Regulatory hurdles and “over-cautiousness” have effectively made Germany a “closed shop” for institutions for occupational retirement provision (IORPs), according to Michael Ries, managing director of Ries Corporate Solutions (RCS).The Bensheim-based consultancy is currently advising an unnamed international company that wants to enter the German market.The client, with a Benelux-based administrative platform, plans to offer an IORP vehicle with the aim of “providing global services to German employers”, Ries told IPE.According to the consultancy, this solution will “effectively open the door” to the German market for foreign providers. RCS is advising on a cooperation with an insurer through which members can purchase annuities on retirement, as well as outsourcing other services to take on local administration.He said the country had been difficult to access due to the complexity of the German model and the ”over-cautiousness” of German clients.Under current regulation, the scope of activity for a Pensionsfonds – which is what a cross-border IORP qualifies as – is limited to transferring existing on-book pension reserves, or “past services”, and managing deferred compensation plans. If future rights to benefits are transferred, this cuts into the tax allowance for re-assigning parts of an employee’s salary, or Entgeltumwandlung.To cover tax-efficient contributions to the German healthcare system, foreign providers need an agreement with a CTA and an Unterstützungskasse, and they need to be able to offer services such as checking a member’s status.Furthermore, pension providers must have the know-how to administer the different options offered to German companies, including non-IORP solutions.“It means that, to enter the German market, the foreign provider must support all the technical resources necessary to manage a wide range of products, including non-IORP solutions, with the support of local experts,” Ries said.This complexity, he said, had served to “check the ambitions of non-German providers”.A further hurdle is Germany’s preference for a life-long pensions payout, or deferred compensation, rather than a one-off payout of accrued assets.“This means you have longevity risk to manage, actuarial challenges and the task of monitoring each migrant worker’s survival status,” said Ries.Commenting on why the German market was harder to penetrate than others, he said belief in the country’s supervisory structures was “very strong”.“It is difficult,” he added, “for a foreign company to gauge this feeling in the market and to understand all the regulatory hurdles.”But Ries argued that the German retirement-provision landscape was “rather backwards” when it came to transparency and fees, adding that it was still almost impossible to ask a German retirement vehicle for a total expense ratio.“So, from an objective point of view, it makes sense to want to enter a market with a low general product quality and billions of unfunded liabilities,” he said.
Both unions and the employers’ association said they were open for further talks, but rather on amendments to the existing tax and social contributions.The two areas have already been identified for review by the Ministry of Finance, which has commissioned the University of Würzburg to conduct a study.Results of this first-ever comprehensive research into effects and incentives from the current tax and social contributions regime are expected by year-end.The study is also one of the reasons the government has chosen to postpone further debates on how to increase participation in the second pillar.Postponing further debate on the industry-wide pension plans, also known as §17b, named after the legal paragraph in the law on occupational pensions (BetrAVG) they would have to be set down in, was also necessitated by the implementation of the EU’s pensions portability directive. The German government will present its amendments to the occupational pension fund law (BetrAVG) to implement the EU’s new legal framework for portability and mobility “at the end of next week or the week after”, according to Peter Görgen, head of the department for supplementary pensions at the BMAS.He confirmed at the conference the amendments would not discriminate between cross-border and domestic German migration.One of the most debated points had been the reduction of the vesting period from five years in Germany to three years, as per the new EU standard.But the BMAS has now softened the blow for employers as the new legal framework in Germany will only apply to contracts negotiated after 2018.This way, the first transfers under the new vesting period can only take place in 2021 at the earliest, Görgen said.Meanwhile, Asmussen confirmed that debates on opting-out models would be among the “other options” for increasing participation in the second pillar to be discussed in future.However, Ingo Kramer, president of the Federation of German Employers (BDA), said any pressure to offer occupational pensions would be “clearly the wrong step” and a distraction from necessary amendments to existing regulation.Overall, delegates at the conference said the debate on occupational pensions had been given a fresh spark by the BMAS’s proposal, even though most rejected the current draft.Thomas Richter, chief executive at the German Investment Funds Association BVI, said: “For a decade, nobody wanted to talk about occupational pensions.”He said the government’s commitment had now finally changed that, and that he was “happy the bird is finally up in the air”.“At the beginning,” he added, “it does not matter whether it flies in the right direction.” Further debate on the German government’s proposal to introduce industry-wide pension plans has been postponed until 2016 after opposition from social partners.The delay was confirmed by Jörg Asmussen, under-secretary in the Ministry of Labour and Social Affairs (BMAS) during a speech at the Handelsblatt conference in Berlin.He stressed the ministry thought it was “worthwhile to continue to discuss its proposal” but added that “no draft will be ready to be introduced to the legislative procedures before 2016”.The BMAS’s plans for new industry-wide pension funds, or Tarifpläne, were rejected last week by the social partners for increasing the system’s complexity and introducing further problems “without solving existing ones”.
To remove any doubts that vehicles based in other states were permissible, PensionsEurope suggested the OECD employ wording that a vehicle was based in a state that had entered a tax treaty with the pension provider’s home state.The Danish industry association, Forsikring & Pension (F&P), raised concerns that the insurance industry – largely responsible for the provision of pension benefits in the country – could be disadvantaged by the framework, despite its being subject to the same domestic regulation as pension funds.“Thus, it is very important to clarify explicitly that they in this role receive the same treatment and are also covered by the definition of ‘recognised pension fund’ in the OECD Model Tax convention – to ensure a level playing field,” the association said.“If life insurance companies are not covered by the definition, an essential part of the Danish workforce may be taxed more heavily than in other countries organised in a different way.”F&P also echoed concerns across the pensions industry that only pension funds exclusively providing pension benefits would be classed as recognised pension funds by the convention, instead endorsing the use of “almost exclusively”.The view was shared by the Dutch Pensions Federation, which said it was “too restrictive” to apply to pension funds in the Netherlands.For its part, PensionsEurope noted that the OECD’s initial report on the matter recognised pension funds would “exclusively or almost exclusively” provide retirement benefits and urged a return to the phrasing.“This addition,” it said, “would guarantee that a fund should be a recognised pension funds when the purpose is to administer or provide retirement or similar benefits, while other activities would be allowed and subordinated to the main activity of retirement provision.” The OECD must ensure its proposed tax framework fully includes pooling vehicles used by pension funds, and does not disadvantage insurance companies in any way, industry groups have urged. Responding to an OECD consultation on its model tax convention, drawn up by the think tank as part of its work with G20 nations around base erosion profit shifting, PensionsEurope said it was important to ensure the streamlined tax framework also applied to pension funds using pooled vehicles for their investment. The new convention aims to remove inconsistencies hampering pension funds’ ability to establish their country of residence due to the numerous bilateral tax agreements struck between nations, allowing investors to reclaim tax more easily.PensionsEurope also expressed concern at wording within the convention that pension investors used wholly owned entities – such as collective investment vehicles – that were resident “in the same state” to hold assets, noting that the wording could, for example, cause problems for a German pension fund using a Luxembourg-based vehicle for its activities.
Firms should also be signatories to the United Nations’ Principles for Responsible Investment.The pension fund wants at least a six-year track record but will accept an absolute minimum of three years.Managers must have at least one predecessor fund.Performance should be stated, net of fees, to 30 September 2016.Responses are invited until 13 January, and long list candidates will be contacted from 20 January.The IPE news team is unable to answer any further questions about IPE Quest tender notices to protect the interests of clients conducting the search. To obtain information direct from IPE Quest, please contact Jayna Vishram on +44 (0) 20 7261 4630 or email email@example.com. A Benelux-based pension fund is seeking an infrastructure manager for a €50m mandate through IPE Quest.According to search QN 2242, the pension fund wants a mandate with a mix of core and value-add assets from OECD countries.The mandate is targeting a minimum internal rate of return of 6.5%.Bidding managers should have at least €250m under management in infrastructure already and at least €1bn in total assets.
A spokesperson for ICG in London said: “We are focused on working to support the management of Esperi Care as it undertakes a full review of its operations and makes the improvements necessary to regain the trust of its residents, relatives and employees.“We take a long-term approach to investing in companies and, as signatory of the UN Principles for Responsible Investment since 2013, have a well-defined ESG framework in place with clear policies and practices. These are key considerations in our investment approach.”Ilmarinen: engagement over divestmentIlmarinen’s CIO Mikko Mursula told Helsingin Sanomat that the insurer would attempt to find out more about the case before any decision on divestment.“The principle of responsible investment is based on the fact that the investment object complies with laws and norms,” Mursula said.Ilmarinen staff were asking the company about the background and the company’s understanding of the chain of events, he said.Anna Hyrske, head of responsible investments at Ilmarinen, told IPE that the company’s responsible investment policies gave preference to engagement over divestment.Helsingin Sanomat reported that disagreements between Esperi Care and Finland’s national health and welfare regulator, Valvira, about the adequacy of nursing staff had been in the public domain for more than two years. Mursula told the paper he had no information on the matter, however.Links between Esperi and EteraEsperi Care’s CEO Marja Aarnio-Isohanni resigned on Tuesday as a result of the outcry, and was replaced by Heini Pirttijärvi.Aarnio-Isohanni is currently a deputy member of Ilmarinen’s supervisory board, having been appointed to the role a year ago. She spent more than 10 years on Etera’s board, according to her LinkedIn page.She had worked at Esperi Care since 2003 and owned 10.5% of the business – a stake she has retained, according to Finnish national broadcaster YLE.Aarnio-Isohanni was Finland’s second wealthiest woman in 2017, earning more than €5.7m that year, according to YLE.Valvira announced at the end of last week that it had shut down one of the company’s homes located in Kristiinankaupunki in the west of Finland, having received “serious, direct customer safety” information.“The weaknesses identified were related, inter alia, to the number of inadequate medical staff in relation to the assessment of care and care needs, lack of basic care, the appropriateness of drug treatment, lack of care information for clients, and the work of close staff of the functional unit,” Valvira said in a statement. Finnish pension insurer Ilmarinen and asset manager Intermediate Capital Group (ICG) are engaging with a Finnish care home company following reports of severe neglect.UK-based ICG and Ilmarinen – one of Finland’s largest pension insurance companies – have said they will engage with the management of Esperi Care rather than divest, after reports emerged of severe neglect at care homes.Finland’s healthcare regulator shut down one facility after at least one elderly resident was suspected to have died due to negligence, according to national broadcaster YLE.ICG holds the majority stake in Esperi Care, while Ilmarinen owns a 4.4% stake according to Finnish newspaper Helsingin Sanomat, having inherited the asset through its merger with Etera a year ago.
The SEC’s output on Wednesday was “commission guidance” rather than “staff guidance”, which some commentators said meant it had greater weight. Source: SECSEC headquarters building, Washington DCThere are different interpretations of the extent to which the guidance contains new rules. Commissioner Hester Peirce, who has been critical about environmental, social and corporate governance (ESG) investing, said the regulator was “not building a new regulatory regime, but… explaining the contours of an existing one to help investment advisers and proxy advisers carry out their responsibilities”.“Investment advisers” refers to fund managers in this context.Commissioner Elad Roisman, who led the SEC’s work on this issue, said the regulator’s releases “reiterate the Commission’s views on the importance of investment advisers’ voting responsibly on behalf of their clients and the applicability of our proxy rules to proxy voting advice”.According to a blog post from staff at ValueEdge Advisors, a US corporate governance advisory firm, the SEC had been under intense pressure from corporate interests, but their efforts had “almost completely failed”.“Pretty much all the SEC did was remind proxy advisers to follow the laws already on the books,” ValueEdge Advisors wrote. Threat to shareholder rights?According to commissioner Allison Herren Lee, however, the regulator’s release contained “new substantive requirements – most notably increased issuer involvement in the proxy advisory firm’s process” and created “significant risks to the free and full exercise of shareholder voting rights”.The Council of Institutional Investors (CII), a US asset owner association, said the SEC’s interpretation about the applicability of proxy solicitation rules to proxy advisers could be the first step towards a rule proposal.“By making it clearer that the SEC sees proxy advisory firms as subject to proxy solicitation rules, this could give the SEC a stronger hook to place requirements on the firms later, which could be concerning,” it said in a statement.Ken Bertsch, CII executive director, argued that “the commission should have put the new guidance and interpretation out for public comment”.Sarah Wilson, chief executive at Minerva Analytics, a UK proxy advisory firm, said the SEC’s guidance “brings asset owners and asset managers back into the equation”.She added: “The whole lobby that was aimed at the SEC from the Chamber of Commerce… you would have imagined that fund managers didn’t exist, by the way that they talked. It was all about shooting the messenger.”Wilson said the SEC’s guidance was a sign of regulatory harmonisation, in that it reflected the requirements laid out in the revised EU Shareholder Rights Directive (SRD II).“It’s not laid out the same way, but it captures the same issues about fiduciary responsibility, transparency, accuracy,” she said.The timing of the SEC’s intervention was therefore helpful, according to Wilson, because asset managers operating in the EU had to revisit their policies anyway to meet new requirements. In a split vote the US regulator has approved guidance about asset managers’ responsibilities when using proxy advisory firms and the rules applicable to them.The Securities Exchange Commission (SEC) was divided along political party lines to make for a three-to-two vote in support of the regulator’s pronouncements. These included an “interpretation” noting the SEC’s view that providing voting advice was “solicitation” under federal law and subject to anti-fraud rules.The backdrop to the SEC’s intervention is a heated debate about the role of proxy advisory firms, which institutional investors use to help them vote shares – a typical service is the provision of voting recommendations.Critics have argued they wield too much influence, are not transparent or accountable enough, and sometimes provide low quality work.
Draft domestic regulation in Sweden to implement the EU’s IORP II directive for pension funds has come in for more criticism from the sector as officials work to get the belated rules in place.Occupational pension fund association Tjänstepensionsförbundet said the Swedish FSA’s proposals for new regulations for occupational pension companies published on 8 July – which are based on the Finance Ministry’s IORP II bill – are too heavily based on Solvency II, the EU rulebook for insurers, which could force pension funds to undertake too much administrative work.In its response to the consultation on the regulations draft, the association said that the proposal deviated in several ways from the intention in the the Finance Ministry’s draft law.Tjänstepensionsförbundet wrote: “The association’s assessment is that the regulations are too heavily based on Solvency II, which leads to an unnecessarily high administrative burden, high costs and regulations that are not always relevant to the activities of occupational pension funds.” The Riksdag in Stockholm, SwedenSweden: Better late than never From IPE’s Top 1000 Pension Funds report: Sweden moves to introduce IORP II-style legislationIORP II: How the EU directive has reshaped the pensions industry A guide to how 10 EU member states have implemented the wide-ranging occupational pensions directive The association – whose members include government pension fund Kåpan Pension, banking sector scheme SPK and insurers’ pension fund FPK – cited examples of the ways in which the FSA’s proposal parted company from the ministry’s draft, including the size of the capital requirement and the handling of proportionality.“According to the calculations of the association’s members, the discount rate model proposed for calculating insurance technical provisions can have a very large impact on the risk-sensitive capital requirement relative to the current model and the rules should therefore be reviewed,” the pension fund lobby group said.The requirements and levels should be adjusted within the scope of a forthcoming decision by parliament on the proposal, the association wrote.Separately, the FSA on Tuesday published a revised timetable for the implementation of IORP II in Sweden, based on the final version of the legislative bill that the Finance Ministry released on 4 September.The deadline for IORP II implementation has now been set for 15 December, slightly later than the previously stated 1 December deadline. As a result, the FSA has now set a 1 January 2020 deadline for pension companies to comply with the first part of its new regulations. The new timetable also provides for a second part of the IORP II regulation to come into force in the spring.Sweden is one of several EU states to have missed the 13 January 2019 deadline for incorporating IORP II into national law. The EU launched unspecified infringement action against some countries in April.Further reading
Acting chief executive officer Teresa Isele said that at the end of last year, AP1 had decided to develop its asset management with new equities strategies and a new organisational structure.“These changes lay a better foundation for achieving our return targets, while also reducing our annual costs,” she said.Earlier this month, AP2 – the only one of the four to be based in Gothenburg rather than Stockholm – reported a 15.9% return after costs of last year, with total assets growing to SEK381.3bn by the end of December.AP3, meanwhile, also declared its return to be the best of the decade, reporting a 17.6% gain after expenses. Its fund capital grew to end the year worth SEK393.7bn.But AP4 posted the highest return of all four funds, reporting a 21.7% return after costs, with the fund saying successful active management had contributed 4.4 percentage points of that.Total fund capital increased to SEK418bn at the end of 2019, increasing AP4’s size lead over its three peers.Niklas Ekvall, AP4’s CEO, said 2019’s strong performance in the financial markets should be seen in the light of the very tough end to 2018, with sharply falling stock markets and rising interest rates.“AP4’s favourable result over time is largely due to the scope to manoeuvre provided by the buffer funds’ legal mandate, the ability to act long-term and withstand large market movements, and low-liquidity investments that are conducive to long-term returns,” he said.The last few years have seen wrangling between stakeholders in the Swedish buffer fund system and politicians over how much investment freedom the funds should be allowed, resulting in two different pieces of legislation which have allowed more flexibility.The four AP funds said they had actively developed work on sustainability issues within their operations and further developed the integration of sustainability into management in the course of 2019. Since 2015, the AP funds said they had shrunk their carbon footprint by 23% in totalThis work included creating a model for measuring carbon footprints, they said, to make it clearer what companies were contributing to, and also to shine a light on the result of funds changing their holdings.However, as a group, they described how corporate behaviour had counteracted some of their efforts to rein emissions in last year:“Of the year’s reduction in total carbon dioxide emissions, 10 percentage points are due to the fact that the AP funds have reduced their emissions through portfolio changes. However, the portfolio companies’ increased emissions have offset this decrease by four percentage points,” they said.Since 2015, the AP funds said they had shrunk their carbon footprint by 23% in total.The four funds paid out SEK26bn to cover the payment deficit in the pension system in 2019, down from SEK27bn the year before.The fifth buffer fund supporting the Swedish income pension system – which makes up the most of the state pension – is Gothenburg-based AP6, which is smaller than the first four and has a special mandate to invest in unlisted companies. It has yet to report 2019 results.Separately, the largest of Sweden’s national pension funds, AP7, reported that savers in its key Såfa product – the default option within the premium pension system – had seen an average return on investment of 33.1% in 2019, which was the highest return in its history.The premium pension forms part of the Swedish state pension and unlike the income pension, is a system of mandatory individual accounts.Total assets in the two building-block funds behind AP7’s generation pension products – an equity fund and a much smaller bond fund – grew to SEK674m during the year from SEK460m.“It is a return that one cannot expect every year”Richard Gröttheim, AP7’s CEOAlongside investment growth, AP7 had seen a huge inflow of savings last year mainly as money was transferred from privately-run funds as they were withdrawn from the premium pension’s funds marketplace platform.Inflows to AP7 grew to SEK64.2bn last year from SEK50.5bn in 2018, while outflows decreased to SEK5.7bn from SEK6.1bn.The funds marketplace is undergoing a radical overhaul, and in December 2018 all fund providers were required to re-apply for admission.CEO Richard Gröttheim said AP7’s return had been boosted by gains in the global equity markets as a whole and by the weakening of the Swedish krona.“It is a return that one cannot expect every year,” he cautioned, in the annual report.During 2019, AP7 said in the report that it had continued developing its management model and the default alternative, putting a 2016 board decision into action.“The purpose of the changes that have been made in the strategic portfolio in recent years is to increase the spread of risk in the default option, and at the same time reduce the overall level of risk by reducing exposure to the stock market, partly through reduced use of leverage in management,” the fund said.Other areas of work AP7 mentioned in its annual report were assessing the feasibility of currency hedging for portions of foreign holdings, integrating sustainability issues into management, and broadening investments in green bonds.New active mandates procured in 2019 would be implemented continuously in 2020, the fund said, adding that through this procurement, AP7’s active management would widen its scope. The big four buffer funds backing Sweden’s state pension made a huge SEK236bn (€22.3bn) return on investments in 2019, but within their sustainability work, a carbon footprint reduction was partly cancelled out by investee companies increasing their emissions during the year.The return generated by the funds – AP1, AP2, AP3 and AP4 – equates to 17.6% and taken as a whole is the highest joint return since the system started in 2001.The year ended with funds’ total capital amounting to SEK1.56trn, up from SEK1.35trn at the end of 2018.Among individual reporting by the funds, AP1 announced a 15.1% return last year, which it described as its highest in a decade. Total net assets amounted to SEK365.8bn at the end of the year.
The home where much of the hit crime drama Harrow was created is on the market. Creator and showrunner of the ABC TV series Stephen M. Irwin worked out of his unassuming home office at 8 Narrien Court in Samford Village when he wrote and finely tuned the scripts for the series. Harrow will be back for season 2.Mr Irwin’s wife, Sarah Lim, told Property Confidential, that they bought the spacious Samford Village home two years ago, in part so that it could be used as a home office for her husband to write.The six-bedroom home is listed through Ray White — Samford for a price of $1.295 million.As well as Harrow, Mr Irwin is also busy working on Netflix’s first Australian original series Tidelands.The ten part series was created by Mr Irwin and began filming in Queensland earlier this year. What a great place to work form home.It was filmed in and around Brisbane and has already been greenlit for a second season, which is due to film later this year. The home is on the market now.More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoThe show focused on forensic pathologist Dr Daniel Harrow, who was portrayed by Welsh-born Fantastic Four and Hornblower star Ioan Gruffudd.
The Duke and Duchess of Sussex during their visit to Fraser Island. (Photo by Chris Jackson/Getty Images)Located at Ocean View, a gateway town to spectacular Mount Mee near Brisbane, the French-inspired country estate hit the market last night, and is packed full of regal features including its own three level stone tower surrounded by a moat. The residences comes with its own tower, which is surrounded by a fish-filled moatPlace Kangaroo Point agent Michael Hatzifotis said he was “gobsmacked” when he first lay eyes on the unique residence. “It has lots of the hallmarks of a castle but with everything you could want in a modern home,” he said.“It even has ducted airconditioning which you definitely would not get in an old castle.“Even the laundry has some of the best views you will ever see.” This modern-day castle is expected to sell for over $4 millionTHE royal tour may be drawing to a close today but the Duke and Duchess of Sussex may want to check out this modern-day “castle” before they head back to Ol’ Blighty.Unlike a cold, medieval castle back in the UK, this one comes with all of the latest mod cons including ducted airconditioning, a woodfired pizza oven, a resort-style pool, even an inbuilt sound system. More from newsParks and wildlife the new lust-haves post coronavirus16 hours agoNoosa’s best beachfront penthouse is about to hit the market16 hours agoThe walled alfresco area would be a perfect setting for a spot of tea and cucumber sangasThe home is built around a tall, central stone tower that is home to a sitting room (lower level), circular bedroom three with Juliette balcony (second level) and circular bedroom 2 (third level) which sits off a landing that adjoins the spacious loft-style master suite with walk-in-robe and ensuite. It has views across the hinterland and valley, and on a clear day you can see NoosaThe residence has high ceilings, stonework, cast iron fireplaces and stained glass windows. Also on the lower level is an open plan living area bordered by a corner kitchen which would be perfect for that first anniversary roast chook dinner. A timber deck flows from the living area, providing hinterland views and overlooking the resort-style pool below. A fourth bedroom is located above the garage in an additional loft space and has its own powder room.Owners Tim Mills and Diana Norman said they built the house in 2009, taking about 18 months to get the finishes just right.The couple, who are now in their 70s, are both downsizing, with Ms Norman saying they had made the diginified decision to move “before they have to carry us out”. The interior is packed full of features that would not look out of place in a French estate Not a bad spot to rest ones weary head or feet after a royal tour“I was born in Jersey in the Channel Islands and my family had business interests in France so I spent a lot of time there as a child and just loved the old castles and houses in Brittany,” Ms Norman said,“I had always wanted to live in a tower … it must have just been in my bones as I have Norman heritage.“But the locals in Dayboro all refer to it as the castle.” Ms Norman said they were proud of the house they had designed and built, and would be sad to let it go.Mr Hatzifotis said the residence would make a spectacular B&B or statement Airbnb. It is list for sale and is expected to go for in excess of $4 million.