Denmark relaxes rules to help pension liabilities

Denmark's government agreed to ease rules for the country's pension funds to help reduce their liabilities as record-low bond yields inflate the value of their obligations.

Pension funds and life insurers will be allowed to raise the discount rate they use to calculate their liabilities to better reflect long-term growth and inflation prospects, the Business and Growth Ministry in Copenhagen said in a statement late Tuesday. The decision sent yields on longer-maturity bonds soaring as the industry's need to buy up debt assets to match their pension obligations was reduced.

“The demand for duration isn't as strong as before,” Henrik Henriksen, chief investment strategist at Copenhagen-based PFA Pension A/S, Denmark's second-largest pension fund with about $50 billion in assets, said in an interview. “Looking especially at the 30-year point, there's less demand for 30-year bonds due to the new rate curve.”

The Danish move follows similar changes in Sweden, where 10-year yields surged 30 basis points on June 7 after the country's regulator put a floor on the discount rate pension funds use to calculate liabilities. Nordic pension funds had come under pressure to increase their asset purchases as the region's haven status from the debt crisis sent bond values higher and swelled the value of their liabilities.

 IPE

UK pension deficits soar to record highs in May

The deficits of final salary pension schemes in the UK surged dramatically in May to new record highs as weak economic growth and central bank monetary easing measures leave companies struggling to plug the shortfall, data showed. The aggregate deficit of the 6,432 defined benefit schemes in the UK increased by 95 billion pounds ($147.36 billion) in May alone, to total 312 billion pounds, the Pension Protection Fund (PPF) calculates. This compares with a deficit of 24.5 billion pounds just a year earlier.

 Reuters

Kanadische PKs im Q4 2011

Das statistische Amt Kanadas hat die Zahlen 2011 der Pensionskassen publiziert. Sie sind deshalb von Interesse, weil vielfach die kanadischen Kassen aufgrund ihrer guten Performance als Vorbilder hingestellt werden. Das Amt schreibt: “The market value of Canadian employer-sponsored pension funds totalled $1.1 trillion at the end of the fourth quarter, a 3.4% increase from the previous quarter. In 2011, these pension fund assets increased 4.6%, compared with 14.2% in 2010 and 10.5% in 2009.

The value of pension fund investments in bonds increased 3.6% to $424.8 billion in the fourth quarter. Investments in stocks recovered from losses in the third quarter, increasing 2.9% to $338.5 billion. In the fourth quarter, 70.2% of pension fund investments were in domestic holdings, and 29.8% in foreign holdings, unchanged from the previous quarter.

Revenue increased 34.4% to $29.2 billion in the fourth quarter. This increase was the result of special payments made by employers to cover pension liabilities, increased investment income and profits from the sale of securities.

With lower losses from the sale of securities compared with the previous quarter, expenditures fell 14.2% to $17.5 billion. With this decrease in expenditures and the increase in revenues, net income rose from $1.3 billion to $11.6 billion in the fourth quarter.

Just over 6.0 million Canadian workers are members of employer pension plans. Of this group, 5.0 million workers are members of trusteed plans. The remaining 1.0 million members with employer pensions are in plans managed principally by insurance company contracts. Data in this release refer only to trusteed plans and their pension funds.

 Statistics Canada

OECD Pensions Outlook 2012

Die anhaltende Krise an den Finanzmärkten und die schwierige Konsolidierung der Staatshaushalte erschwert die finanzielle Absicherung älterer Generationen. Die Organisation für wirtschaftliche Zusammenarbeit und Entwicklung (OECD) schätzt in einem Ausblick, dass wegen der ungebrochen steigenden Lebenserwartung Behörden und Versicherte umdenken müssen, um zukünftigen Rentnergenerationen adäquate Einkommen garantieren zu können, schreibt die NZZ.

Um drohende Rentenlücken zu decken, seien zudem staatliche Altersvorsorgen durch private Systeme zu ergänzen. Hier plädiert die OECD für Obligatorien wie die zweite Säule in der Schweiz. Wo diese Ergänzung noch nicht existiere, stehe die Politik vor der Schwierigkeit, dass entsprechende Beschlüsse von der Bevölkerung als Zusatzsteuer empfunden würden.

Im Durchschnitt der 34 OECD-Länder können Einsteiger in die Arbeitswelt heute Nettorenten von etwa der Hälfte ihrer Verdienste erwarten. Doch diese «Nettoersatzquote» in Form öffentlicher Transferleistungen ist in zahlreichen Staaten derzeit noch weit unterhalb der Marke von 50%. Idealerweise seien mindestens 60% anzustreben. Alle Länder, die dieses Niveau von Pflichtleistungen derzeit garantieren könnten, hätten Schritte zu einer verlässlichen zusätzlichen privaten Altersvorsorge eingeleitet.

Figure 1.3 returns to the changes in pensionable ages over time, showing the OECD
average age from 1949 to 2050. It surprises many that pension ages were often falling for
over four decades, to a nadir of 62.7 for men and 60.9 for women in 1993. During that
period, 10 OECD countries cut pension ages for men and 13 did so for women. The average
pension age around 1950 had been 64.5 for men and just over 63 for women. From the
low-point in 1993, the average pension age for men had risen by 0.6 years. The larger
increase for women, of one year, reflects the equalisation of pension ages between the
sexes in Australia, Belgium, Italy and Portugal, for example.

Pension ages are on the rise in most of the OECD: 19 out of 34 countries for men and
23 for women. Current legislation will push the pension age for men to 65.6 in 2050 and
65.0 for women. However, these hard-fought increases look less impressive in an historical
perspective. Only in 2030 for men and 2020 for women will the average pension age in
OECD countries be at the same level as many years ago, back in 1949.

  Pensions Outlook / News Release

“Wer soll das bezahlen”

In der neusten Ausgabe von NZZ Folio wird die Altersvorsorge in einer Reihe von Ländern vorgestellt und analysiert. Die Titel geben bereits einen Eindruck von der Verfassung der jeweiligen Sozialwerke: Deutschland – Ärmel hochkrempeln, Frankreich – Et alors?, Italien – Abschied von den “Baby-Renten”, Österreich – unstillbarer Drang in die Frührente, Spanien – Keine sonnigen Aussichten, Schweden – Arbeiten bis 75? Grossbritannien – Shoppen statt sparen, USA – Altersquillotine verboten, China – 15 Jahre sind genug, Brasilien – Die Bombe tickt. Die kurzen Texte geben einen guten Eindruck von der Situation und lassen erkennen, dass wir in der Schweiz eigentlich nicht so schlecht dran sind. Ergänzt werden die Beiträge mit aufschlussreichen Grafiken (zum Original durch Klick auf Bild).

 NZZ Folio Rentner

US: Huge government pension gap sparks backlash

Pensions and other retirement benefits have become a multi-trillion-dollar black hole for state and local government budgets, sparking fierce battles between elected officials and voters on one side and public sector unions on the other.

Estimates of the public pension fund gap for police, firefighters, teachers and other municipal, county and state employees range from about $1 trillion to nearly $3 trillion. The gap does not include the cost of retiree medical care promised to many public sector workers, likely adding hundreds of billions more.

The underfunding could lead to significant cuts in government services, tax increases or both, according to experts. But it's also provoking a backlash that could reduce many of the benefits promised to more than 19 million current state and local government workers nationwide.

 CNN Money

FT: Pensions funds back out of infrastructure

Pension funds globally are pulling back back from infrastructure investments in a worrying trend for cash-strapped western governments seeking to attract private money to the sector.

In the past five years until the end of April 2012, pension funds around the world have reduced their allocation, or deployment of capital, to such $49.46bn, according to research by Infrastructure Investor, a publication for infrastructure finance and investment. The news is a blow to European governments looking to revive their hamstrung economies by wooing pensions funds and other institutional investors to infrastructure investments.

 Financial Times

US: Pension funds bet on high returns

While Americans are typically earning less than 1 percent interest on their savings accounts and watching their 401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haul, a practice that New York City Mayor Michael R. Bloomberg recently called indefensible.

Public pension funds across the country are facing a painful reckoning. Their projections look increasingly out of touch in today’s low-interest environment, and pressure is mounting to be more realistic. But lowering their investment assumptions, even slightly, means turning for more cash to local taxpayers — who pay part of the cost of public pensions through property and other taxes.

Boston.com

Economist: How low real interest rates hurt pension funds

“Don’t save,” say the governments of rich countries as they worry about demand in economies that are hovering between sluggish recovery and recession. Their injunctions are aided and abetted by central banks, which are keeping interest rates negative in real terms (ie, after inflation), a policy that transfers wealth from savers to borrowers.

“Save,” say those same governments as they contemplate the ageing of their populations and the potential strain on the public purse. As encouragement, they offer tax breaks to those who put money aside to fund their retirement.Pension funds are caught in the middle of these contradictory messages, and they are suffering. In Britain the Pensions Regulator, which oversees corporate schemes, recently relaxed its guidelines to help funds that are heavily in deficit.

The same policies that have forced down government-bond yields have forced up the cost of providing pensions. Offering a pension is like incurring a debt, since it involves the promise of a series of future payments. When pension funds calculate the value of their liabilities, they therefore use a bond yield to discount future payments. As bond yields fall, the liabilities rise.

This is not just a theoretical issue. It is possible for British companies to offload their pension liabilities to an insurance company. The insurance company largely funds such pensions by buying government bonds. So getting rid of the pension promise has become more expensive.

Economist

U.K. pension funds look to emulate Canadian investment strategies

Representatives of the U.K.’s financial sector have been meeting with Canada’s largest pension plans to learn how British plans might adopt their investment strategies.‬ ‪They are also seeking to drum up more interest from Canadian plans in British infrastructure projects.‬

The meetings come as the British government embarks on a massive £250-billion five-year infrastructure spree to update things like its energy, transportation and water systems. While the spree is to be funded by both private and public-sector money, the government is still working to attract investors. And it has realized how far behind its own pension funds have fallen, compared to those in Canada, when it comes to investment prowess.‬

Canadian pension funds are already among the biggest investors in British infrastructure. For example, Borealis Infrastructure (an arm of the Ontario Municipal Employees Retirement System) and the Ontario Teachers’ Pension Plan had the winning $3.4-billion bid for the rights to run High Speed One, Britain’s only high-speed rail line.‬

 Globe Investor

Norwegens Staatsfonds stößt sämtliche Irland-, Portugal-Bonds ab

Der norwegische Staatsfonds hat sämtliche Positionen an irischen und portugiesischen Staatsanleihen verkauft. Zuvor hatte er eine Teilnahme am griechischen Anleihetausch abgelehnt und gewarnt, dass Europa vor erheblichen Herausforderungen stehe.

Der 610 Mrd. Dollar schwere Staatsfonds namens Government Pension Fund Global hat im ersten Quartal, gemessen an einem Währungskorb, einen Ertrag von 7,1 Prozent oder 234 Mrd. Kronen (30,94 Mrd. Euro) erzielt, teilte der Fonds aus Oslo mit. Die Aktienpositionen verzeichneten ein Plus von 11 Prozent, während die festverzinslichen Anlagen nur einen Zuwachs von 1,6 Prozent aufwiesen.

Der Fonds hatte in diesem Jahr den griechischen Anleihetausch abgelehnt, da er nicht damit einverstanden war, schlechter als die Europäische Zentralbank gestellt zu werden. Er hat auch seine Staatsanleihepositionen in Italien und Spanien verringert im Rahmen einer allgemeineren Strategie einer Reduzierung der Investments in Europa. Hingegen hat er Staatsanleihen aus Schwellenländern wie Brasilien, Mexiko und Indien zugekauft.

Welt online

NZZ: Pensionskassen sind keine Versicherungen

Werner Enz beschäftigt sich in der NZZ vom 14.5.12 mit der Finanzierungssituation der Publica sowie Forderung der EU nach Anwendung der Insolvenz-Regeln auf die Pensionskassen. Im Falle Publica empfiehlt er trotz magerer Reserven (DG 103%) eine ruhige Hand bei den Anlagen. Mit Blick auf die EU stellt er fest: “Einige wollen EU-Kommissar Michel Barnier so verstanden haben, dass auch Pensionskassen dereinst dieses moderne Solvenz-Regime, wie es in der Schweiz mit dem Swiss Solvency Test schon gilt, einhalten müssten. Das aber würde in einer nach der Finanzkrise ohnehin von Regulierungswut gekennzeichneten Phase eindeutig zu weit gehen. Versicherungen müssen Renten, die sie garantieren, zwingend leisten; ein solches Geschäft lässt sich ohne Risikokapital gar nicht betreiben. Betriebliche Pensionskassen verfolgen ähnliche Ziele, aber es kann nicht genug davor gewarnt werden, sie mit Versicherungen über einen Leisten zu schlagen.”

 NZZ

US union pensions hole deepens to $369bn

The hole in the pension plans of US labour unions now stands at $369bn Credit Suisse has calculated with the aid of new reporting standards. This raises the prospect of higher pension contributions for employers and deteriorating industrial relations. Multi-employer pension schemes, managed by trade unions on behalf of members working for many different employers, are now just 52 per cent funded, the bank calculates with most of the burden to close this gap likely to fall on small and midsize companies. S&P 500 companies’ share of this obligation is estimated at just $43bn. However Credit Suisse identifies seven large companies in the S&P, including Safeway and UPS, where the pension liability is a significant proportion of their market capitalisation.

 FT

Norwegischer Staatsfonds kürzt Investments in Europa

Der Staatsfonds von Norwegen modifiziert seine Anlagestrategie und wird dabei seine Investments in Europa wesentlich kürzen. Der Fonds will sich vermehrt am globalen Wachstum ausrichten. Es sei das Ziel, einer vierprozentigen Rendite näher zu kommen, heisst es am in einer vom Finanzministerium in Oslo ausgegebenen Mitteilung. Demnach soll der in Europa angelegte Teil des Kapitals von insgesamt 600 Mrd. Dollar von derzeit 54 Prozent auf 41 Prozent gesenkt werden.

Bereits im letzten Jahr war eine neue Richtlinie für Anleihen eingeführt worden, die sich am Bruttoinlandsprodukt der Länder und nicht mehr an der Größe des Marktes orientiert. So sollen Investments in besonders stark verschuldeten Staaten vermieden werden.

Der Fonds ist der größte Einzelinvestor in Europa und wird unter Maßgabe des Finanzministeriums von der norwegischen Zentralbank verwaltet. Im letzten Jahr verlor der Fonds 86 Mrd. Kronen oder 2,5 Prozent.

Verkauft wurden im letzten Jahr vor allem Staatsanleihen aus den stark verschuldeten Ländern der südlichen Eurozone. Hingegen waren europäische Aktien zugekauft worden. Um 25 Prozent reduziert wurden die Bestände italienischer und spanischer Staatsanleihen. Der Fonds lehnte es überdies ab, am Schuldenschnitt für Griechenland teilzunehmen.

  Welt online

Portugal erreicht Sparziel dank Rentenklau

Schuldensünder Portugal hat sein Sparziel im vergangenen Jahr deutlich übertroffen. 2011 sei ein Haushaltsdefizit von 4,2 Prozent erzielt worden, teilte die nationale Statistikbehörde INE am Freitag in Lissabon mit. Gegenüber den internationalen Geldgebern hatte sich das pleitebedrohte Euro-Land zu einem Minus von höchstens 5,9 Prozent des Bruttoinlandsprodukts (BIP) verpflichtet. Das Defizit 2011 liegt sogar unter dem für das laufende Jahr angestrebten Ziel von 4,5 Prozent. 2010 war in Portugal noch ein Defizit von 9,8 Prozent verzeichnet worden. Im April 2011 musste das Land dann unter den Euro-Rettungsschirm schlüpfen.

Heimische Medien erinnerten allerdings daran, dass das Ergebnis 2011 nur möglich war, weil der Staat sich von den vier größten Banken des Landes sechs Milliarden Euro aus Pensionskassen auszahlen ließ. Das mache 3,5 Punkte des Defizits aus, so die staatliche Nachrichten-Agentur Lusa. Ohne diese Transferzahlungen wäre also ein Defizit von 7,7 Prozent registriert worden, hieß es. In Zukunft wird der Staat in Portugal die Renten der Bankangestellten finanzieren müssen.

 Handelsblatt

NY: public retirement benefits cuts

New York state lawmakers approved pension reform that will save an estimated $80 billion over 30 years, largely by reducing benefits for newly hired state and local public workers, which union officials blasted as an attack on the middle class. The state thus joins 43 others that have recently enacted legislation curtailing .

Though New York needs to reduce its spending, the cuts come at a particularly bad time: over a third of New York workers, both public and private, approaching retirement age have less than $10,000 in liquid assets. As a result, those workers are projected to be poor or near poor in retirement, with an average budget of about $7 a day for food and approximately $600 a month for housing.

 NYT / Reuters

UK pension funds and the "cult of equity"

The UK’s big pension funds now own a smaller slice of shares quoted on the London stock market than at any time for nearly half a century. Figures from the Office for National Statistics claim that ownership has slipped to just 9% of the total – the lowest since 1963. So what happened to the “cult of the equity” – the concept that shares outperformed other assets over the longer term? 

Pension funds have become less important as schemes are closed to new members or are closed altogether and those that remain move into bonds to cover “liabilities” - the ageing membership. But even within pension funds - the decline does not tell the whole story. Funds now increasingly consider non-UK shares. And the pension statistics ignore Sipps, a growth area for purchases of equity funds and individual shares. The investment world abhors a vacuum. As pension funds continue their secular decline – there will be little left in 20 years without a change of policy – foreign buyers including sovereign funds have stepped in. Equities are still seen as good long-term holdings.

The UK equity market was valued at £1.8 trillion at the end of December 2011 – it is more today. Foreign owners control about 40%. Their growth in importance over the past 25 years has been almost a mirror image of the decline in big pension fund power.

 Henderson Global Investors

Berlin gegen EU-Plan zur Altersvorsorge, Freizügigkeit in Deutscher Sicht

Es geht um etliche Milliarden Euro und die betriebliche Altersvorsorge von Millionen Arbeitnehmern: Pläne der EU-Kommission, die Vorschriften für Betriebsrenten zu verschärften, bedrohen Pensionskassen und Pensionsfonds in Deutschland. Deshalb schlagen Politiker in Berlin jetzt Alarm. Der Vorsitzende der Arbeitnehmergruppe der CDU/CSU-Bundestagsfraktion, Peter Weiß, spricht von einem 'Zangenangriff auf die Altersvorsorge in Deutschland', heisst es in der Süddeutschen Zeitung.

Nun will Brüssel die Bezieher von Betriebsrenten besser schützen. Die Richtlinien, die für Versicherer maßgebend sind (genannt Solvency II), sind für die Kommission dabei 'ein nützlicher Ausgangspunkt'. Würden sie auf die Pensionskassen übertragen, müssten diese aber achtmal so viel Kapital vorhalten. Das wären, grob geschätzt, 40 bis 50 Milliarden Euro, was viele Kassen überfordern würde.

Doch nicht nur deshalb droht Ungemach aus Brüssel: Mit Sorge sieht der CDU-Rentenfachmann Weiß auch die Pläne der EU-Kommission, leichter eine Betriebsrente bei einem Jobwechsel in ein anderes Unternehmen mitnehmen zu können (genannt 'Portabilitätsrichtlinie'). Das sei für den Arbeitnehmer sicher ein Vorteil, räumt er ein. Zum Probleme werde dies allerdings für Arbeitgeber, die ihren Mitarbeitern Betriebsrenten für die Zukunft zusagen, ohne sofort Geld dafür einzuzahlen. Sie müssten dann für Mitarbeiter zahlen, obwohl diese vielleicht nur für wenige Jahre im Betrieb bleiben. Das widerspreche dem System in Deutschland, bei dem freiwillige Leistungen der Arbeitgeber auch ein 'Instrument zur Personalbindung und Belohnung von Betriebstreue' seien.

 Süddeutsche Zeitung

UK: Pension schemes slam QE for 'wiping billions from retirement funds'

The Bank of England confirmed a full three years of record low 0.5 per cent interest rates today as opposition grew to the quantitative easing scheme that pensions funds claim has reduced scheme values by £90billion. The policy is producing victims with savers suffering returns close to zero. The effect is particularly tough on pensioners who rely on savings to supplement their income.

And current and future pensioners also suffer because QE makes funding final salary scheme more expensive and reduces the incomes retirees can expect when they cash in their pension pot. The National Association of Pension Funds (NAPF) said that £90billion has been knocked off the value of final salary pension schemes due to £125billion of quantitative easing in the past six months. That is on top of £180billion in additional finding costs arising from earlier QE.

 This is Money

NAPF and PPF confirm creation of pension scheme infrastructure fund

Alan Rubenstein, chairman of the Pension Protection Fund (PPF)  and Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), have confirmed the launch of a new UK infrastructure platform for pension schemes. Speaking at the NAPF's annual Investment conference in Edinburgh , the pair said that the platform would be in place by January.

The fund will initially aim to raise £2bn and Segars said that the NAPF and PPF are currently in talks with a variety of pension schemes to find 10-12 funds who are willing to be the first investors in the project. They claim that feedback from the industry has been good and so are optimistic over the platform's future.

Rubenstein said: "We are not looking for a platform that solely focuses on infrastructure equity but also debt, there will be a 50/50 divide, as we see it. Pension schemes want to own whole projects so that income is flexible, easy, and is linked to inflation." The goal is to raise 2-5% over the RPI  inflation measure. "We see it as a less risky investment than government bonds," Rubenstein said. The PPF's chief executive added that the idea was simply to "take advantage of a natural supply of assets which offer good opportunities for schemes".

Who will run the scheme is as of yet undecided, though it is possible it will be run by a team set up for the specific purpose. In November George Osborne said the Treasury was seeking to raise £20bn through infrastructure, yet Segars said the current £2bn was a more realistic goal at the moment.

 Pension Fund Online