NBIM said it first entered the German property market at the end of 2012 through a joint venture with AXA Real Estate, buying the two assets “Die Welle” in Frankfurt am Main and “Neues Kranzler Eck” in Berlin.The SZ Tower serves as the headquarters of the German publishing group Süddeutscher Verlag, and is fully let to the company.It has Gold LEED (Leadership in Energy and Environmental Design) for sustainable construction, AXA Real Estate said.Pierre Vaquier, chief executive of AXA Real Estate, said expanding its real estate business in Germany was a strategic priority for the company. Norway’s giant Government Pension Fund Global is investing in its third property in Germany in a joint deal with AXA Real Estate to buy a Munich office building for €164m.Norges Bank Investment Management (NBIM), which manages the NOK4.9trn (€593bn) Norwegian sovereign wealth fund, said the transaction to buy the 28-storey, 62,000sqm SZ Tower was set to complete before the end of the year.AXA Real Estate, acting on behalf of AXA France Insurance Companies, and NBIM were buying the building from publicly listed Prime Office REIT-AG, the Norwegian asset manager said.AXA Real Estate and NBIM are each buying a 50% share in the property, representing an investment of €82m.
The Czech Republic is close to forming a new government, whose policies include closing down the second-pillar pension system.The second pillar was introduced by the former government of Petr Nečas at the start of 2013.It was funded by diverting 3% of the 28% social contribution, alongside an additional 2% of wages from members.The system was voluntary, but the decision, once made, was irrevocable. Nečas pushed through the changes despite warnings from Bohuslav Sobotka, chairman of the opposition Social Democrats (CSSD), that his party would scrap the system should it win the next election, scheduled at the time for 2014.Nečas resigned in June following a series of scandals, while his presidentially appointed successor Jiří Rusnok failed to win the confidence vote for his caretaker government in August, precipitating an early general election in late October.Following protracted coalition talks, Sobotka now looks set to lead a three-party coalition with political newcomer ANO 2011 and the Christian Democratic Party (KDU-CSL).The coalition agreement includes merging members’ second-pillar accounts with those in the third pillar, and cancelling the 3% contribution.The change would have a minimal impact on Czech finances, unlike Poland’s current second-pillar overhaul.Pavel Jirák, chief executive and chairman of the board at KB Pension, said: “My expectation of this outflow is CZK800m (€29m) in 2014, slightly more than 0.2% of the state budget for pensioners.“It was more of a political than an economic issue. The change is expected from the beginning of 2015.“None of the participants would lose their second-pillar money through the merger, in accordance with the Czech constitution.”What is not clear at this stage is what happens to those second-pillar members, thousands according to Jirák, without an existing third-pillar account.The overall take-up of the second pillar is relatively low, with 83,753 members as of the end of November.“By far, the most important reason has been the threat from the CSSD party, since the discussions about the creation of a second pillar started, to cancel it,” Jirák told IPE.The requirement for workers to contribute an additional 2%, their inability to withdraw their monies before retirement and the legally capped low commission that pension companies could pay financial intermediaries also contributed, he said.“We are still convinced the creation of the second pillar was the right step towards diversifying financial sources for retirement, and a good long-term solution given the unfavourable demographic trends and their negative impact on state pension financing,” he added. “So we are against this merger – but without any power to stop or influence it.”
The Church Workers Pension Fund (CWPF) has agreed a partial buy-in deal with the Prudential, for just over £100m (€120m).The CWPF provides pensions for the employees of more than 250 organisations associated with the mission and ministry of the Church of England, including dioceses, cathedrals and mission agencies.It is entirely separate from the Church of England Funded Pension Scheme, which provides pensions for clergy and others in stipendiary ministry, relating to service from 1998 onwards.Benefits for pre-1998 service are provided by the Church Commissioners’ endowment fund. The CWPF is a hybrid scheme covering more than 250 employers, most of which participate in the defined contribution (DC) scheme section, with smaller numbers in the defined benefit (DB) Scheme section, or in both.It has around 2,500 active members, 3,000 deferred members and 2,900 pensioners.Under the new arrangement, the premium will buy a bulk annuity policy committing Prudential to make payments to the fund that match 70% of the payments the fund makes to current DB scheme pensioners.This percentage is related to the liability-matching assets backing the pensions in payment in the DB scheme section.The CWPF’s assets are invested in the Church of England Investment Fund for Pensions, a pooled fund for some of the Church’s smaller pension funds.The CWPF’s total assets were worth £382.4m as at 31 December 2013, of which the DB scheme section’s assets were worth £295.7m.Over the five years to 31 December 2013, the CWPF’s growth assets returned 11.2% per annum, while index-linked Gilts and bonds returned 8.2% per annum.A spokesperson from the Church of England Pensions Board (CEPB), the scheme’s trustee, said: “Many of the assets that were sold to buy this policy were valued at historically high levels and, as this was combined with competitive market pricing for this type of policy, it made sense to sell the underlying assets now and buy this policy instead.”Ken Hardman, partner at Lane Clark & Peacock, lead advisers on the transaction, said: “It was the right time to carry out the transaction because the scheme was in the right place, and the market is still competitive, with attractive pricing.”He added: “It is no secret that in the buyout market there are some significantly sized schemes looking to transact over the short to medium term, and that will drive the market over the next year.“This could have a big impact on insurance capacity and competitiveness, so it is an interesting time.”Mercer provided investment advice on the transaction, while legal advice was provided by Linklaters.Meanwhile, no buy-in arrangements have previously been made for the Church of England Funded Pension Scheme (CEFPS) and none are planned for the near future, the CEPB spokesperson confirmed.He said: “The DB scheme section of the CWPF has a high proportion of pensioners and few active members, so it is important to match a relatively high proportion of liabilities with appropriate assets such as Gilts and bonds, or an annuity policy.”The spokesperson continued: “By contrast, the CEFPS is mostly invested in a diverse range of return-seeking assets such as equities, property and infrastructure, reflecting the fact it is both open to new members and is only paying out pensions earned since 1998.“The scheme’s income from contributions will exceed pension outgoings for many years to come.”But he added: “However, the board may consider options such as a buy-in as the clergy scheme matures, and the board continues with its phased de-risking programme for clergy pensions.”
The European Commission should focus less on regulation and more on politics, according to one of its most senior commissioners.Michel Barnier, commissioner for the internal market, said the focus on less regulation had been applied to the revised version of the IORP Directive, which the Commission is set to publish tomorrow.Speaking at a conference in Brussels to mark the second anniversary of the White Paper on Pensions – a policy paper jointly drafted by the directorates general for internal markets, social affairs and economic and monetary affairs – Barnier stressed that, despite tomorrow’s IORP proposal not including any measures related to solvency or capital requirements, work conducted by the European Insurance and Occupational Pensions Authority (EIOPA) would form a “useful foundation” for the commissioners appointed after the May European parliamentary elections.The French commissioner, who abandoned plans to introduce the first pillar of the revised IORP Directive last year, said his successor would be able to look forward to a “definitive report” on the impact of the proposals compiled by EIOPA. He also said it was now time for Europe to be a force for removing red tape and avoiding over-regulation of markets, focusing instead on mobility.He argued his preferred approach was for “less regulation, more politics” to emanate from Brussels, a mindset he had taken forward into the revision of the IORP Directive.Nadia Calviño, deputy director general within the internal markets commission’s financial services unit, reiterated during the panel debate following Barnier’s speech that pension matters would carry over into the next Commission’s term.“I don’t think tomorrow’s proposal, whatever reform we do to IORP, is going to be the end response to the challenges we face, and we probably need to continue this debate in the coming years,” she said. Reacting to Barnier’s comments, UK pensions minister Steve Webb called on the commissioner to urge his successors “to do exactly what you’ve just said”.Webb said it was important to have less regulation on pensions matters, reflecting that all countries are different, and not to attempt to impose a Europe-wide “blueprint”.“My concern is that EIOPA, which perhaps has a little less profile and a little less scrutiny, will simply bring all of this [solvency] back in a few years time, and we’ll have to go through the whole thing again,” he said.Later, he added that, despite the White Paper stating that the Commission should support member states’ efforts to reform pensions, it had been perceived differently.“For the last two years, it’s felt like the role of the Commission is to try and destroy what we have,” he said, adding that solvency requirements would have been “catastrophic” for his native pensions industry and that time had been spent attempting to prevent damage, rather than cooperating on more positive policies.Calviño sought to assuage those concerned about “regulation through the back door”.“I haven’t seen the European Commission ever propose something out of the blue and being a big surprise,” she said. “Normally, things are discussed – and there are panels such as this. Regulation through the back door is quite difficult in this area, where we have active stakeholders.”However, even Calviño’s comments did not appease Webb.When asked what he wanted from the Commission in future, he said: “Let’s not have that phrase you just used: ‘more harmonisation’.”
De Nederlandsche Bank, M&G Investments, KPA Pension, Liquidnet, Actiam, Ernst & Young, AEW EuropeDe Nederlandsche Bank (DNB) – The Dutch state has appointed Margot Scheltema as a member of the supervisory board of the regulator, effective 1 September. Scheltema, a lawyer, has served in several jobs, including CFO at energy giant Shell. In addition, she has worked in supervisory roles at financial institutions such as Triodos Bank, insurer ASR and civil service scheme ABP. She has held similar positions at Schiphol Airport, postal firm TNT Express and thermal energy company Warmtebedrijf Rotterdam. The DNB said Scheltema was familiar with corporate governance and behavioural codes and as such would be chair of the pension fund code monitoring committee. M&G Investments – Bernard Abrahamsen has resigned as head of institutional distribution within M&G’s Fixed Income business, a position he has held for 13 years. Simon Pilcher, chief executive, and Jenny Williams, head of institutional public debt, will take on his responsibilities in the near term. M&G, which provided no reason for Abrahamsen’s departure, said it would update clients on further developments in due course.KPA Pension – The Swedish pension fund has hired former financial markets minister Peter Norman’s deputy as its chief executive, following the announcement of Lars-Åke Vikberg’s departure. Erik Thedéen, who was state secretary in charge of state-owned companies and the AP fund system reform until Sweden’s 2014 general election, was hailed as a “powerful” personality by Jens Henriksson, KPA’s chairman and chief executive of parent company Folksam. He will take up his new role 13 April. Liquidnet – The institutional trading network has appointed Chris Jackson as European head of Liquidnet’s Execution and Quantitative Services Group. He joins from Citi, where he was head of execution sales for the EMEA region. Before then, he spent 12 years at Merrill Lynch, where he was latterly head of sales across programme, transitions and electronic trading.Actiam – Dennis van der Putten has started as head of ESG at asset manager Actiam, after leaving his job as investment support manager at pensions insurer Zwitserleven. He is to focus on guiding Actiam’s ESG team and integrating ESG into the company’s investment processes. Van der Putten has been working for Zwitserleven since 2010, initially as liaisons manager.Ernst & Young – Martine Frijlink has been appointed as a partner at accountancy firm Ernst & Young in the Netherlands, where she is active in the Professional Practice Department, focusing on quality, risk and regulatory affairs. Her appointment is one of a series of recent hires as Michèle Hagers – chair of E&Y Accountants LLP – expands her Quality Assurance team. Prior to joining E&Y, Frijlink held a number of similar roles at KPMG.AEW Europe – Nikolas Koulouras and Alexander Strassburger have joined the private equity investment team as executive directors. Strassburger joins from The Carlyle Group, where he was country head of Germany. Koulouras joins from Salamanca Group, where he was director and co-head of real estate.
National Trust has announced the closure of its defined benefit scheme after continued growth in the fund’s deficit.The £447m (€540m) National Trust Retirement and Death Benefits scheme was closed to new entrants in 2003, with the charity at the time launching a defined contribution (DC) arrangement for new employees.In a statement, the charity said it agreed with the trustee to increase its deficit reduction payments from £3m to £8.5m from 2016 onward, with the payments increasing by 1% above the consumer prices index each year until 2029.It estimated that the deficit, which stood at £69m following its last triennial valuation in 2011 had since increased to around £116m, resulting in the 60-day consultation to close to new accrual. “We have made these proposals now because we feel we can no longer sustain the level of cost and risk associated with providing a defined benefit pension scheme without it impacting on our ability to fulfil our core purpose of looking after thousands of special places on behalf of the nation forever, for everyone,” the charity, which maintains buildings of historical significance across the UK, said in a statement.According to its most recent annual report, from 2013-14, the charity expected members of the fund to live to 89, with female life expectancy increasing two years by 2033.At the end of March, the fund had £106m in bonds, £47m in derivatives and swaps and £290m in equities – which returned 7.7%.In other news, the UK government has welcomed a report on how to increase participation of workers over 50 in the workforce.The report by Ros Altman was commissioned by the Department for Work & Pensions (DWP) and examined the importance of an active, older workforce at a time when employees could no longer rely on guaranteed income.“As pension provision moves to less generous defined contribution pensions, millions of older people will not be able to rely on a decent level of later life income, especially as annuity rates have fallen and investment returns have not met expected forecasts,” it said.It argued increasing the number of workers over 50 would have a number of benefits – not only improving economic growth, but lowering the amount of money spent on benefits and improving overall intergenerational cohesion.Altman also recommended the government consider a permanent role across all departments to extend working lives.Pensions minister Steve Webb, one of the two ministers for whom the report was prepared, recently called for the creation of a Department for Pensions and Ageing Society.The Liberal Democrat suggested the department be responsible for occupational and state pension policy – currently with the DWP – pension tax affairs (the responsibility of the Treasury) and old age care (overseen by the Department of Health).,WebsitesWe are not responsible for the content of external sitesLink to ‘A New Vision for Older Workers’
“I know of your [pension funds’] concern over the HBS [holistic balance sheet] stress test,” he said, adding that he looked forward to the industry’s recommendations.“I’ll listen very careful to your considerations.”Hill has previously said there could be a need to “deepen the single rule book” for financial institutions, and included the potential rollout of further solvency requirements within those rules. The commissioner said the development of the Capital Markets Union (CMU) was one of the main issues now facing the financial sector.“It could be of great potential benefit” to support a developing economy and job creation, he said.He said the CMU was receiving encouragement from all sections, including the industry, and that pension funds were possibly one of the largest sources of investment, notably for infrastructure projects. The project, he noted, was relevant parts of the EU, including those with less developed capital markets.The fact 40% of workers in the EU do not have occupational pensions brings into focus the development of personal pension schemes, he added.Again, applying tact, he assured the audience of his belief in the importance of the occupational system. The European Insurance and Occupational Pensions Authority is due to issue a consultancy exercise on the subject on 1 July, and report on it around February next year.A bystander at the reception noted that Hill made no mention of the term ‘29th regime’, suggesting that perhaps this was because it could cause misunderstanding.The term was previously employed to denote the development of a new, European regime for private pensions, rather than the harmonisation of existing systems across all member states.But Hill’s reference indicated that he was taking the subject seriously.He has used the term on at least one previous occasion, but without elaboration. The European Commission is not opposed to the use of solvency rules when regulating pension funds, Jonathan Hill has said. Hill, commissioner for financial stability, told a reception hosted by industry group PensionsEurope that funds had to be “managed responsibly”. “I do not oppose solvency rules,” he said.Clearly aware of the years-old campaign by the occupational pension sector to oppose insurance-type rules on solvency matters, Hill appeared to speak tactfully but firmly.
Improving financial literacy will increase savings rates and raise the level of equity exposure pension fund members are willing to take on, according to a US researcher from Wellesley College.Presenting the findings from a paper he co-authored at a retirement conference hosted by Vienna Economic University (WU), Seth Neumuller argued that “large gains” to returns were still possible if the financial literacy of people in their 30s and 40s was improved.Neumuller’s paper, ’Financial Sophistication and Portfolio Choice over the Life Cycle’, published together with Casey Rothschild in June this year, also examined how the older age groups had accrued sufficient assets to actually make investment choices.However, he warned that encouraging “unsophisticated investors to save for retirement using tax incentives may create significant deadweight loss”, because it could encourage the wrong kind of saving patterns. In his research, Neumuller blamed a lot of wrong investment choices on what he termed “meta-uncertainty”. “Less sophisticated investors get lower quality assets and are uncertain about which assets they get,” he noted.As they were aware of this, it decreased their willingness to invest or they choose less risky assets.His sample showed that more sophisticated investors had 36% more wealth by retirement and “enjoy 17% more consumption annually” than unsophisticated investors because of higher returns on their portfolios.However, in in a later debate on the paper, David Robinson from the US National Bureau of Economic Research (NBER), cited his own research on people overestimating their financial literacy.He agreed that meta-uncertainty lowered wealth through a reducution in market participation.But in a survey he did on the networking platform LinkedIn in July 2015, he found people that had modest financial literature scores thought they were more educated than their ratings implied. “The level of meta-uncertainty is lost on these persons.”For example, he found that people that overestimated their financial literacy were more likely to “get answers wrong than say they don’t know” and they also were more likely to reject financial advice.Another factor influencing savings’ behaviour was the way information was displayed, according to Maya O. Shaton from the University of Chicago Booth School of Business.She examined how the Israeli authorities decision to stop retirement funds displaying one-month returns had affected people’s choice in funds.Since 2010, private retirement funds in Israel have only been allowed to display returns for a 12 months period or longer.According to the research published in the paper “The Display of Information and Household Investment Behavior” (November 2014) the “allocation to riskier retirement funds by households increased after the regulatory change.Overall, however, the trading volume decreased by approximately 38%.“As 12-month returns are smoother these can impact households’ perception of losses and the retirement funds’ risk profile,” Shaton argued.She added this “relatively low-cost” regulation was “less paternalistic than telling households what to do”.Shaton stressed “failure to recognize the effect of the display of information on investors might lead to granting unwarranted power to the party disclosing information”.The significance of investor choice for future wealth was underlined by findings from another paper by Javed Ahmed, Brad Barber and Terrance Odean entitled “Made Poorer by Choice” (2013).The findings showed that almost all US workers selecting their own investment option in a private retirement account (PRA) were in the end worse off than those only getting money from the pay-as-you-go Social Security system.Ahmed argued that investor choice was an “underappreciated, emergent risk in private alternatives to Social Security”.
KLM’s three largest pension funds have reported negative third-quarter returns of up to 4.1%, while their coverage ratios fell by at least 10 percentage points over the period.Their official policy funding – drawn from the 12-month average – also dropped by several percentage points.Last week, the five largest pension funds in the Netherlands announced investment losses of up to 3.2% over the past three months, with only the €345bn civil service scheme ABP (0.8%) and the €39bn metal scheme PME (0.5%) managing to record positive returns year to date.The KLM pension funds attributed their deteriorating financial position to a combination of negative returns, the reduction of the ultimate forward rate (UFR) for discounting liabilities and falling long-term interest rates. The two rate developments in particular led to a significant increase in liabilities, with the €7.3bn Algemeen Pensioenfonds KLM, the scheme for ground staff, indicating that its liabilities had increased by 5.5%.However, the €2.5bn pension fund for cabin staff, with a quarterly loss of 4.1%, took the biggest hit, resulting in its policy funding falling by 3.3 percentage points to 110.9%.The Pensioenfonds KLM Cabinepersoneel cited a quarterly loss of 9.2% on its 42.5% equity allocation, as well as a 1.4% loss on its 44.5% fixed income holdings.In contrast, the scheme’s real estate portfolio returned 0.6% over the third quarter, taking its year-to-date return for the asset class to 5.6%.Mark Burback, CIO at Blue Sky Group, the KLM schemes’ asset manager and pensions provider, attributed the performance of real estate to investors’ preference for fixed income investments following the negative sentiments on financial markets.The Algemeen Pensioenfonds KLM, meanwhile, lost 3.8% over the last quarter.Commenting on the quarterly results, the scheme for ground staff said the volatile equity markets wiped out its expected annual result.It said its policy funding fell by 2.4 percentage points to 112.8%, adding that indexation would be unlikely in the years to come.The €7.8bn pension fund for cockpit staff – despite an investment loss of 3.9% and a 1.8-percentage-point drop in policy funding to 123.9% – remained in the best shape of the three large KLM schemes.The Pensioenfonds Vliegend Personeel said it still had a funding surplus and did not need to submit a recovery plan.The pilots’ scheme announced a positive return on investments of 0.6% year to date, while the pension funds for cabin and ground staff incurred losses of 1.4% and 1%, respectively.
Viridium Holding’s Heinz-Peter Roß, addressing delegates at the 2019 Handelsblatt occupational pensions conference“Generali has a very complex occupational pension offering and this is a field in which we lack the necessary resources – and an area where we do not aim to build in-house know-how,” Roß acknowledged.Viridium would therefore take on the assets in the pension insurance accounts – for which no asset value has been disclosed – but would then “commission Generali’s occupational pension team to administer the accounts”.The announcement last year of Generali’s plan to sell the life insurance business branch in Germany came at a time when external run-offs had suddenly appeared on many insurers’ agendas.Two occupational pension plans, Axa’s probAV and the pension plan for the Cofra Group, were also sold to run-off platforms last year.In his presentation to delegates, Roß addressed fears about the outsourcing of parts of an insurance business.“Occupational pension provision is not something to toy with”Heinz-Peter Roß, CEO, Viridium HoldingHe told them that the private equity group that co-owns Viridium was “itself rooted in the pension provision for miners in the UK”.“Occupational pension provision is not something to toy with,” he added.Private equity firm Cinven was an investment arm of the former British Coal pension schemes before becoming independent in 1995. Roß stressed that it was not new for insurers to close parts of their business, but that what was new for Germany was the outsourcing the assets and liabilities of these closed branches.He reminded the audience that Viridium was “a regulated insurer just like any other” with the only difference being that its only business was in run-offs.A poll at the Handelsblatt conference showed that over half of the delegates think the run-offs make it harder for companies to convince worker representatives of the long-term security of occupational pension arrangements.Next stepsRoß explained that Viridium would have to find a new label for the Generali products it would be taking on as the insurance group “has not given permission to keep on using the name”.He also noted that Viridum had committed to using Generali Investments Europe for the management of the Generali Leben assets for five years.Earlier this year, Generali started pushing its new provider of occupational insurance solutions, Dialog Lebensversicherung.The long-term subsidiary of the Generali group is now taking on new occupational pension business for the group using the insurance group’s occupational pension team and know-how for client and account administration.Also speaking at the conference in Berlin, Stille, who is also CEO at Dialog Lebensversicherung, said that selling off Generali Leben was “part of the strategy”.Several life insurance companies in Germany have been struggling to continue business with their old fully guaranteed products.Some decided to keep this part of the business open but Generali closed the sales department for classic life insurance contracts, which also sold occupational pension insurance contracts.Stille is also CEO of Generali’s Pensionsfonds AG, a vehicle to which companies can outsource their pension plans. It is not part of the deal with Viridium as it is a separate entity within the Generali Group. In an unprecedented move, BaFin, the German financial supervisor, had issued a press release – in German as well as English – last summer after the sales announcement to reassure the public.“BaFin can prohibit the planned acquisition if the interests of the insured are not sufficiently safeguarded,” it had said. Viridium’s Roß said BaFin had carried out “in-depth screenings” of his company to ensure “financial solidity and the operational capabilities”. Talks were still ongoing.The deal with Generali Leben would mark the first time Viridium takes on occupational pension insurance contracts and for those it would buy-back Generali’s expertise, he said. The planned sale of Generali Germany’s life insurance business, including pension contracts, to run-off platform Viridium could be given the green light over the coming months, according to executives at the companies.Speaking at this year’s Handelsblatt occupational pension conference in Berlin, Heinz-Peter Roß, CEO at Viridium Holding, and Michael Stille, head of pensions for the Generali Group in Germany, said they were “confident” regulatory approval would be given before the summer.Generali announced the external run-off of Generali Leben, its life insurance business, last summer. It is worth around €41.5bn and includes over 550,000 individual pension contracts set up by employers as part of employee-only financed occupational pension plans.The selected buyer is the life insurance run-off platform Viridium, for whom the deal with Generali Leben would be its biggest since 2014.