The introduction of auto-enrolment pensions provider NEST has made the UK’s pension system more durable in relative terms, pushing the country into the world’s top 10 sustainable pension systems, a study has shown.Allianz Global Investors’ latest pension sustainability index places the UK at number 10 in 2014, up from 12th position in 2011 when the last index was calculated.Andreas Hilka, head of pensions Europe at the asset manager, said: “With the introduction of NEST, a simple yet sophisticated auto-enrolment scheme, the UK took an important step towards enlarging the share of people saving for their retirement.”He said the recently announced overhaul of the annuities market and the decision to cap auto-enrolment charges showed more reform was clearly on the agenda in the UK. Removing the tax incentives for purchasing an annuity may act as a catalyst for a more efficient pension system, Hilka said.“By allowing greater choice, retirees can choose from a far wider range of income-generating products to suit their circumstances and preferences,” he said.But he said it was important to make sure savers had access to all the information, tools and advice they needed to stop them falling into economic hardship at the end of their lives.As in the 2011 study, Australia came out as the country with the most sustainable pension system in the index ranking, followed by Sweden in second place.New Zealand took third place, followed by Norway, the Netherlands and then Denmark.Denmark fell by three places between 2011 to 2014, while Norway rose by three.Among European countries, Ireland, Luxembourg and Romania rose more than five places between 2011 and 2014, while France, Malta, Slovenia and Croatia fell more than five places.Australia was under the least pressure to reform pensions, Allianz Global Investors said, with its two-tiered system of lean public and highly developed funded pensions.It said the Western European countries in the top 10 benefited from their comprehensive pension systems that were based on strong, funded pillars. Sweden and Norway, meanwhile, had comparatively solid public finances, and Norway benefited from a high legal retirement age and moderate ageing demographics, the asset manager said.
Nijpels had taken over from Harry Borghouts – a former governor of the province Noord-Holland – who also had to give up his chair because of his disputed role in the loss of a significant provincial deposit, when the Icelandic bank Landsbanki went bankrupt.ABP’s board said that it respected Brouwer’s decision, and voiced its appreciation for his devotion to the scheme.José Meijer and Cees de Veer, both vice chairs, would replace Brouwer until the pension fund has appointed a new chairman, according to ABP. Henk Brouwer, chairman of the €309bn civil service scheme ABP, has announced that he is to step down, citing personal reasons for his decision.An ABP spokeswoman said Brouwer’s last day would be on 1 June, but declined to comment further on the decision.Brouwer – an economist, and former director at supervisor De Nederlandsche Bank and top civil servant at the Treasury – started as chairman for a four-year period on 1 January 2012.He succeeded Ed Nijpels, who was forced to leave after seven months, following his involvement on the supervisory board of Dutch DSB-Bank, which went bankrupt in 2009.
GBP, the €55m industry-wide scheme for wholesale flower and plant growers in the Netherlands, is to join PGB, the €20bn pension fund for the Dutch printing industry.The smaller scheme is to merge its assets with those of PGB on 1 January, pending regulatory approval, according to GBP employee chairman Gerard Roest.In the past, local insurers have criticised that pension funds from other industrial sectors, or “alien” schemes, are allowed to join the scheme for the printing industry, as they consider this unfair competition.With the news, GBP – a non-mandatory scheme – follows in the footsteps of Zeevisserij, the €100m industry-wide scheme for offshore fisheries, which also intends to join PGB. Both pension funds are to accrue pensions under an individual defined contribution plan, which would also be provided by the printing scheme, in addition to its defined benefits arrangements.Jetta Klijnsma, state secretary for the Social Affairs Ministry, cleared the way for “alien” schemes to join industry-wide pension funds.Responding to questions from Parliament, Klijnsma said different sectors would be allowed to place their pension plans with a single industry-wide scheme if the companies and workers involved wished to do so.Roest said: “Joining PGB means the wholesale sector for flowers and plants can still achieve the desired mandatory participation for employers.”In his opinion, such status is required to improve current pension arrangements.GBP’s contribution is no more than 14% of the pensionable salary.According to Roest, this is too low to join other industry-wide schemes, such as those for the retail and grocery sector, because their basic pension plans are more expensive.He said his scheme had also ruled out the low-cost PPI DC pensions vehicle, as it lacked the possibility for mandatory participation.Neither was the new, so-called ‘general pension fund’, or APF, an option, he said, due to the time involved in gaining the required legal status.GBP is under pressure to secure alternative pension provision for its 6,500 participants, as it considers itself too small to carry on independently.Roest said administration costs now stood at €283 per participant and were rising rapidly.At PGB, these costs would be reduced by 50%, he said. Further, asset manager APG terminated its contract with GBP as of 1 January, as it considered the scheme “too small”.Since that time, GBP has kept its assets in an NN Investment Partners money market fund.Roest said his scheme was keen to transfer assets to PGB as soon as possible to start generating “proper” returns again.
He previously worked at the Ministry of Finance, Nasdaq OMX (the Stockholm stock exchange) and the Swedish National Debt Office. He will start in his new role at Finansinspektionen on 21 October, taking over from Martin Noréus, who was appointed acting director general in April.Noréus stepped in when the regulator’s previous leader Martin Andersson left the post to become a partner with the consultancy firm Oliver Wyman.At KPA Pension, 60% owned by Folksam and 40% owned by the Swedish Association of Local Authorities and Regions (SKL), Mia Liblik has been appointed acting managing director in Thedéen’s place. She has worked at KPA since 2008, most recently as managing director of KPA Livförsäkring (life insurance) and head of market development at KPA Pension. Sweden’s KPA Pension is losing its new chief executive Erik Thedéen just six months into the job after he was appointed by the government as director general of the country’s financial regulator Finansinspektionen.Jens Henriksson, chairman at KPA Pension and chief executive at Folksam, said: “It is sad Erik is choosing to leave KPA Pension, but, at the same time, it is an honour to have such sought-after and highly skilled people in the company.”He wished Thedéen good luck in his new job.Thedéen became chief executive of the local government sector pension fund in April.
Cripps has also been appointed to the RPMI board as an executive director of the company. RPMI oversees administration and operations of the pension scheme.Cripps said: “I am delighted to have this opportunity to lead our investment business as we continue to build our internal capability to generate superior returns for our 350,000 members and their families.”Two other non-executive board appointments were announced.Joining the RPMI board is Richard Jones, who is a director of RPMI’s parent, the Railways Pension Trustee Company Limited (RPTCL). He is also head of UK real estate and facilities at engineering firm AECOM.Joining the board of RPMI Railpen is John Chilman, who is group pensions director at FirstGroup plc and chair of RPTCL. He is the former chair of RPTCL’s own investment committee.CEO Hitchen said: “I know that Julian will be a great leader for our investment business, and that Richard and John will provide strong governance while maintaining and strengthening our links to our rail stakeholders and the members whose pensions we are here to pay.” RPMI has appointed Julian Cripps as managing director of investment business, a new role from which he will lead RPMI Railpen, the in-house investment manager for the UK’s £25bn (€29bn) Railways Pension Scheme.Cripps has been chief operating officer for investments at RPMI since 2015, but “now takes a wider role in leading the business in its vision to be a world-class asset owner”, RPMI said in a statement.A spokesman for RPMI told IPE that the role was new, although it had some similarities with a position held by Frank Johnson before RPMI’s restructuring.RPMI Railpen’s three investment directors – Ciarán Barr, Paul Bishop, and Richard Williams – now report to Cripps, who in turn reports to Chris Hitchen, CEO of RPMI.
Collective defined contribution (CDC) schemes are more likely to prove popular with larger companies seeking to close their defined benefit (DB) plans, according to a leading credit rating agency.Fitch Ratings has argued that CDC arrangements are “more likely to be adopted by larger institutions, including public-sector organisations and private-sector corporations, to replace DB schemes that have proven onerous for employers”.Such schemes are being heavily debated in the UK following the Royal Mail’s decision in February to introduce a CDC plan to replace its defined benefit scheme.Christophe Parisot, managing director of international public finance at Fitch, said: “For CDC to be a viable operation its member pool needs to be large enough, or a multi-employer setting needs to be available, so that it can benefit from effective risk-sharing and economies of scale.” CDC plans – also known as ‘defined ambition’ funds – are already popular in Canada and the Netherlands, albeit in slightly different formats compared to what has so far been put forward in the UK.Sir Steve Webb, former pensions minister, attempted to steer them into legislation in 2013 – only to be stymied by a subsequent departmental desire to concentrate on at-retirement reforms instead.They returned to the spotlight earlier this year following the UK postal service’s agreement with the Communication Workers Union, which broke the deadlock over the closure of DB scheme to future accruals.However, while employers might welcome the new savings vehicle, many of the UK’s leading unions warned recently that CDC plans should not be seen as an ideal replacement for DB plans.However, the TUC, which represents 50 UK unions, said CDC pensions might be an improvement for people in standard defined contribution (DC) schemes.“[CDC] pensions could bring these savers benefits of scale, improved investment returns and a secure income in old age,” said Tim Sharp, TUC pensions officer. “Good-quality defined benefit schemes are valued highly by workers. Every effort should be made to ensure those schemes that remain continue to be open to new members.”However, in Fitch’s report, it said employers that had already switched to DC were “much less likely to switch to CDC, given the added layer of complexity of running such schemes and the potential for controversy and reputational consequences if something goes wrong in the scheme”.
Joachim SchwindOther previous roles include membership of the advisory board to the German financial regulator, BaFin, from 2002 to 2012. Joachim Schwind, a veteran of the German pensions industry, is to retire from his role as head of one of Germany’s most significant pension fund set-ups, according to local media.The two pension funds, the €7.1bn Pensionskasse der Mitarbeiter der Hoechst-Gruppe and the €1.6bn Höchst Pensionskasse, are run by the same management team and Schwind has been chairman of their management boards – effectively chief executive – for around 20 years.According to Leiter bAV, a German occupational pension publication, he is to retire from the Hoechst pension funds in July, and is due to be succeeded by Jürgen Rings. Rings has been on the pension funds’ management boards since 2016 and has had responsibility for risk management.IPE was unable to reach Schwind by the time of publication. Schwind has also held important unsalaried positions. He is currently deputy chairman of aba, the main occupational pensions association in Germany, a role he has held since 1996. He is a former member of the European Insurance and Occupational Pensions Authority’s Occupational Pension Stakeholder Group, a role that he left in 2016. Jürgen RingsThe Pensionskasse der Mitarbeiter der Hoechst-Gruppe is one of the largest company-based pension institutions in Germany.It is the pension fund for employees of Hoechst, a well-known German chemicals company that is now a subsidiary of the Sanofi-Aventis pharmaceuticals group. Closed to new members, the pension fund’s roots can be traced to the 1880s.Schwind became its chief executive in 1996. Höchst Pensionskasse was established in 1998. For more about the Höchst Pensionskassen, see last October’s How We Run Our Money interview
Dutch companies with subsidiaries in the UK pay a significantly higher contribution to their UK DB pension funds than their FTSE350 counterparts on average, according to a survey by UK consultancy Barnett Waddingham.Surveying the 2016 figures of 12 anonymised companies, with combined UK pension liabilities of almost ₤49bn (€55bn), it found that pension contributions amounted to at least 1.6% of total revenue on average. This compared to a minimum 0.7% from the FTSE350 companies.Including the two highest contributors, the overall contribution was 13.5% on average, it said.Dutch-sponsored schemes had a funding level of 95% on average, Barnett Waddingham reported, 1 percentage point higher than the FTSE 350 average. It added that four subsidary schemes had a funding surplus, while funding of the least funded scheme stood at 67%.According to Barnett Waddingham, funding had dropped by 2 percentage points on average in 2016, and at some schemes it had decreased by as much as 6-9%.“This is likely to be caused by a significant fall in bond yields, resulting in lower discount rates and higher liabilities,” it said, noting that the average discount rate fell from 3.8% to 2.6% during 2016.The company suggested that some employers and parent companies would struggle to meet contribution requirements over the longer term without making changes to their funding strategy.Schemes could instead use of formal guarantees to improve covenant and enable a lower assessment of accrued benefits, Barnett Waddingham suggested, or asset-backed contributions to bolster the value of assets without immediate cash injections.It added that a more simple approach would be extending the recovery plan in order to reduce the annual contribution requirements. However, UK companies have been criticised in recent months by politicians for longer than average recovery periods.The consultancy also found that the 12 UK subsidiaries on average produced 7% of their parent companies’ global revenue, while accounting for 44% of their global DB liabilities and 33% of their global contributions.All but one of the companies’ UK pension funds were closed to new entrants, which compared to 86% of all UK schemes.Barnett Waddingham also noted that four companies with at least a stable funding level disclosed liability-matching investment strategies, and suggested this policy had helped to mitigate the effects of the large discount rate fall during 2016.
ESG products are too expensive and their targets are too vague, according to a poll of Swiss pension funds.In addition, investors often had to pay extra fees for specialist expertise for environmental, social and corporate governance (ESG) investing, consultancy group Complementa found.The company’s latest risk “check up” survey of Swiss Pensionskassen reported that, regardless of whether respondents had exposure to sustainable investments, 60% agreed that the costs of specialised products had put them off investing in the sector.More than half (57%) cited the need for additional expert know-how as a detractor. Complementa questioned 97 pension funds with total assets of CHF183bn (€160.9bn).The main negative factors cited by the Pensionskassen as discouraging them from sustainable investing were the randomness of ESG-related targets (75%) and lack of measurability of targets (72%).Only 35% agreed that bad performance might be a reason not to include ESG products in their portfolio. More than half of Pensionskassen thought ESG could help achieve higher performance over the long run and reduce risks.Despite their concerns, almost 80% of the focus group denied that sustainability was just a passing trend.Given the “limited resources” of pension funds, Complementa said it was “surprised” to find 79% of participants agreeing that ESG was becoming more of a topic for smaller Pensionskassen as well.The survey confirmed recent findings by the lobby group Swiss Sustainable Finance, which reported a major increase in the inclusion of ESG products and approaches in Swiss institutional portfolios. In the Complementa survey, 80% of participants agreed it made sense to add sustainable investments to make a difference for society as well as the environment.Asked which of the three factors in ESG investing was the most relevant, “governance” received the highest marks, followed by “environment” and “social”.Most of the surveyed Pensionskassen added sustainable investments as single products or funds to their portfolio.Over the next few years many pension funds want to increase their exposure, make their first foray into sustainability or at least begin to research ESG, Complementa reported.The respondents agreed that considering sustainability was part of their fiduciary duty under the BVG law guiding the Swiss second pillar – but they did not see it as their fiduciary duty to actually invest in sustainable products.
AXA Investment Managers is to scale up use of artificial intelligence (AI) technologies across its business as part of its restructuring programme announced in the summer.The French asset manager said it had already made “good progress” with implementing AI in some areas, “including enhancing data capabilities and ensuring cybersecurity processes remain robust”.In a statement published today, the company said it was making investments into digital services, data analytics and science capabilities in order to improve efficiency and “identify new sources of alpha”.The plans form part of a €100m investment programme and restructuring, announced in June. Hans Stoter – hired from NN Investment Partners earlier this year – has been appointed global head of core investments, overseeing AXA IM’s fixed income, active equities and multi-asset teams.AXA IM said: “This will foster synergies and innovation with a view to develop new offers aligned with evolving market and client needs. The investment process and philosophy of each underlying investment platform will remain unchanged.”Meanwhile, Francisco Arcilla has been appointed global head of institutional client group, having joined the company’s management board in June. He has taken on institutional distribution responsibilities from Christophe Coquema, who has left AXA IM “to pursue new opportunities”, the manager said.Bettina Ducat has been named global head of distribution client group, overseeing retail sales.Andrea Rossi, CEO of AXA Investment Managers, said: “By enhancing the client offering and experience, for example improving our customer journeys digitally, providing education where appropriate and creating simpler processes, we believe [we] can get closer to our clients and focus on providing them with what they need and in the format they want it. We look to the future with confidence and enthusiasm, building on our strengths as an active asset manager to continue our journey.”