Austria’s €2bn Vorsorgekasse VBV has announced plans to reform its fee structure from next year, rewarding people who leave their money in the system for a longer period.Under the new structure, members will pay 1.9% in fees for the first five years, 1.4% after that and, from the tenth year onwards, 1%.“This is the legal minimum for fees in Vorsorgekassen,” VBV said.One of VBV’s competitors, the €1.45bn Valida Plus Vorsorgekasse, told IPE it would lower its own fees from 1.9% to 1.5% from January 2017 for all members – regardless of how long they have been contributing to the Vorsorgekasse. Since the implementation of these severance pay funds in 2003, Austrian companies have been required to make contributions for each employee amounting to 3.5% of salary.Employees can then take the money out after three years with the company.Because the system is not officially designed as retirement provision, many people do take out the money or leave it dispersed over various Vorsorgekassen after changing jobs.To date, the 10 Vorsorgekassen on the market have collected more than €6.5bn in assets.But, in order to gain new assets, the funds must convince companies to change providers.Last year, Valida Plus managed to gain the major Austrian retailer Spar, with 22,000 employees, as a new client.In other news, Valida Consulting has taken on the administration of the supplementary pension plan of Austrian Public Accountants (Wirtschaftstreuhänder).The pension plan of undisclosed size, to which all members of the Chamber have to make contributions, had re-tendered the administration mandate.The previous admin company was Concisa , a subsidiary of the Bonus Pensionskasse.
SNPF, Sprenkels & Verschuren, Finland’s State Pension Fund (VER), PIMCO, Kames Capital, Ignis Asset ManagementSNPF – The €1.3bn pension fund for notaries in the Netherlands has appointed Tobias Bastian as part-time director following the departure of Eric Uijen, who is to become chief executive at the €43bn metal scheme PME as of 1 June. Bastian, a partner at consultancy Sprenkels & Verschuren, is to work with Eric Greup, SNPF’s chairman. The scheme said it would seek a new director for its pensions bureau, which is meant to become the bureau of the new pension fund after the merger of SNPF and the €900m pension fund for notaries’ staff, SBMN.Finland’s State Pension Fund (VER) – The board has announced that Timo Viherkenttä had been named managing director, taking over responsibilities from Maarit Säynevirta in June. Viherkenttä, a lawyer by training, spent eight years at local authority pension provider Keva as deputy chief executive, but left in 2010. Prior to this, he spent four years as budget director at the Ministry of Finance, and more recently returned to the ministry, where he was permanent under-secretary responsible for tax policy.PIMCO – The US-based investment management firm has appointed Ben Bernanke, former chairman of the US Federal Reserve, as a senior adviser to the firm. PIMCO said Bernanke would contribute his economic expertise and insights to the company’s investment process and “periodically” engage with PIMCO clients. Kames Capital – Brian Jack has been appointed head of treasury, with responsibility for overseeing the management of the cash and liquidity team. He joins from Ignis Asset Management, where he headed up its Cash & Securities Lending/Repo business. Before then, he worked as an analyst/portfolio manager at Scottish Widows Investment Partnership.
Robeco, JP Morgan Asset Management, Deutsche Asset & Wealth Management, Cardano, Aon Hewitt, Edmond De Rothschild, Allianz Global Investors, Kames, PwC, Prevanto, Swisscanto, Infranode, Spence & Partners, Russell, CatellaJP Morgan Asset Management – Patrick Thomson has been promoted to head of institutional clients, retaining his role as global head of sovereign clients. He has previously worked at Ivy Asset Management and served in the British Army for five years.Robeco – David Steyn has been named as replacement for the company’s outgoing chief executive Roderick Munsters. Steyn has previously worked for Aberdeen Asset Management and AllianceBernstein.Deutsche Asset & Wealth Management – Mital Mathwani has joined the company’s passive investment division as director, based in Birmingham. Mathwani joins from BlackRock, and worked at Barclays Global Investors before its acquisition, more recently working on the company’s iShares products. Cardano – Tony Baily has been hired as client director, joining from Aon Hewitt. Bailey, an actuary, has spent his career to date working for Bacon & Woodrow, Hewitt and latterly Aon Hewitt within its investment advisory business. Edmond De Rothschild Asset Management – Daniel Lee has joined as director of UK wholesale from Allianz Global Investors. Lee spent nearly two years at Allianz as sales director and before then was head of UK discretionary sales at Cazenove Capital. He has also worked at Old Mutual Asset Managers and Britannic Asset Management. Kames Capital – Grace Le has been named investment-grade bond manager, joining the firm’s Edinburgh office from PwC in London. Gresham House Asset Management – Rupert Robinson has been announced as managing director. Prior to joining Gresham House, Robinson was chief executive of Schoders Private Bank, and has worked at Rothschild Asset Management. Prevanto – After a friendly management buyout, the existing consultancy team at Swisscanto has formed the independent consultancy Prevanto. Stephan Wyss is managing director in Zurich, while Michèle Mottu Stella runs the business in Lausanne and Patrick Spuhler the business in Basel. The buyout follows last year’s acquisition of Swisscanto by Züricher KantonalbankInfranode – Aleksi Rajakasi has been appointed country lead for Finland, joining from Fortum Distribution. Spence & Partners – Martha Quinn has joined as a consultant after two years at Burness Paull. Quinn previously worked at Brodies, Berwin Leighton Paisner and, more recently, Dalriada Trustees. Russell Investments – Elise Cardon has been named portfolio manager within the global currency team, joining from Optim Invest. She has also previously worked at JP Morgan and State Street Global Advisors.Catella – Markus Holmstrand has been named CFO at the Swedish property advisory company. He was previously the firm’s group business controller and has worked as a controller at both Haldex and SCA Group.
Joseph Mariathasan looks into how companies should trade currency in what looks set to be a volatile yearThe start of a new cycle of rate rises in the US, together with a weakening renminbi, suggests 2016 should see plenty of volatility in the currency markets. How should companies trading internationally react to this?One of the issues I was once asked to examine when I was running a treasury function before the introduction of the euro was the currency hedging strategy for the management of the balance sheet of the insurance company I worked for.There seemed to be a lot of confusion as to what the objectives actually were (I suspect not a lot has changed since then). When I approached the subject by having detailed discussions with a range of international banks and insurance companies on what their policies were, I found the results were certainly not what I expected. The answer was usually very clear for US banks and insurance companies – all net exposures to overseas assets were hedged back into US dollars. Indeed, the question itself was seen as an odd one to ask. But when I asked a UK or Dutch bank or insurance company the currency distribution of their shareholders funds, the answers were often very different and frequently incoherent. Many responded that the distribution was spread across a range of currencies, reflecting the range of international business exposures the company possessed. One major bank admitted it had changed its policy a few times over the previous decade.Why should the US financial institutions have such a very different attitude to Europeans? There is no theoretical reason why one currency benchmark should be preferable to another in an era of international ownership. And there is certainly no reason why US institutions should have a different policy to European ones.The answer must be cultural. The growth of US financial institutions occurred predominantly within a domestic environment during the 19th and most of the 20th centuries. For most of the history of share ownership in the US, shareholders never see foreign currency exposures, and, as a result, any international forays were automatically hedged back into US dollars.In contrast, the growth of capitalism within countries such as the UK and the Netherlands has been associated with the growth of international empires, where foreign currency exposure was an inevitable part of investment activity, both by trading companies and by the banks and insurance companies that supplied services to them. What that meant was that shareholders of the international banks such as HSBC and the insurance companies that spread across their old colonial empires were used to seeing exposures to foreign currencies. Their strategy of international exposure, with the foreign currency exposure it implies, has continued into modern times.The problem we faced then was that, while having a broad exposure to foreign currencies can be a perfectly acceptable theoretical approach, not having a clear benchmark had some negative side-effects. Valuable management time was wasted by asset/ liability management committees taking currency positions that become bets when successful and hedges when not. No doubt, a fun time was had by all in switching some currency positions at a committee meeting after a decent lunch, but, with no clear benchmark, there was also no clear measurement of performance or of any value added by the exercise.The answer lies in companies having a definite position as to where an asset/liability committee can add value, and if it is not in taking currency positions, they should adopt a precise benchmark, announce it publicly and stick to it, allowing their shareholders to take currency bets elsewhere. But when I suggested that as the solution, that idea never took off – it would have removed the after-lunch bets that the committee liked to take once a week.Joseph Mariathasan is a contributing editor at IPE
Smurfit Kappa has combined pensions accrual for its 2,000 workers into a single pension fund to avoid a significant hike in costs.The firm – European market leader for cardboard wrapping material – had two pension funds as a result of the merger of Dutch firm Kappa and Irish company Smurfit in 2005.At the end of 2016, the contract of Smurfit Netherlands for fully re-insured pensions with Nationale-Nederlanden expired.According to Marco Kiewiet, director of both pension funds, extending the contract for its 325 active participants would have meant a 50% contribution increase. Employers and unions last year investigated several options for the scheme’s future, such as joining a large industry-wide scheme or a general pension fund (APF), or insured pension arrangements.At the time, they concluded that the APF was an “interesting option”, but deemed it “too uncertain” as a vehicle for pensions provision.The joint €625m pension fund Smurfit Kappa indicated that it would provide pensions accrual for the company’s workers for a couple of years.Pensions accrual of the company’s two schemes was already largely similar, with an annual accrual of 1.875% in an average salary plan up to a salary of €40,000, and a defined contribution plan for any surplus income.At the moment, employers and unions are still discussing the future contribution policy for the Smurfit Kappa pension fund, with the sponsors being interested in a switch to collective defined contribution.They are also still assessing the future of the smallest scheme, which has now been closed, with the intention to liquidate if indexation of pensions that remain with Nationale-Nederlanden can be guaranteed.The Pensioenfonds Smurfit Kappa has approximately 4,685 participants in total. Its €625m of assets are managed by PGGM, the €200bn asset manager for the large healthcare scheme PFZW.
A union of Dutch defence staff has suggested it would take civil service scheme ABP to court if it were to change its articles of association to enable it to unilaterally change pension arrangements of military and civilian personnel at the country’s Ministry of Defence (MoD).In a letter, published in the magazine of GOV/MBH, the union for officers as well as high- and mid-ranking civilian staff, pensions lawyer Mark Heemskerk said ABP’s plan was “not acceptable and in violation with legislation”.The €389bn pension scheme wants to change the pension arrangements for MoD staff from final salary to average salary, arguing that providing the final salary plan – currently the single exception within the pension fund – was too complicated.When asked by IPE, ABP said it had been seeking solutions for simplifying the complexity of the pension plan for defence staff since the summer of 2016, but indicated it could not comment any further. However, the minutes of a meeting of the scheme’s accountability body confirmed that “if consultation would not result in an agreement, ABP’s board would have to prepare an adjustment of the articles of association”.According to sources, ABP’s board was considering a compromise proposal to implement a simplified final salary plan next year.In this scenario, the social partners of employers and workers would have until October 2018 to come up with an agreement for an average salary plan.The union indicated that it needed more time, as the introduction of average salary arrangements also required changes of the salary structure of defence staff.Young participants would accrue more pension rights early in their career but would initially lose out on net income, while higher-ranking military staff could lose up to 20% of their pension, it argued.This has been an issue since ABP switched from final to average salary plans in 2004 for most of its civil servant participants.
Dutch consultant Montae is to adapt pension fund software from Swedish financial advice firm Söderberg & Partners for the Dutch market.As part of the arrangement, Söderberg is to take a stake in Montae.The consultancy firm said that the job involved adjusting software that enables freedom of choice for members of collective pension plans.Söderberg, which employs 1,600 staff, is already active in Denmark, Norway and Finland. In Sweden, participants have much more freedom of choice for their pension and can, for example, select their own investment funds for part of their pension assets.Planned reforms in the Netherlands could mean similar flexibilities are introduced under a new pensions contract.Mike van Engelen, Montae’s founder, said this meant Söderberg had significant experience developing and providing tools for employers and pension funds to assist participants making choices digitally.“They have developed standard tools with the correct communication and education for participants,” he added.According to Van Engelen, using Söderberg’s software would be cheaper than developing programs for individual employers.He said: “Medium-sized and larger companies in particular are interested in this software, for example, if they intend to switch from defined benefit [DB] to defined contribution, and if they want to offer more choice within a DB plan.”Montae, which has offices in Rijswijk and Eindhoven, is to open a new branch in Utrecht next year.Montae focuses on pensions advice and board support. It serves approximately 20 pension funds.Earlier this year, Söderberg took a stake in Dutch pensions advisor and communication company Floreijn Group .At the time, Floreijn said it expected to benefit from Söderberg’s experience in robo-advice for individual workers in defined contribution plans.
Researchers at investment bank UBS have proposed a ‘deficit repair’ approach to valuing pension deficits rather than the current International Accounting Standards model, known as IAS 19.UBS argued that the current accounting number was “not an appropriate number for valuation purposes” for defined benefit (DB) schemes. Using a discount rate linked to AA-rated corporate bond yields – as in the UK’s current approach to valuations – “inappropriately prices pension risk into fundamental equity valuations”, the researchers added.Two leading UK actuaries who spoke to IPE about the proposal agreed there was merit in UBS’ proposal.Under a deficit repair approach, DB scheme sponsors would discount their deficit recovery contribution using the sponsor’s weighted average cost of capital. Lane Clark & Peacock partner Tim Marklew said: “Depending on the company you look at and the situation, you could end up with either an upside or downside from [UBS’] approach.“One of the starting points in their analysis is that the accounting number is arbitrary. I firmly agree with that. There is no particular reason why pension schemes should be valued using the accounting measure. Tim Marklew, partner, Lane Clark & Peacock“It is based on AA corporate bonds and that is not based a robust economic reason. AA bonds are used for convenience. It is a useful starting point. It might do the job, if the pension liability is insignificant.“But if you really want to understand and value a pension liability, you need to go beyond that. And that is what UBS are attempting to do.”Aon Hewitt partner Lynda Whitney said UBS’ work was “useful” but not a replacement for current accounting methods. “There is more variability in how people approach their technical provisions and so although the cash agreement tells you what they are expecting, it says nothing about the context,” she said.Whitney also warned that UBS’ approach could result in less comparability across schemes.“It does mean you have to accept that two very similar schemes can have quite different funding plans,” she explained. “So you might have a scheme that is working on something closer to a long-term objective – say, buyout – but over a longer period than a comparable scheme with a focus on technical provisions and a shorter recovery plan.”Actuaries typically arrive at a figure for the deficit repair plan using a valuation approach, known as ‘technical provisions’, in co-operation with a scheme’s trustees, regulators and the sponsor.Technical provisions are the scheme’s own measure of its liabilities, or its own measure of its pension commitment. Each scheme, and its actuaries, will have its own way of totalling up its liabilities according to its asset portfolio, investment strategy, actuarial assumptions and the employer’s covenant.In the UK, technical provisions form the basis for the triennial funding negotiations between the scheme’s sponsor and its trustees.Under IAS 19, sponsors must project forward their liability in line with the plan’s assumptions and discount back using a AA-corporate bond rate before netting off any plan assets.Critics of this approach have argued that it tended to oversimplify a complex issue.They have also pointed to problems with a shortage of duration-matched AA corporate bond rates in the market place to be able to discount reliably .
UK universities have agreed to accept more investment risk for their industry-wide pension fund after months of heated debate over the scheme’s valuation.In a statement yesterday, the £60bn (€67.8bn) Universities Superannuation Scheme (USS) said it would begin the formal actuarial valuation process using data from 31 March 2018, after its sponsoring employers agreed to more risk.The valuation will update market data and longevity statistics, among other information, and result in a fresh proposed contribution schedule.USS’s 2017 valuation resulted in a proposal to close the defined benefit section of the scheme to new contributions and switch all members to defined contribution arrangements for future pension accrual. This was strongly opposed by the University and College Union (UCU), which called nationwide strikes in protest. Credit: Warwick University UCU branchUCU members striking at Warwick University over USS proposalsUniversities UK – which represents employers – recently reported that universities were willing to support the panel’s proposals, “subject to [USS] providing more information on the additional financial risks involved – and if and how they could be managed, and mitigated”.However, in an open letter to USS in October, a number of consultants warned that increasing the scheme’s long-term equity exposure would not solve its deficit problem.USS said that, following the valuation process, UUK members would be consulted during December and January, with the aim of finalising updated contributions for employers and employees in early February.However, contribution rates were still set to increase automatically in April 2019, USS said, as part of a default process that kicked in when it became evident that UCU and UUK could not agree on an approach.Further contribution increases are scheduled for October 2019 and April 2020, but USS said it hoped the new valuation and subsequent consultation would mean these could be avoided. An independent panel of industry experts was convened earlier this year in an effort to resolve the disputed valuation. One of its recommendations was to re-evaluate the sponsoring employers’ attitude to risk, which it said could have “a material impact on the valuation and resulting contribution increases”.USS said yesterday: “The panel’s proposals would require employers to take on greater risk, and both members and employers paying higher contributions, than we were advised they were originally willing to support.”
This home at 29 Queens Rd, Hamilton, has sold for $2.1 million.THE Hamilton Hill home of a Brisbane inventor who helped put NASA into space has changed hands for the first time in more than 50 years — selling for $2.1 million at auction.Norman Flournoy, 88, has 27 worldwide patents to his name, including technical inventions used in ballistics and rocketry in the United States.MARGOT ROBBIE’S SECRET WEDDING ESTATE FOR SALEThe view from the home at 29 Queens Rd, Hamilton.His wife, Marea Reed, worked from home as an optometrist for three decades and still has the original chair she used, which was made in 1876 from solid brass and bronze.Mrs Reed moved into the home at 29 Queens Road in 1965 with her first husband, who was an architect.“It was a wreck when we first came here,” she recalls.“He did some beautiful, sensitive alterations to the house.“It’s a wonderful mix of the traditional colonial and the new avant-garde.”THIS TAKES SPOONING TO A NEW LEVELMore from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoInside the colonial home at 29 Queens Rd, Hamilton.Marketing agent Nick Kouparitsas of Ray White Ascot said the home attracted eight registered bidders at auction, with four actively vying for the property.Mr Kouparitsas said the winning bidder was a family from Clayfield who wanted the six-bedroom, two-bathroom colonial home because of the spectacular river and city views and the large 890 sqm block perched high on Hamilton Hill.“It’s got an absolutely fantastic view and position,” Mrs Reed said.“What I love about it is the great expanse of sky.“It’s a very happy home.”QLD HOUSING MORE AFFORDABLEOne of the bedrooms in the home at 29 Queens Rd, Hamilton.Traditional features include a wraparound entry veranda, original timber flooring, wide hallway and VJ walls.There is a large back deck, which extends off the living and dining area that would be perfect for alfresco dinners or parties.The colonial charm of 29 Queens Rd, Hamilton.It overlooks the backyard, which allows plenty of room for a pool or home extension.Underneath the home is a spacious studio with bedroom/lounge area and kitchenette — ideal for a guest wing or teenage retreat.Mr Kouparitsas said the new owners planned to renovate in a couple of years.