”. “If a pension fund even can’t write down what the risks are, the chances of everything being under control are smaller.”According to the spokesman, DNB’s assessment was merely based on risk analyses of 25 pension fund which already had such assessments available during an earlier probe into conflicts of interest by the regulator.He added that the supervisor had subsequently requested all other pension funds to submit such a risk analysis before 1 August.The spokesman further made clear that DNB was fully aware that pension funds differed from financial institution such as banks and insurers, and that for example money laundering risks were smaller.“However, pension funds have invested billions for their participants, and therefore they should be aware that such matters pose a potential risk for their integrity,” the FD quoted him as saying.He further underlined that the DNB framework for integrity standards was fully based on legislation. DNB announced that it would present guidelines for addressing integrity risk later this year.
The deal by the Dutch company’s UK subsidiary, the largest full buyout to date, is unlikely to be overshadowed by further transactions before the end of the year, according to David Collinson, PIC’s head of strategy.“I would expect there would be a steady flow of deals completing before the year-end,” he said, when asked if the increased transaction price resulting from Solvency II would act as an incentive to finalise deals.However, he argued that it was unlikely any of PIC’s competitors would withdraw from the market as a result of the new capital requirements.“By necessity, the players in the bulk annuity market have to have capital and feel comfortable with their capital position,” he said.“Companies will be aware where their Solvency II position is landing. They will have been liaising with the Prudential Regulation Authority over the course of this year.“In a sense, any retrenchment I would have expected to have happened already, rather than at cut-off next year. People know where they are hopefully landing on Solvency II.”The £2.4bn deal significantly boosts the volume of bulk annuity transactions for 2015, which, according to Aon Hewitt, stood at £4.4bn by the end of June.However, the current volume of deals remains short of 2014’s £12bn in transactions. The UK’s Philips Pension Fund has completed a full buyout, transferring £2.4bn (€3.3bn) to Pension Insurance Corporation (PIC).The transaction, covering 26,000 scheme members, saw PIC simultaneously transfer all associated longevity risk to Hannover Re, the insurer said in a statement.It comes only a few months before UK insurers will be forced to increase capital reserves as a result of Solvency II, widely expected to increase the cost of such bulk annuity deals.Jay Shah, PIC’s head of origination, said reducing risk was gradually becoming “part and parcel of modern commercial thinking”.
“The OPSG is in a unique position to help EIOPA and other European institutions to reach the best possible outcomes.”Leppälä is the second secretary general of PensionsEurope to chair the OPSG, following Chris Verhaegen’s term as the group’s inaugural chair, when the organisation was known as the European Federation for Retirement Provision. The OPSG, which met on 28 April for the first time since 21 new members were named, also elected Bernard Delbecque as deputy chairman during its meeting, the EIOPA press office confirmed to IPE.Delbecque was appointed to the OPSG earlier this year.He is director of economics and research at the European Fund and Asset Management Association (EFAMA), which in the past has been a propronent of a pan-European personal pension product – an idea now championed by the European Commission as part of its Capital Markets Union proposals. Matti Leppälä, secretary general at PensionsEurope, has been elected chair of the European Insurance and Occupational Pensions Authority’s (EIOPA) pension stakeholder group (OPSG), succeeding Philip Shier.Leppälä, who has been with the European industry group since 2011, was previously the OPSG’s deputy chair, serving under Benne van Popta and Shier, following the former’s resignation mid-term in 2015.“I am honoured to chair the OPSG for the coming term of two and a half years,” Leppälä said in a statement.“The role of occupational pensions and other private pensions is increasingly important for good pensions in Europe.
The scheme has already sold €68m of German inflation-linked bonds and re-invested the proceeds in property in the US and Japan, as well as in the Dutch Mortgages Fund of TKPI, its asset manager.The pension fund plans to start investing in private equity at the expense of European and emerging market equities, and said it was looking to replace part of its 3.3% commodities allocation with hedge funds.Although it lost 24.6% on its overall commodities holdings, the pension fund emphasised that the asset class contributed to the diversification of its investment portfolio, “as the correlation with stocks had decreased”.KPN Pensioen reported an overall return of 3.7% for 2015.Its 44.8% equity allocation returned 3.7%, while its fixed income allocation of 45.6% returned 1.3%.Real estate produced an 8.3% return.The scheme’s interest hedge was the main contributor to its annual result, generating 2.9 percentage points of return.Its interest cover includes swaptions, which caused the hedge to decrease after rates increased, it said.Over the first six months of 2015, the pension fund adjusted its interest hedge twice due to rate movements.After rates decreased at the start of the year, the pension fund reduced its cover from 75% to 35% and re-invested most of the proceeds of the divested swaps and swaptions.When interest rates were increased again, KPN Pensioen raised the hedge level to 45%.In the wake of these adjustments, it fine-tuned the trigger mechanism for future changes, it said.The pension fund lost 0.1% on its 50% currency hedge on the US dollar, British pound and Japanese yen, which all appreciated against the euro over the period.As of the end of last April, the KPN scheme’s funding stood at 113.3%. The €8.7bn pension fund of Dutch telecommunications company KPN has overhauled its strategic investment portfolio to match its new risk approach, aimed at increasing risk exposure and illiquid investments.In its 2015 annual report, KPN Pensioen said it based its new investment policy on the new financial assessment framework (nFTK) in the Netherlands.It said the nFTK had increased Dutch schemes’ options for smoothing out rights discounts and broadened their long-term investment horizons. As an initial step, KPN replaced its 4% allocation to euro-denominated government bonds with US government paper, and, in future, it intends to replace the US bonds – together with its credit holdings – with residential mortgages and asset-backed securities.
However, PensionsEurope criticised the report in a paper published last week, which included hard-hitting comments from its member associations in Bulgaria, Germany, Italy, and Spain. PensionsEurope said these organisations had found “substantial discrepancies and wrong interpretations”.For example, the Spanish Association of Collective Investment Schemes and Pension Funds (Inverco) said that although it appreciated Better Finance’s research effort and the difficulties involved, it had “still found a number of inconsistencies and mistakes offering a distorted vision of the Spanish pension funds industry”.It said its main concern was the “deliberate omission of tax impact in Spain when comparing Spanish pension funds with those from other [EU] member states”.The European occupational pension fund trade body was at pains to strike a constructive tone, however. It suggested areas of improvement, and welcomed “the research on the quality of occupational and personal pensions and the outcome of pension savings”.Janwillem Bouma, chair of PensionsEurope, said: “In [our] paper, we highlight numerous specificities that the research should take into account in order to give a realistic picture of the quality and outcome of pension savings. If ignoring these specificities, the research faces a serious challenge of comparing apples and pears.”Matti Leppälä, secretary general of the association, offered PensionsEurope’s help to improve the methodology of Better Finance’s report: “Particularly, we invite Better Finance to use the data and time periods which are consistent and comparable, focus on both the accumulation and payout phase, and explore the benefits in addition to the costs.”Better Finance today said that it welcomed the offer of cooperation, but that it also wanted “to clarify some misunderstandings as to the objectives, the methodology, and scope of the research effort”.“Our research goal is far more specific and far less ambitious than the one Pensions Europe highlights in its headlines: the aim is not to analyse ‘the quality and outcome of pension savings’, but to improve the transparency on the real returns of pension savings in Europe,” it said.It called on trade associations to help plug a data gap and improve the transparency of data on pension returns, “since the bulk of the criticism aimed at the report by Better Finance originates from the lack of available data on returns”.Both organisations have noted that the European Commission wants the European financial supervisory authorities to carry out out work on the transparency of long-term retail and pension products, including an analysis of actual net performance and fees.Speaking at the launch event for Better Finance’s pension savings report in September, Commission vice-president Valdis Dombrovskis said that returns on retail investment products and pensions can be heavily influenced by fees levied by asset managers and intermediaries and that the “the right data on the net performance and fees of the most commonly sold products is important […] to ensure more competition and better service for consumers”.IPE understands that EIOPA – the supervisory authority responsible for the insurance and occupational pensions sector – has yet to be formally assigned such work by the commission. PensionsEurope has urged European consumer finance campaign group Better Finance to make changes to the research behind a report on the real returns of pension savings of Europe, arguing that it is otherwise “comparing apples and pears”.It follows the fourth edition of a Better Finance report that aims to show the real returns of pension savings – after charges, inflation, and taxes – in 15 European countries.The 2016 report, published in September argued that once inflation, charges and (where possible) taxes were taken into account, private pension products have often performed poorly.“Unfortunately our research findings show that most pension savings did not, on average, return anything close to those of capital markets, and in too many cases even destroyed the real value for European pension savers (i.e. provided a negative return after inflation),” said Better Finance.
Carine Smith Ihenacho, chief corporate governance officer“Responsible investment is of increasing importance for risk management,” it said. Hege Gjerde, chief financial officerNBIM, which now has offices in five countries, said recruitment, people development, cost awareness and cost efficiency were key to maintaining an efficient investment organisation fit for its task.The heads of HR and financial would also be included in the leader group because of this, it said.“Investment is our main area of work, but people development and cost efficiency are key to success,” Slygstad said. The appointments, which took effect on New Year’s Day, do not involve any other organisational changes than the expansion of the leadership group, NBIM said.Asked if NBIM had any comment on the resulting change in gender diversity at its top management level, a spokesman explained the organisational reasons for the appointments, but added: “The increased gender diversity that follows is of course welcome.” Norges Bank Investment Management (NBIM), the manager of Norway’s giant sovereign wealth fund, has expanded its leadership team to 11 people from eight, adding three new members to reflect its growing emphasis on governance, costs and other non-investment matters.Carine Smith Ihenacho has taken on the role of chief corporate governance officer, Hege Gjerde became chief financial officer, and Sirine Fodstad has moved into the role of chief HR officer.The three new leadership team members are all women who were already heading up their respective areas at the organisation. The leadership team was previously all-male. Explaining the reason for Smith Ihenacho’s elevation to the leadership team, NBIM said good corporate governance, sustainable business practices and well-functioning markets were essential to safeguard the Government Pension Fund Global’s (GPFG) wealth for future generations. Sirine Fodstad, chief HR officerYngve Slyngstad, chief executive of NBIM, said: “Our responsibility as owner and our work with corporate governance, sustainable business practices and well-functioning markets is extensive and important, and calls for a dedicated area of responsibility in the fund’s leader group.”Smith Ihenacho has headed up the ownership strategies department at NBIM since August 2017.Gjerde, meanwhile, has been in charge of corporate management since 2009, having joined the GPFG’s management in 2004.Fodstad has been head of HR since June 2015.
“We believe that the selected managers will contribute strongly to our purpose of making a difference to investment outcomes for the Local Government Pension Scheme,” she added. Keswick in Cumbria, one of the 12 counties backing the Border to Coast Pensions PartnershipEarlier this year the pool launched two private markets vehicles with an aim to eventually invest £10bn in private markets. It said it expected to announce fund launches for multi-asset credit and private credit “in the coming period”.People’s Pension allocates to ‘adaptive cap’ indexThe People’s Pension, a £7bn multi-employer defined contribution scheme, has invested in an “adaptive cap” index fund through State Street Global Advisors.According to a statement from the auto-enrolment provider, the World Adaptive Capping Equity index sets a limit on the size of an investment in a single holding within the fund to reduce exposure to the biggest companies, and seeks to improve diversification by increasing the exposure to smaller holdings.For example, as a result of investing in the fund, The People’s Pension was reducing its exposure to five “super companies” in its North America portfolio from 15% to 2%.Nico Aspinall, chief investment officer of B&CE, provider of The People’s Pension, said: “By investing in the World Adaptive Capping Equity index, we are continuing to improve the risk-return profile of members’ portfolios and reducing the reliance we have on a small number of companies.“We see this change as a part of our continued evolution of the portfolio and the hallmark of good trustee governance available from a large master trust.”IPE understands that the allocation to the adaptive cap fund will be 44% of The People’s Pension default fund once it is completed.The People’s Pension said it was moving away from market capitalisation weighted equities. Border to Coast Pensions Partnership, one of the UK’s eight public sector pension asset pools, has appointed Royal London Asset Management, M&G Investment Management and Insight Investment to run a sterling investment grade credit fund.The fund is the first of an intended series of fixed income funds for the pool’s 12 local government pension scheme (LGPS) clients, who have £46bn (€51.5bn) in assets under management between them. Around £9bn of this total is already being managed by Border to Coast.The pool said 25 asset managers bid for the sterling credit mandate, and that it expected the fund to have more than £2bn in assets at launch.Rachel Elwell, CEO of Border to Coast, said the pool was “particularly pleased with the way the asset management industry responded to the challenges we made to deliver innovative and value for money mandates”.