Barbara Ottawa hat in IPE einen aufschlussreichen und klugen Artikel über den aktuellen Stand der 2. Säule verfasst.
The asset pool of Europe’s leading 1000 retirement funds now exceeds €7.22trn – a 2.49% increase over last year’s 4.45%.
Switzerland should link pensioner incomes to long-term market interest rates, according to the International Monetary Fund (IMF). In its latest assessment of the Swiss financial system, the IMF said the ‘guaranteed conversion rate’ – which determines how much of a retiree’s second-pillar pension savings can be paid out each year – should be more flexible to account for rising life expectancy.
“Adjustment of the pension system parameters would support the sustainability of the social safety net,” the IMF said, adding that “population aging makes pension system reform essential”.
The conversion rate should be linked to “the market yield on a long-term sovereign bond and life expectancy at retirement”, the organisation stated. However, Swiss pension professionals criticised the idea of a market-driven approach at this year’s Swiss Pensions Conference, organised by the CFA Society Switzerland.
“This would be the best method to do away with the second pillar as it would become completely unattractive for its members” “The immediate shift to a market-valued technical interest rate [technischer Zins] would lead to a conversion rate of 3.6%, the application of generation tables and an interest rate slightly below 0%,” said Stephan Wyss, founder and managing director of research consultancy Prevanto.
Gerard Fischer, independent consultant and former CEO of Swisscanto, warned: “This would be the best method to do away with the second pillar as it would become completely unattractive for its members.” He added: “For people, it is only important to know what their pension can buy once they retire.” Fischer pointed out that Switzerland still had an “implicit defined benefit system” as pension promises remained unalterable once given.
The Bernische Pensionskasse (BPK) is to recruit a new managing director with Werner Hertzog set to leave after less than two years in the role, IPE has learned. Hertzog confirmed via email that he will leave the CHF13.4bn (€11.6bn) pension fund for the Swiss canton of Berne at the end of October. He did not give any reasons, saying only that he will be “focusing on other tasks”.
Hertzog was previously managing director at Aon Switzerland between 2011 and 2014, and before that led the country’s largest pension fund, Publica, for seven years. After taking a personal sabbatical in 2015, he joined the BPK in December 2016.
No successor has been nominated for Hertzog yet. “This still has time as we are in a very quiet phase and no exceptional leadership decisions have to be made,” Hertzog said.
Switzerland’s AHV fund is shifting to physical gold for the commodity exposure in its CHF35.2bn portfolio. At the end of last week the first pillar buffer fund tendered a custodianship and storage for CHF700m in gold bars via IPE Quest.
The bars are to be stored in Switzerland either collectively or individually, the tender states. The tender marks a shift in the investment strategy for AHV/AVS, as it previously only invested in gold and silver via swaps.
“The supervisory board has decided we are to invest in physical gold bars from now on,” the fund told IPE in a statement. In 2016 the supervisory board of the buffer fund decided to raise its the commodities exposure from 1% to 2% while divesting from energy-related commodity exposure.
The fund explained last year that gold was better suited to add “diversification and hedging in certain situations (inflation or recession)” than the previously preferred energy commodities.
IPE Real Assets’ top 100 ranking of some of the world’s largest real estate investors has captured more than $1.23trn (€1.01trn) in real estate assets held by pension funds, sovereign wealth funds and other institutional capital owners.
The IPE survey shows that, on average, investors are below their target allocations – but by only 130bps. Most have either increased (33%) or maintained (51%) their allocations in the past 18 months.
Most investors (59%) expect to invest the same amount of capital in real estate over the next 12 months as they did in the past 12-month period. Only 15% expected to decrease its activity.
In terms of investment intentions, investors are favouring European markets, followed by North America. Industrial and logistics markets are also top of the list, ahead of residential and offices. Core and value-add strategies are in poll position in terms of strategies deemed most attractive in the current market environment.
Bei den jährlich von der IPE vergebenen Awards wurde Elisabeth Bourqui, Geschäftsleiterin der ABB Group Pension Management mit Sitz in Zürich, mit dem “Pension Fund Achievement of the Year” Award geehrt.
Im Bericht der IPE heisst es:
Elisabeth Bourqui heads the Zurich-based ABB Group Pensions Management team whose remit is to oversee the collective management of the multitude of pension schemes that ABB sponsors worldwide. This includes more than 100 defined benefit and 50 defined contribution funds – both open and closed with different liability and pay-out structures – covering more than 400,000 members. Bourqui joined ABB in 2012 and since then the team has conceived one of the most advanced methodologies for running multiple arrangements in multiple jurisdictions.
This is a risk-based approach that is tailored to the needs of each scheme allowing for the best risk-adjusted returns. Rather than rely on a single set of assumptions, the methodology Bourqui’s team applies is designed continuously to question the basis for investment based on both established processes and other sources of information.
IPE hat in ihrer aktuellen Ausgabe von November 2017 einen Schwerpunkt auf Aktualitäten aus der Schweiz gelegt. Barbara Ottawa schreibt “Goodbye AV2020” und zitiert eine Reihe prominenter Vertreter der Schweizer Vorsorgeszene dazu. Susanne Rust nimmt die katastrophale Verfassung der Genfer Kasse mit ihrem Sanierungspaket von 4,7 Mrd. Franken intensiv unter die Lupe. Von Ottawa wiederum stammt der Beitrag “On Pause” zum Thema “Standardisierung” für einen besseren Vergleich der Finanzierungssituation resp. der Risikofähigkeit von Vorsorgeeinrichtungen. PPCmetrics hat dazu eine Studie verfasst, weitere Schritte hat der Bundesrat im Rahmen des Postulats Vitali aber abgelehnt. Eine ähnlich vertiefte Behandlung der Frage findet man in den Schweizer Medien vergeblich. Weitere Beiträge sind dem Thema Rendite und steigende Anlagerisiken gewidmet. Dazu gibt es ausführliches Zahlenmaterial zu den Asset Managers.
Blockchain. What is it good for? Absolutely everything, reply the blockchain cheerleaders, who see no end to the possibilities it presents. Absolutely nothing, say the blockchain deniers, who view it as a technological solution in search of a problem.
While its champions see it as a panacea, a cure for all imaginable ills, and some as yet unimaginable, the deniers see blockchain as a Wizard of Oz, all smoke and mirrors distracting attention from its nothingness. Or they chorus that the blockchain emperor wears no clothes. Readers are, of course, free to substitute their own preferred metaphor for style over substance.
- Opinions on the usefulness of blockchain vary widely.
- The transparency of blockchain, where everyone can see the ledger, creates problems related to lack of privacy.
- The system could prove costly and difficult to implement.
- Its main advantage is providing an immediate and immutable record of transactions.
Ueli Mettler und Benita von Lindeiner (c-alm) gehen in der IPE auf die hierzulande heiss umstrittene Frage der Vermögensverwaltungskosen ein. Sie schreiben u.a.:
Interestingly, disclosed costs have not only shown a strong increase from 2012 to 2013 – but have also, albeit to a much lesser degree, risen significantly from 2013 to 2014. This increase was probably partly the result of a lack of experience and less particularity on the auditors’ part – the first implementation of the new regulation was treated as a kind of grace period especially with respect to explicit transaction costs. At the same time, however, data show that the share of (expensive) alternative investments has risen from 6% in 2013 to 8.2% of total assets in 2015 – probably also accounting in part for the observed cost increase since 2013.
By now, only 7.2bps remain between disclosed costs and total cost measured in the cost survey. This difference can be attributed to implicit transaction costs such as spreads and to transaction and tax costs within collective investment vehicles.
The new cost regulation is considered to be highly successful both within Switzerland and abroad. Over 80% of formerly opaque costs are disclosed in the annual results today in a coherent, relatively simple and comprehensible way. All cost information is based on unambiguous and audited reports, ensuring full comparability with respect to level and quality.
Pension schemes are paying their active investment managers up to 70% more than six years ago even though average fee rates have dropped for most asset classes, according to consultancy LCP.
For an active global equity mandate that had matched the return of the global equity index, an investor could be paying up to 70% more in fees than they had been in 2011, LCP reported in its latest Investment Management Fee Survey.
It said this highlighted how active managers were rewarded for simply retaining assets, and not necessarily making above-benchmark returns.
The report’s author, Matt Gibson, partner and head of investment research at LCP, said: “Investment managers have done very well out of increases in assets under management over recent years.”
Olivier Deprez, a pensions expert and a member of the board of the Swiss actuarial association, argued passionately in favour of supporting trustee boards address funding problems, even if it means, in his words, “adjusting” pensions already being paid. “There is only one entity responsible for the financial security of pension funds and that is the board of trustees,” he stressed.
He called upon the Swiss pension fund association, ASIP, to support a lowering of pension benefits by funds trying to shore up their financial stability. Addressing the director of the association, Hanspeter Konrad, Deprez continued: “When the entity responsible for the pension fund is trying to find solutions to the benefit of active members and beneficiaries – including involving existing pension benefits – then ASIP has to support this approach.”
Konrad had earlier spoken against cutting pensions already in payment, saying that this was a fundamental question that went to the heart of the pension system and needed to be decided at the political level. It cannot be dealt with without a “fundamental debate about whether this systemic correction is wanted” taking place, said Konrad. Deprez disputed the reference to cutting pension payouts, preferring to refer to “adjusting” benefits.
Thomas Schönbächler, chief executive at BVK, the pension fund for employees of the canton of Zurich, argued that it wasn’t right “to change the rules in the middle of the game”, but that levels for new and future pension benefits should be set at the correct actuarial level – which would mean lower payments for future retirees. Konrad took a similar stance, saying ASIP was not against the introduction of flexible pension models for new and future beneficiaries, but that cutting pensions that were promised at a certain level is “the wrong way” for pension funds to address funding difficulties.
Susanne Rust hat anlässlich der Ergebnis-Publikation von BVK und PK BB mit den sehr unterschiedlichen Resultaten die jeweiligen Strategien in der IPE unter die Lupe genommen. Sie schreibt:
The Swiss pension fund for employees of the canton of Zurich and the country’s federal railways pension fund achieved returns of 5.7% and 3.4%, respectively, in 2016.
BVK, the CHF29bn (€24bn) Zurich pension fund, said its return of 5.7% was a “good performance” and that it was largely down to gains in US equity markets, its overseas equity and emerging market debt portfolios, and commodities.
The pension fund’s asset management costs reached a record low, it said, with the total expense ratio (TER) standing at 0.18%. It noted that this is below the 2016 average (0.51%) for Pensionskassen calculated by Swisscanto.
Its funding level, on a provisional basis, was 99.4% at the end of 2016. BVK described this as a “very good starting position” from which to cut the technical rate (technischer Zinssatz), which is akin to the discount rate, to 2%, as it announced it would do over a year and a half ago.
BVK’s target return is lower as a result of the changes to the technical parameters., at 1.5%. This is the return that is needed to maintain the funding ratio at its current level.
Pensionskasse SBB (PK SBB), the CHF17.1bn pension fund for the Swiss federal railways, achieved a return of 3.4% on its investments in 2016.
This is up from 1.5% the year before, but lower than its benchmark, which posted a return of 3.8%. The pension fund said this was because interest rates in the capital markets fell yet again in 2016.
Pensionskasse SBB’s funding level fell from 105.7% in 2015 to 104.6% in 2016, as a result of the pension fund lowering the technical rate from 2.5% to 2% with effect from 31 December 2016. This increased liabilities by CHF438m.
The return and the funding ratio figures are provisional, and the scheme’s annual report will be published in April 2017.
Swiss Pensionskassen’s allocation to alternatives reached a record high as at the end of 2016, according to a quarterly survey carried out by Credit Suisse.
IPE hat einen Bericht zum Status der Beratungen zur Altersvorsorge 2020 publiziert und dabei ausgiebig aus unserem letzten Newsletter zitiert. Zur Sprache kommt aber auch Hanspeter Konrad, der sich über die Zukunft der Reform ebenfalls besorgt zeigt.
Hanspeter Konrad, director of ASIP, the Swiss occupational pensions trade association, told IPE it was possible that the entire reform initiative collapsed but that he was optimistic and that the association was continuing to work towards a solution being found in parliament.
“We’re of the opinion that this reform is necessary and that it must not be allowed to fail,” he said.
Not everyone in the second pillar in Switzerland believes the reform is needed, although one source recently expressing this view to IPE said his was a contrarian one.
Konrad said that the question about the CHF70 first pillar top-up was political and that ASIP was neutral on this, focusing instead on the second-pillar aspects of the reform.
It believes that solutions can be found for the lowering of the minimum conversion rate to be offset within the second pillar.
The next steps in the law-making process are for the advisory committee in the Nationalrat to debate the upper chamber’s proposal, and then for the full lower chamber to do so.
“After that, the reform package will go back and forth in session,” said Konrad, adding that he expected a few differences to remain, including over the CHF70, and that a mediation conference was likely.
He expects that, at the end of the day, the politicians will “get their act together” to find a solution. “But I wouldn’t bet on it,” he said.
Jetta Klijnsma, state secretary at the Dutch Social Affairs Ministry, has confirmed that the government plans to decide early next year whether to extend the 10-year recovery term for the country’s beleaguered pension funds.
In a letter to parliament, she said the decision would depend on schemes’ financial position at year-end, which is the criterion for rights cuts, as set out in the new financial assessment framework (nFTK).
Klijnsma warned that, based on the regulator’s Q3 funding estimates, 30 pension funds would be forced to discount pension rights – by more than 0.7 percentage points on average – for more than 2.1m participants and pensioners next year.
Current recovery rules dictate that pension funds must cut pension rights by a equal percentage annually over the next 10 years, with a view to achieving the required funding level of 125%.
Klijnsma, however, said the regulator had concluded that, by extending the recovery period by one year, 24 pension funds would have to implement a 0.4% discount on average for 2m participants, including 190,000 pensioners next year.
Under a 12-year improvement term, the necessary discount could be reduced to 0.4% at no more than 17 schemes.