UK highlights mammoth task for pensions in independent Scotland

first_imgIt said an independent Scotland would need to set up its own arrangement, and in doing so, establish how it would fund the body given the potential insufficiency of a levy structure in the smaller Scottish DB industry.This has long been an issue in Ireland, a market of similar size, where it was deemed unfeasible to create a protection fund due to the lack of resource available.The DWP also highlighted that an independent Scotland would need to fund a new regulator and regime, as well as decide whether to fund this through taxation or by a levy on participating schemes.The government said Scotland’s desire to join the European Union would also subject it to the IORP Directive and its stringent requirements on cross-border scheme funding, which would encompass a large number of schemes and likely lead to further closures.The UK government said an independent Scotland, in copying auto-enrolment, would face complications in funding the creation of a compliance regime and undergo the strenuous difficulties the UK did in setting up the National Employment Savings Trust (NEST).The state-backed master trust was created and funded by a government loan, after lengthy negotiations with the European Commission, over state funding for a company operating in a private market.The paper argues that Scotland would have to decide how to create an equivalent, an aim promised by the Scottish government, as well as conclude how to transfer Scottish members currently saving in NEST.In conclusion, the paper said an independent government would need to decide on its approach to funding regulations and risk-sharing among savers, schemes, employers and the government.It will also need to ensure that cross-border provisions do not create barriers to trading and business, including the fact that Scotland accounts for 24% of the workforce in the UK life and pensions industry.The DWP said the independent government would need to ensure it has the appropriate regulatory and protection regime in place to allow defined contribution members to invest.It said that, without such measures and a sound structure to fund state pensions, members could be fearful of means testing in future.In response to the paper, Scotland’s deputy first minister Nicola Sturgeon told the BBC the report was another example of scaremongering from the UK government.“It is plucking figures out of thin air to try and tell people in Scotland ‘you can’t do it’,” she said. The UK government has published its views on how an independent Scotland would need to set up its own pensions system in a damning 111-page report.The Department for Work & Pensions’ (DWP) paper sets out in lengthy detail the decisions, and costs, an independent government would need to tackle.It covers the costs and complications of setting up a new regulatory infrastructure and the difficulties of setting up safe cross-border provisions, mimicking auto-enrolment, creating a new protection fund for defined benefit (DB) pensions and accounting for its share of public service pensions – to the tune of £100bn (€122bn).The report crushes previous suggestions from the Scottish government that it could remain in the current Pension Protection Fund (PPF) through a cooperation agreement.last_img read more

Pension fund for ING produces 14% first-half return

first_imgDue to falling interest rates, it returned 8.1% on its fixed income holdings, which make up almost three-quarters of the overall investment portfolio. Credit and emerging market debt also delivered positive results.Over the first six months of 2014, fixed income holdings returned 18.2%, outperforming the benchmark by a considerable margin, the Stichting Pensioenfonds ING said.Its 17.7% equity holdings generated 5.8% over Q2, with emerging market equities returning 8%.The scheme said the quarterly return on its 4.8% property portfolio was more than 4%, adding that both listed indirect real estate and non-listed property contributed positively.Listed property generated almost 9%.The pension fund’s alternative investments in private equity and hedge funds returned more than 4%.ING attributed the 0.7-percentage-point underperformance largely to the “disappointing” results of hedge funds.Private equity returned almost 7%, it said. The €22bn pension fund of banc-assurer ING has reported a 7.2% return on investments over the second quarter, taking its overall return for the first six months of the year to more than 14%.Its coverage ratio, based on market value, increased by 0.9 percentage points to 129.5% in Q2.However, the scheme’s official funding – discounted against the three-month interest rate average, with the application of the ultimate forward rate – increased by 3.2 percentage points to 139%.The pension fund attributed the quarterly result to low growth and inflation, as well as a central bank policy aimed at promoting growth.last_img read more

UK pensions regulator hits back at suggestion it lacks ‘teeth’

first_imgTitcomb argued that, for the “vast majority” of pension funds, the current regulatory framework was sufficient, rejecting claims TPR could only take action when it was too late.“We see that if there is a strong, well-behaved, responsible employer standing behind the scheme, that is the best thing for it, and it is right to give that sufficient time to work through,” she told MPs during the meeting on 9 May.When it was put to her that TPR was “not much of a regulator”, Titcomb pushed back.“I don’t agree with that statement,” she said. “We have to, as a regulator, operate within the framework provided to us.”She also questioned the need for TPR’s powers to be enhanced.“The work and pensions select committee is well aware I am prepared to ask for more tools in my toolkit if I need them,” she said. Twenty-three-year recovery planTitcomb agreed the length of the BHS recovery plan was “atypical”, noting trustees usually submit funding proposals of 7-12 years.However, she emphasised that the 23-year plan, submitted in 2014 as part of the 2012 triennial valuation, had not been approved by the regulator by the time Arcadia Group sold BHS to Retail Acquisitions in 2015, which triggered the launch of a still-ongoing anti-avoidance case.Retail Acquisitions was the company’s owner when, last month, it entered administration.Speaking during the same committee hearing, the Pension Protection Fund’s chief executive Alan Rubenstein said there were lessons to be learned from the collapse of BHS.He suggested there should be “some natural limit” to the flexibility granted to deficit-reduction payments under the current system, arguing in favour of shorter repayment periods.He also pointed out, however, that TPR had a number of issues it needed to address and that it did not wish to “push companies over the edge”. The UK’s Pensions Regulator (TPR) has defended itself against accusations it does not possess the requisite “teeth” to regulate the defined benefit (DB) sector, amid an examination of the insolvency of retailer BHS.During a joint hearing by the work and pensions select committee with its counterpart for business, innovation and skills, Lesley Titcomb, the regulator’s chief executive, rejected repeated suggestions TPR lacked the requisite powers to deal with situations akin to the collapse of BHS.The insolvency of BHS saw two DB funds sponsored by the employer left with a combined buyout deficit of £571m (€734m).It has led to questions of whether its former owner, the Arcadia Group, should have increased its contributions to address the deficits sooner than the 23-year timeline of its deficit-reduction schedule envisaged.last_img read more

UK roundup: Brunel Pensions Partnership, FCA, MiFID II, Zurich

first_imgThe Brunel Pensions Partnership (BPP) has added its voice to those calling for the Financial Conduct Authority (FCA) to rethink its stance on MiFID II.The FCA, in its most recent consultation on implementing the wide-ranging European directive, proposed classifying local authorities as retail investors, providing them with greater investment protections but restricting the asset classes in which they can invest.This risks undermining efforts to overhaul local government pension schemes, which are run by local authority staff.The BPP, a collaboration of 10 LGPS funds based in the south and south-west of England, argued that not being classified as professional clients was “likely to be significantly negative”. In a statement on its website, it said: “Costs would likely increase because of the higher regulatory burden. Particularly at risk would be most alternative investments: as illiquid or complex investments, they are not considered suitable for retail clients.“In particular, investment in infrastructure could be curtailed significantly, undermining the government’s stated desire to see LGPS funds have an increased ambition to invest in infrastructure.”Other pools, including the Local Pensions Partnership and the London CIV, have also called for the FCA to classify LGPS funds as professional investors, as has the Pensions and Lifetime Savings Association.In other news, Zurich Assurance has completed a £300m (€341m) longevity swap transaction with an unnamed UK pension fund.The deal was a “named life” longevity hedge, meaning it covered 2,300 named pensioners and their dependants.It is the fifth such deal for sub-£1bn schemes to be completed in the past 12 months, according to advisers Mercer.Suthan Rajagopalan, lead transaction adviser and head of longevity reinsurance at Mercer, said: “These deals pave the way to competitive longevity reinsurance pricing for small and medium-sized schemes, which are more exposed to so-called ‘concentration risk’, and where there is potential for greater variability in members’ life expectancy due to diverse pension amounts.”He added that the longevity swap was “a significant step towards a “DIY pensioner buy-in’”, something Mercer claimed had never been achieved before for a deal of this size.Elsewhere, more than half of FTSE 100 companies could pay down their pension shortfalls within two years by foregoing dividend payments, according to JLT Employee Benefits.The consultancy’s research found that just six companies in the index were paying more into their pension schemes than to their shareholders, but 53 could erase deficits within 24 months.In contrast, eight companies had pension liabilities worth more than their market capitalisation.Charles Cowling, director at the firm, said: “The good-news aspect of all this is that it is clear that, for the very large majority of FTSE 100 companies, their pension deficits can be easily managed within the normal ongoing management of their capital structure – even for some of those with very large pension deficits.”In the 12 months to the end of June, FTSE 100 companies contributed £6.3bn in deficit recovery payments, up from £6.1bn in the previous 12-month period.Darren Redmayne, head of Lincoln Pensions, pointed out that there was no regulatory requirement to pay down deficits as soon as possible.He said: “Withholding dividends where there is a healthy sponsor covenant that can afford to pay a deficit over time could worsen shareholder value, make UK [companies] less investible and negatively impact the businesses supporting the pension schemes. “So somewhat counter-intuitively, such an approach could damage both the shareholder value and the security of the member benefits you are trying to improve.”Lastly, almost one-third of pension schemes in the UK have been hit by fraud, according to a survey by audit and tax consultants RSM.However, more than half of respondents said fraud was “not a significant threat”, which RSM said showed a “worrying level of complacency among trustees”.One-quarter did not realise fraud prevention was a responsibility of pension scheme trustees.Hoaxes included ‘pensioner existence fraud’ – dependants continuing to receive benefits despite the pensioner having died – and pensions liberation fraud.“Worryingly, schemes and administrators have experienced an increase in suspicious member transfer requests since the introduction of new pensions freedoms introduced in April 2015,” RSM said.last_img read more

Dutch Cabinet seeks to rein in mandatory sector scheme growth

first_imgAs an option for highlighting the limits, Klijnsma cited a “more systematic application of the requirements for the coherence between an industry-wide pension fund and voluntarily joining schemes”.During the past 20 years, mandatory sector schemes have seen their stake in the non-mandatory pension market – companies that are not forced to join a pension scheme – increase from 6% to 11% of the number of active participants.In the same period, non-mandatory sector schemes saw their share decline from 15% to 3%, while the stake of company pension funds fell from 47% to 23%.The growth of mandatory schemes is in part attributable to the low interest rate environment, which has made defined benefit (DB) arrangements at insurers much more expensive.In addition, some sector schemes have significantly extended their sphere of influence. For example PGB, initially the pension fund for the graphic design sector, now also covers the industries of rubber manufacturing, maritime fisheries and the wholesale of flowers and plants.“Without this extension, more employers would have had to diverge to the low-cost defined contribution vehicle PPI or insurers,” argued Klijnsma.The new multi-plan APF vehicle offers employers an additional alternative for DB arrangements.However, stricter financing conditions apply to providers starting an APF than to an existing mandatory sector pension fund, resulting in up to one-third lower costs for employers joining an industry-wide scheme.Klijnsma warned that “in particular temporary differences in the rules for calculating contributions could see APFs pushed out of the market by sector pension funds, even if the latter are less efficient”.She said the domain demarcation was also necessary to prevent industry-wide schemes getting into an even stronger position and dominating the market.Last summer, the government approved a bill that would allow mandatory sector pension funds to merge but keep their assets separated for a period of five years.Klijnsma also explained that the proposed new limitations would only apply to the current rules requiring companies to participate in a pension fund.Earlier, the government had indicated that it considered mandatory participation in pension arrangements – rather than a pension fund – as “an interesting and useful option” for the mid-term. The outgoing Dutch cabinet has called for clarity on the limits of mandatory industry-wide pension funds taking over schemes and companies in other sectors.In a letter to parliament, Jetta Klijnsma, state secretary for social affairs, said companies voluntarily joining mandatory sector schemes could put at risk the principle of mandatory participation in such schemes that is required under Dutch law.This trend could push the new general pension fund (APF) vehicles out of business, she warned.By tightening the rules, the government aims to ensure that mandatory industry-wide schemes only manage pension plans for their own sector.last_img read more

Toshiba offloads UK scheme in £170m buyout deal

first_imgIn recent years, there have been a rash of DB schemes transferring their pension liabilities to insurers.Last year, SSE, the energy company, shifted its £1.2bn scheme to Legal & General and Pension Insurance Corporation. Between 2014 and 2016, trustees of the ICI Pension Fund passed an estimated £8bn across to a number of insurers in a series of deals.Building supplies group Kingfisher completed the biggest publicised derisking deal so far this year, insuring £200m in a buy-in with Pension Insurance Corporation.Hymans Robertson, the consultancy firm, last year predicted that the bulk annuity market could see approximately £700bn of DB scheme assets and liabilities transferred to insurance companies by 2032.At present, annual transaction volumes stand at between £10bn and £15bn – a figure the consultancy suggested in a recent report could rise to £50bn a year. The overall size of the defined benefit market is estimated to be worth £1.6trn.Rival consultancy group LCP claimed in January that the UK derisking market was at its cheapest level since the financial crisis for those interested in buyouts and buy-ins. Japanese technology giant Toshiba has offloaded its £170m (€193m) UK pension scheme to insurance company Rothesay Life.The Toshiba Pension and Assurance Scheme is the latest in a long line of UK defined benefit (DB) schemes transferring to the insurance sector.The deal covers 1,350 former staff members of Toshiba UK, the British arm of the Japanese multinational, who are based in Plymouth and Guildford.Guy Freeman, co-head of business development at Rothesay Life, said: “The advantages of having a sole trustee in place to secure a bulk annuity were very apparent. Corporate appetite to remove pension risk continues to grow.”last_img read more

Asset management roundup: Survey predicts ESG-related ETF boom

first_imgMore than four-fifths of professional investors expect investment into environmental, social and corporate governance (ESG) related exchange-traded funds (ETFs) to grow over the next five years, research from State Street Global Advisors (SSGA) has found.More than one-fifth of the 45 institutional investors and wealth managers canvassed said they expected a “dramatic rise” in interest.“Interest in ESG investing from index and ETF providers alike has been a large focus area for some time now,” said Claire Perryman, head of ETFs at SSGA in the UK.However, she added that, by contrast, “the voice of the client in the ESG ETF debate has been quite muted”.  “We know that clients prioritise ESG criteria differently and that standardised methodology for ESG scoring is currently lacking,” Perryman said.According to figures from the London Stock Exchange, May proved a record month for new entrants into the ESG area of the ETF market, with eight new launches bringing the overall total to 31.Assets under management within ESG ETFs at the end of May stood at just under £4bn (€4.5bn).Old Mutual splits asset management business Quilter, the UK wealth manager, has finalised the £583m sale of its single strategy asset management business to the management team and funds managed by TA Associates, the private equity firm.The deal, announced in December last year, follows the separation of Quilter’s single strategy business from its multi-asset division.Quilter, formerly known as Old Mutual Wealth, listed on the London Stock Exchange on Monday. Its multi-asset division will now be known as Quilter Investors.At 31 March 2018, Quilter oversaw £111.6bn in customer investments.HFR adds smart beta benchmarks for multiple asset classesHedge Fund Research (HFR) has launched a range of 40 risk premia indices to meet growing institutional investor demand for greater transparency and liquidity.The HFR Bank Systematic Risk Premia indices will offer daily performance reporting across a range of assets and strategies, the company said.Assets covered by the indices include commodities, credit, currencies and equities, while also covering various investment styles such as momentum and value.“Investors in these strategies have been asking for indices they can use for performance attribution, factor analysis, and investment purposes,” said Jerome Abernathy, head of the systematic risk premia project at HFR.“This family of indices gives investors the tools they need, plus the ability to invest in alternative betas in a liquid, transparent fashion so they can focus on managers who truly generate alpha.”Institutional investor demand globally for indices of risk premia strategies has exploded in recent years, Abernathy added.HFR reported that more than $700bn (€600bn) in notional capital was invested in risk premia strategies across more than 1,200 products.last_img read more

FX investors move nearer to potential trial

first_imgInvestors damaged by the unlawful rigging of foreign exchange markets between 2007 and 2013 have made significant progress towards recompense, following a ruling on a claim brought to the Competition Appeal Tribunal (CAT) by former UK pensions regulator Michael O’Higgins.O’Higgins filed the action last July against Barclays, Citibank, Royal Bank of Scotland (RBS), JPMorgan and UBS. The action was brought by Michael O’Higgins FX Class Representative Limited, a company he set up specifically for that purpose, and is being financed by third-party litigation funder Therium Capital Management.The banks were fined more than €1bn by the European Commission (EC) in May for violating EU competition law by exchanging commercially sensitive information and trading plans for foreign exchange deals, co-ordinating their trading strategies via two cartels, the so-called “Three-way Banana Split” and “Essex Express”.But while the companies have admitted responsibility, investors who were affected have not been compensated, and this “follow-on action”, under the Consumer Rights Act 2015 (CRA), is intended to seek civil redress. At a CAT case management conference earlier this month, Mr Justice Marcus Smith set out a timetable for activity and also made it clear that the class action would not be delayed until after a similar case, “Merricks”, has been heard by the Supreme Court next May.The Merricks class action, one of the first brought under the CRA, was filed by Walter Merricks, a former financial services ombudsman, on behalf of millions of consumers who made purchases on Mastercard between 1992 and 2008. The action seeks compensation for unfair interchange fees paid by consumers on credit card transactions.The CAT refused to certify the class on the grounds that financial loss could not be determined for each individual, and also that the case was not suitable for an aggregate award because of the sheer numbers of transactions affected and the lack of data from consumers and retailers.However, this was overturned on appeal.The Supreme Court will now set the legal test for certifying the Merricks claims as eligible for inclusion in collective proceedings – effectively deciding the CAT’s remit – in a hearing next year.However, Mr Justice Smith ruled that the first hearing for the FX case, dealing with funding arrangements, will be in February 2020, with the formal application for class action certification provisionally scheduled to start in early 2021.O’Higgins told IPE: “We were very pleasantly surprised by the speed with which the court acted, and could not have hoped for better. The judge made it clear that he wanted to keep things moving on and will not delay the case for the Supreme Court ruling.”David Scott, partner with law firm Scott + Scott which is representing the claimants, said: “We feel confident that certification will be allowed. Unlike the Merricks case, the amount of loss can be accurately determined because the institutional claimants and the defendants will have records of the relevant FX transactions.”The banks concerned have already paid $2.3bn (€2bn) in damages to US-domiciled investors who sued them, following $10bn-worth of fines imposed by regulators around the world, including the US Department of Justice and the UK Financial Conduct Authority.UK-domiciled investors are automatically included in the class action, while non-UK domiciled entities may also be included on an opt-in basis as long as they are not US, Australian or Canadian domiciled. Non UK-domiciled entities will need to register their interest in the claim at www.ukfxcartelclaim.com.last_img read more

Stylish Gold Coast home designed to make the most of limited space

first_imgThe master bedroom has multiple windows to let in lots of natural light.Outside, there is an entertainment deck and saltwater pool.Mr Giles said the kitchen was his favourite part of the home.“I think the kitchen is a cracker, it’s a massive kitchen,” he said.“It’s the heart of the house.”As well as the double garage, he said there was plenty of off-street parking.The fact that it was within walking distance of schools and local cafes was a bonus.“If we weren’t living in Palm Beach, we’d be in there, we’d be enjoying it,” Mr Giles said. DETAILS The kitchen has a butler’s pantry and stainless steel appliances. 25 Boundary St, Currumbin Waters.‘LOOKS can be deceiving’ is a mantra that rings true for this Currumbin Waters home.Its footprint is relatively small but the four-bedroom residence on Boundary St was designed to make the most of its limited space.Owners Dave and Mel Giles bought the vacant 405sq m block a year ago. The upstairs living area is ideal for children or teenagers.center_img The downstairs living room flows into the dining area and kitchen.As their Palm Beach home’s value was increasing, they decided to stay where they were and build on their new Currumbin Waters block before selling it.Mr Giles, who is a builder by trade, said they treated the planning and building process as if they were going to move in, making sure there was plenty of space for families.“We just tried to maximise as much floor space as we could but also have usable outside space as well,” the father-of-three said.It has an open living area with a butler’s pantry off the kitchen.Upstairs, there are four bedrooms, the main of which has an ensuite and walk-in wardrobe, and a family room.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago Agent: Leanne Frohmuller and Rob Cinelli, LJ Hooker Palm Beach Features: Saltwater pool, butler’s pantry, stainless steal kitchen appliances, study nook, double garage, electric security entrance Price: Offers over $900,000 Inspections: Saturday, 10.30-11amlast_img read more

Paddington property that earns $110k a year hits the market

first_imgMore from newsParks and wildlife the new lust-haves post coronavirus15 hours agoNoosa’s best beachfront penthouse is about to hit the market15 hours agoThe kitchen and study in one of the units.One of the units is one bedroom with a study, and the other has two bedrooms and a shared bathroom.Belle Property Paddington agent Elizabeth Wright said the key points to a good investment was low vacancy, a mix of tenancies, rent that reflected market value and a location that attracts good commercial and residential tenants.“The property at 102 Latrobe Tce offers all of that,” Ms Wright said.“The location supports and gives confidence to business owners investing in new and existing businesses, while two beautifully presented residential units, each with their own outdoor area, continually attract high quality tenants.” The property at 102 Latrobe Tce, Paddington, is for sale.A Paddington property with four separate streams of rental investment income has hit the market.Currently home to restaurant Hai-Hai Ramen, this property also has two residential units and a storage area. The floorplan for 102 Latrobe Tce, Paddington.Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 0:51Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:51 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels720p720pHD576p576p432p432p270p270pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenStarting your hunt for a dream home00:51center_img Part of the restaurant.A savvy investor could snap up the 102 Latrobe Tce property for a cool $1,575,000 and see the purchase pay for itself, with $109,980 gross income per annum.The restaurant is currently rented at $61,000 per year, flat one at $20,800, flat two at $21,580, and the storage area at $6600.last_img read more