BaFin unconcerned by stress test failure of nearly dozen Pensionskassen

first_imgNearly a dozen German Pensionskassen have failed the stress set by local supervisor BaFin, the body has announcedHowever, the supervisor added that it was not concerned about the short-term risk-bearing capacity of Pensionskassen.Of the 146 Pensionskassen supervised by the German supervisor BaFin, 131 filed the results for the issued stress test.Some 11 Pensionskassen failed the test in 2013, compared to seven in the previous year. Only three of those Pensionskassen failed all scenarios and the supervisor added none of the eleven institutions were among the 20 largest in the sector in Germany.Additionally, five of those that failed the test are already closed for new entries. The BaFin added the underfunding level was “generally low” and the Pensionskassen concerned had already put in place measures to improve risk tolerance and achieve the necessary solvency levels – or will do so soon.As part of its internal prognosis on the impact of a continued low interest rate scenario, the German supervisor calculated the average net interest rate granted by Pensionskassen for 2013 at 4.3%, slightly below the 4.4% granted the year before.The supervisor said in its annual report: “With some Pensionskassen, BaFin had to raise awareness last year that in times in which capital gains will most likely continue to decline it is more important to strengthen buffers than to increase member payouts.”Overall, German Pensionskassen reported a solvency level of 134%, which was similar to that of the previous year and “generally speaking” fulfilled the solvency requirements, BaFin pointed out.“This obviously continues to ensure the short-term risk-bearing capacity in the sector,” the supervisor added.Based on projections, BaFin calculated an increase in contributions to Pensionskassen by €6.4bn in 2013, bringing the total number of assets managed in the sector to €131bn – although the increase was also aided by capital gains.However, the increase in contributions at 2.6% last year was less pronounced than in 2012 when it amounted to 5.9%.Regarding the 31 Pensionsfonds, the other major vehicle in the German occupational retirement landscape which is less strictly regulated in its investment and liability management, BaFin also noted a decrease in contributions from €831m in 2012 to €742m last year.“The fluctuations in contributions are mostly down to the fact that with a Pensionsfonds, depending on the contract, contributions are often made as one-off lump sum payments,” the supervisor explained.It added all Pensionsfonds passed the BaFin’s internal stress test and fully covered their liabilities.Assets managed by Pensionsfonds increased from €1.4bn to €1.6bn year-on-year.last_img read more

European Commission to investigate possibility of levy to fund EIOPA

first_imgThe European Commission has backed calls for the European Insurance and Occupational Pensions Authority (EIOPA) to no longer be funded from the European Union’s budget, increasing the likelihood of an industry levy.The European executive recommended the changes as it endorsed reviews of both the European Systemic Risk Board (ESRB) and the European Supervisory Authorities (ESA) for banking, securities markets and the pension and insurance industry.The review noted concerns that the current approach to ESA funding – whereby a budget is provided by the EU and through grants from the national regulators – could prove unsustainable as the supervisors looked to increase staffing levels.“Given EU and national budget constraints, the Commission considers that a revision of the existing funding model should therefore be envisaged,” the review said. It went on to note that the new model would “ideally” abolish the current funding model and that the Commission would start preparatory work to “improve the funding arrangements of the ESAs so they could fulfil their mandate”.“Further analysis could be carried out to assess the possibility of different funding models for the ESAs, including by increasing the level of funding by raising fees and levies,” it added.Gabriel Bernardino, chairman of EIOPA, last year called for greater funding to attract further staff, a call backed by the European Parliament’s economic and monetary affairs committee (ECON).The Commission said that, in light of the proposed Banking Union, it would also consider either relocating the ESAs and ESRB to have a single seat.EIOPA is currently based in Frankfurt, the European Securities and Markets Authority in Paris and the European Banking Authority in London.The Commission said it would also consider whether a “Twin Peaks” approach to regulation should be implemented, with a single prudential regulator and a second to police the industry.The review further suggested changes to the way ESA stakeholder groups are composed, increasing transparency and suggesting that those appointed should be chosen in a more “balanced” way – potentially by increasing the number of consumer and small and medium-sized enterprise (SME) representatives.The 30-strong occupational pensions stakeholder group (OPSG) currently consists of 10 representatives from the pension industry, employers, employees, professional bodies, academics and a sole representative for SMEs.The OPSG last year appointed Benne van Popta as its chairman.,WebsitesWe are not responsible for the content of external sitesLink to review of European Supervisory Authoritieslast_img read more

ING pension fund slashes allocation to return portfolio

first_imgSince 2014, ING staff have accrued pensions through the new ING collective defined contribution scheme.The pension fund’s official coverage ratio was reported at 145%, while the average for Dutch pension funds last year was 108%.Thanks to an additional contribution from the employer, as well as a full hedge of the interest risk on its liabilities, the scheme’s coverage increased by 17 percentage points over 2014.Last year, the ING scheme adjusted its targets after surveying its participants on their risk appetite.The survey showed they preferred certainty on their nominal pension over full indexation. The new target places the odds that its funding will fall short of 109% within a year, based on market rates, at less than 1%.It also stipulates that the probability the scheme will miss its indexation target of at least 80% of the consumer index within a 15-year period should not exceed 30%.The pension fund said its goals should be achievable if its ‘market funding ratio’ is approximately 130%, and 70% of its assets are invested through its matching portfolio. The remaining 30% should be placed in its return portfolio, consisting of credit, equity, property and private equity.The pension fund said it reduced its equity allocation from 20% to 16% and its interest hedge from 105% to 92.5%.It also plans to increase investments in inflation-linked bonds and swaps. ING’s €29bn pension fund in the Netherlands has scaled back its return-portfolio allocation by 15 percentage points, from 45% to 30%, in favour of its fixed income allocation.The pension fund hopes to achieve an indexation of 80% of the consumer index.The move, cited in its annual report for 2014, bucks the norm, as many other Dutch pension funds are planning to increase their equity allocations for higher returns.However, the Pensioenfonds ING differs from the average pension fund in that it has been closed to new entrants.last_img read more

Equity holdings boost returns at Finland’s Etera

first_imgFinland’s Etera saw its listed equity portfolio boost returns for the first half of 2015 to 3.7%, as its solvency level continued to recover.The pension mutual said assets under management were approaching €6bn by the end of June, while year-to-date returns rose further to 4.2% when taking into account results from July.Stefan Björkman, the provider’s managing director, praised its continued active investment in domestic markets, highlighting its stakes in property and corporate bonds. Currently, 40% of Etera’s assets are invested in Finland.Listed equities were the provider’s best performer during the first six months of the year, retuning 8.5% compared to 9.6% for the first half of 2014. However, returns from equities as a whole outpaced 2014’s results by 0.9 percentage points, standing at 7.8. Its fixed income portfolio remained flat, returning 2.4%, while property dropped slightly year-on-year to return 2%.The mutual also continued to see improvements to its solvency level after questions over its future viability as a standalone entity emerged in late 2013.At the time, Etera reported a solvency level of 16.2%, which has improved to 17.2% by the end of June.Rival pension provider Ilmarinen saw returns of 6.2% over the first six months of the year, and Varma reported returns of 4.3%.last_img read more

Accounting roundup: IASB, asymmetry, FRC, cashflow statements

first_imgDoubts remain, however, whether the IASB’s latest effort to win over long-term investors will succeed.Speaking during the 18 October discussion, IASB member Mary Tokar said: “We aren’t setting a requirement – we are just doing an unnecessary acknowledgement in the text of the standard that we may make asymmetric decisions. That is what we were asked to acknowledge.“I think, then, we should draft it in accordance with that, which is that this does not preclude the board from establishing requirements that may be asymmetrical.”Project manager Anne McGeachin said: “For you to be able to reach a decision about asymmetry, you need to be able to conclude it provides relevant information and that the information was faithfully represented. To be faithfully represented, it would need to be neutral.” The board is attempting to juggle the demands from some UK-based long-term investor interests on the one hand and the need to maintain convergence with the US FASB’s accounting model on the other.Chapter 2 of the Conceptual Framework currently follows a form of words agreed with the US board that eliminated the notion of conservatism from the accounting rubric.Meanwhile, the UK Financial Reporting Council (FRC) has concluded that “reporting quality is generally good, but companies have room for improvement”.The verdict comes in the audit watchdog’s Annual Review of Corporate Reporting 2015-16. In its latest review of the UK reporting landscape over the past year, the FRC concluded: “Given the complexity and breadth of corporate reporting, it is not possible to assess the overall quality of corporate reporting in one sentence.“Compliance with the accounting framework, particularly by larger public companies, is generally good, and the introduction of the strategic report has improved the quality of narrative reporting.”The FRC has also repeated its call from 2015 for preparers to adopt the requirements of the IASB’s draft amendments early to its asset-celling guidance in IFRIC 14.The IFRS Interpretations Committee agreed at its September meeting to press ahead with the amendments.Further in relation to pensions, the FRC flagged up what it calls “recent high-profile corporate failures” as having highlighted the risk posed by defined benefit scheme deficits in today’s low interest rate and low-return environment.The FRC urged directors to consider “whether a company’s obligations under pension agreements with current and future employees create principal risks and uncertainties to be disclosed and explained in the strategic report”.Lastly, the FRC has released a consultation on improvements to the cashflow statement.The FRC has said it wanted to hear views on potential improvements to the statement.It plans to feed through input from interested parties to the IASB’s Primary Financial Statements project.This project, a research initiative, is at an early stage and examining possible changes to the structure and content of the primary financial statements.In particular, the FRC discussion paper contains an analysis of the direct method cashflow statement.This method proved highly controversial when floated by the IASB during its abandoned project on financial statement presentation. The International Accounting Standards Board (IASB) has agreed to include a discussion of asymmetry in the main body of its Conceptual Framework document.Staff will now work on a revised form of words to work into Chapter 2 of the framework. The decision to include an analysis of asymmetry is driven by the board’s earlier decision to reintroduce a reference to prudence back into its framework.Since the financial crisis, the accounting establishment has come under pressure for what some critics see as its inherently imprudent standards.last_img read more

High pharma exposure depresses Alecta’s returns in first half

first_imgSweden’s biggest pension fund has expressed disappointment at its own investment returns for the first half of this year after its allocation to pharmaceutical equities dragged on performance.In its interim report for the first half of 2018, Alecta, which manages private sector occupational schemes, emphasised its higher longer-term performance.The pension fund’s defined contribution (DC) and defined benefit (DB) schemes returned 2.1% and 1.7% respectively in the January-to-June period, down from 5.8% and 4% in the same period last year.Magnus Billing, the firm’s chief executive, said: “Given Alecta’s very long-term business the key figures for the latest five-year period are the most interesting, and for those we did somewhat better than the Swedish and international benchmark we measure ourselves against.” However, he added: “We have higher expectations for ourselves than what we actually delivered in terms of return in the first half.” Magnus Billing, Alecta CEOThe DC product Alecta Optimal Pension returned an average 10.2% a year over the last five years, down from 12.1% at the end of June 2017. The DB scheme made a 7.8% return over the period, down from 8.8% when measured at the same point last year, according to the interim report.The pension fund explained that, in the first half of this year, it had a high allocation to pharmaceutical stocks, which had not developed as positively as other sectors. Its underweight position in oil-related shares compared to the benchmark index had also had a negative impact on performance.Group total assets rose to SEK260.6bn (€25.4bn) at the end of June from SEK255.8bn at the end of December.Billing hailed his firm’s success in the recent bidding process through Collectum, the administrator of Sweden’s supplementary private-sector occupational pension (ITP), which saw Alecta winning new five-year contracts within the plan, including the renewal of its contract as default provider within traditional insurance.The procurement process led to Alecta reducing its fee further to 0.09% for ITP members, lowering the fee ceiling to SEK600 from SEK900 and strengthening the guarantee, Billing said.last_img read more

FTSE Russell finalises fixed income country classification framework

first_imgFTSE Russell has finalised a country classification process for fixed income, having this week published the framework it developed in consultation with market participants.The framework assesses how easy it is for foreign investors to access different local currency, fixed-rate government bond markets. This is measured across four main sets of market criteria, such as the foreign exchange market structure, and 17 separate indicators.‘Market Accessibility Levels’ are assigned to countries tracked by FTSE Russell’s indices, which the provider said would replace existing “barriers to entry” criteria for the methodology of its flagship world and emerging markets government bond indices from 30 March.The index provider said it intended to expand the classification process to other fixed income universes, such as inflation-linked bonds and credit sectors. An initial review of markets was due to be completed in March, after which the index provider would publish an inaugural list of those markets being considered for potential reclassification.Chris Woods, managing director for governance and index policy at FTSE Russell, said the introduction of the minimum market accessibility scores provided “an evidence-driven, robust framework, which can be applied across both flagship and bespoke benchmarks”.The company has had a country classification framework for equity markets since 2003.Separately, FTSE Russell has also launched a new index series tracking Chinese green bonds – “securities whose proceeds are specifically used to finance climate or environmental projects in mainland China”.The debt would be labelled as ‘green’ by the issuer.  According to the index provider, China was the second-largest green bond market globally, with $37bn (€32bn) issued in 2017.There were currently 126 bonds included in the main index, covering approximately 75% of all on-shore labelled green bonds issued by China’s government, agencies and corporates, it said.Waqas Samad, CEO for FTSE Russell’s benchmarks business, said: “In 2017, China green bonds issuance represented 23% of global green bond issues and the market is expected to continue to grow significantly over the coming years.”last_img read more

UK regulator to expand scope and powers [updated]

first_imgTPR said it had identified core regulatory risks that would pose “a significant threat to the achievement of our regulatory outcomes”, in order to establish its priorities for the next three years. Charles Counsell, chief executive, TPRThese risks included: the failure or unmanaged exit of a trust-based scheme or its provider; excessive numbers of individuals opting out or not saving into pensions; and pension schemes or their members becoming victims of fraud.Counsell – who took over from Lesley Titcomb as TPR boss at the start of last month – said that with the regulator’s powers now extending to far more schemes than in the past, including smaller schemes, it would engage with them “if they cause us concern”.TPR’s enforcement team would carry out “full investigations into those who wilfully or persistently flout their duties”, he added.In the plan, TPR said it had already been using “a broader range of our powers to deter and punish those who persistently fail to comply” over the past 12 months.“The past year has seen our first prosecution for fraud, our first custodial sentence, and the courts handing down the largest ever fine following a TPR prosecution,” said the regulator’s chairman Mark Boyle.“We have also seen a number of high-profile cases being resolved, including Southern Water agreeing to pay £50m [€57.1m] into its pension scheme under a shortened recovery plan.”TPR confirmed it would continue working with other UK regulators, in particular the Financial Conduct Authority (FCA) and the Money and Pensions Service, on DB to DC transfers, and that it would be launching a joint review of the “consumer pensions journey” with the FCA.Laura McLaren, partner at Hymans Robertson, said the regulator’s plan served to reaffirm its pledge last year to be “clearer, quicker, tougher”.“A clear sign of its hardening stance comes under the heading of ‘using a broader range of powers’ where the regulator is at pains to demonstrate it has both sharp teeth and well exercised jaws, with examples of where it has taken decisive action,” McLaren said.“With many trustees and sponsors already starting to feel the impact of this shift we believe that increasing clarity and transparency should be welcomed.Recent Hymans Robertson research showed 29% of trustees wanted to see “more clarity on what ‘prudence’ and ‘affordable’ mean”, she added, with 13% “valuing more clarity on when TPR will intervene”.“This greater clarity will in turn help to inform those who are at greater risk of intervention to understand what to expect if the regulator’s jaws come down in their direction,” she said.Further reading‘Clearer, quicker, tougher’: UK regulator sets out three-year plan In last year’s three-year plan, TPR said it would increase its staff and “take action in a broader and more visible way to improve outcomes for retirement savers” UK to consider criminal sanctions against negligent scheme sponsors The UK government last year pledged to grant TPR more powers to fine directors and companies “to tackle irresponsible activities that may cause a material detriment to a pension scheme”This article was updated on 17 May to add comment from Hymans Robertson. The UK’s Pensions Regulator (TPR) has promised to extend its regulatory grip and intervene to ensure defined benefit (DB) schemes are properly funded to meet their liabilities.In its corporate plan for 2019-22 TPR stated that, as part of its more proactive and targeted approach, hundreds more schemes would be contacted in the coming year – including the use of a “rapid response” team to respond more quickly to intelligence about companies or major restructuring plans.The regulator said: “Communications clarifying duties and TPR’s expectations will be sent to DB schemes, newly authorised master trusts, defined contribution (DC) schemes and new employers with auto-enrolment responsibilities.”Charles Counsell, chief executive of TPR, said he recognised the plan was being published at a time of “great change in both the pensions landscape and the way TPR works”, citing the increase in automatic enrolment contributions to 8%, effective from last month, and the new authorisation regime for master trusts.last_img read more

Regional QLD property markets back in business with buyers

first_imgTownsville’s housing market is experiencing a pick-up in demand. Photo: Megan MacKinnon.ONCE down and out, regional Queensland property markets are back in business with buyers, with some areas recording a surge in demand of more than 50 per cent in a year.New research from realestate.com.au reveals a strong pick-up in interest in houses and units in the main regional centres in the north and centre of the state.GET THE LATEST REAL ESTATE NEWS DIRECT TO YOUR INBOX HEREEvery regional local government area in the state experienced a pick-up in demand in the past 12 months, except the Gold Coast, which appears to be experiencing a post Commonwealth Games hangover, according to the realestate.com.au Property Outlook report.Surfers Paradise on the Gold Coast.But with very high demand in some Gold Coast suburbs, that was likely to be short-lived, particularly given how popular the region was with Sydney-based property seekers, the report noted.Gladstone experienced the biggest jump in demand in the past year, with interest from potential buyers rising close to 40 per cent.HOME FIT FOR HARRY AND MEGHANBoats moored at the Gladstone marina.Bundaberg and the Fraser Coast both enjoyed an increase in interest of more than 30 per cent in the past 12 months.Even Townsville, where high unemployment has weighed heavily on the housing market, has made a solid recovery — up nearly 11 per cent.GOLD MINE FOUND IN BRISBANE BACKYARDTownsville’s housing market is recovering. Picture: Megan MacKinnon.REA Group chief economist Nerida Conisbee said the end of the mining downturn and government investment in locations like Gladstone had helped boost regional housing markets.Ms Conisbee said government grants could have a significant effect on a regional location.“It allows more jobs to be created and that flows through to housing demand,” she said.The change in fortunes is a welcome reprieve for regional homeowners and investors who could only sit back and watch as their once valuable investments tumbled, in many cases, to less than a quarter of their sale price during the mining boom.More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours agoDEMAND FOR HOUSES AND UNITS IN REGIONAL QLD IN PAST 12 MONTHSLGA Property views per listing (last 3 months) Year on year changeBUNDABERG 401 30.2%CAIRNS 825 6.5%DOUGLAS 470 19.3%FRASER COAST 673 33.8%GLADSTONE 434 39.1%GOLD COAST 1173 -9.1%GYMPIE 657 32.2%MACKAY 574 31.1%NOOSA 1795 24.2%ROCKHAMPTON 360 5.6%SUNSHINE COAST 1328 6.5%TOOWOOMBA 682 4.8%TOWNSVILLE 578 10.9%(Source: realestate.com.au)last_img read more

Lack of new stock drives sales

first_img… large bright bathrooms … The Garden Terraces is being constructed on its namesake street, and will consist of 26 one, two and three bedroom apartments. Just nine apartments remain on the market, with a two-bedroom unit starting from $470,000. … and comfy living spaces leading on to the balconyA key feature of the project is its masonry facade, which has been designed to create privacy but allow for the natural flow of sunlight and cool breezes.Each apartment has an open plan kitchen and living spaces, spacious, shaded balconies, large bathrooms and ensuites, wool blend carpets, timber detailing and quality appliances.Prior to construction, local investors were the dominant off-the-plan buyers but with trucks now on the ground, Mr Parker said first homebuyers and downsizers were making the majority of inquiries. Just 5km from the CBD, the Garden Terraces is within easy reach of amenities via major arterial roads and public transport.Mr Parker said the Newmarket train station had been given a facelift and Newmarket Village redeveloped to now include major retailers, specialty stores, dining and cinemas. Garden Terraces, NewmarketA lack of new homes in Newmarket has proven to be one developer’s dream, with two thirds of its latest project snapped up before construction had even started.Brisbane-based Your Style Homes, which made the move to Queensland from Victoria, is constructing The Garden Terraces, a 26 terrace home project. It comes after the completion of its nearby Eve on Erneton development, which consists of 12 apartments.center_img Garden Terraces, Newmarket, will consist of 26 terrace homesYour Style Homes managing director Dean Parker said they operated in the sought-after “middle ring” and had another upcoming project in Newmarket, another in Salisbury and one in Stafford.More from newsParks and wildlife the new lust-haves post coronavirus17 hours agoNoosa’s best beachfront penthouse is about to hit the market17 hours agoThere will be spacious bedrooms …“When we finished Eve last year, it was the only new and completed apartment project in the suburb for several years. Again this one (The Garden Terraces) is the only new project currently under construction in Newmarket.”last_img read more