The Polish government has finally published the draft bill radically changing the second-pillar pension system.The bill, issued late on 10 October, puts in place essentially all the proposals announced in September, alongside punitive restrictions on advertising by the second-pillar funds (OFEs) and some proposed changes to the third pillar.The bill is now out for a 30-day public consultation.Its publication marks a U-turn from 1999, when the establishment of the mandatory second pillar was seen as a means of providing higher retirement income while eventually reducing the pension and public deficit, to a position where the system has ostensibly done the opposite. The draft bill states that the costs associated with the OFEs had, according to the Finance Ministry, ballooned to PLN279.4bn (€66.7bn) by the end of 2012.This was equivalent to 17.5% of GDP and more than 30% of the country’s public debt.The Finance Ministry has estimated that the changes will in 2014 reduce the public debt by 8.4% of GDP according to national accounting standards and by 9.2% according to EU methodology.As expected, the first pillar Polish Social Insurance Institution (ZUS) will handle the OFE retirement payouts, with the accumulated funds transferred incrementally 10 years before retirement.The controversial investment changes are also in place.All Polish sovereign and state guaranteed bond holdings, including central bank issues, will be transferred from the OFEs on 3 February 2014.The law actually stipulates 51.5% of portfolio value on 3 September 2013 – the day before the government officially announced the changes – so the funds that cannot satisfy this quota with state bonds will have to make up the difference with other non-equity assets such as cash and bank deposits, road and municipal bonds.Earlier, the Polish Chamber of Pension Funds (IGTE), which has disputed the legality of both the transfer of assets to ZUS before retirement and the removal of government securities, sought opinion from the European Commission.Małgorzata Rusewicz, IGTE acting president, told IPE: “We still emphasise that proposed changes raise serious legal doubts.“In accordance with legal regulations valid in Poland, the OFEs have the right to invest the assets of their members until the insured retire.“Therefore, the transfer of assets from the OFE to ZUS, even if it concerns only a part of them, as in the case of bonds, constitutes appropriation of the assets that are the property of the OFE and its members by a public institution without compensation.“The assets accumulated on behalf of the insured will cease to be private property – they will become public property and will be consumed by the state.”In future, the OFEs will be banned from investing in any state securities, not just Polish ones, as well as state-guaranteed loans, deposits and related instruments. As part of what the government has consistently called “real economy” investment, they will be allowed to invest in Polish road and other infrastructure bonds, corporate and municipal issues.As of 4 February 2014, the OFEs will have to invest a minimum 75% in equity, irrespective of their members’ age and risk appetite.“Forcing a pension fund to invest a minimum 75% exclusively in shares will significantly increase the risk of such transactions and make it impossible to manage in a manner beneficial for the insured,” said Rusewicz.“It will make it impossible to protect the real value of those assets in periods of a slump in the economy. Until now, such solution has never been used in pension funds anywhere.”Other investment restrictions will be lifted as of 1 July, including the abolition of the minimum investment return benchmark.The foreign investment cap of 5% will be raised to 10%, then 20% in 2015 and 30% in 2016.The OFEs will be able to lend stock, a practice previously prohibited, while a separate law will specify in what circumstance they will be able to use derivatives, also banned up till now.Contribution fees will be halved, to 1.75% for the OFEs and 0.4% for ZUS, and the contributions to the OFEs capped at 2.92% of gross wages.The hitherto mandatory system becomes voluntary.New entrants to the labour market and existing OFE members will have a three-month window from 1 April to declare their intention to remain in the second pillar or have future contributions transferred to ZUS.They can make this choice in person, by post or online.Those who do not will by default have their future contributions moved to ZUS.Workers will be able to change their decision, with the April-June window open in the first instance after two years, then every four years.This is effectively the only concession the government has made since its proposals were announced in September.Previously, the freedom to change one’s mind was to be restricted to those workers who had opted to remain in the second pillar.OFE members will be able to change their fund every three months, although it is not clear how they will make their decision, as the government also dropped a bombshell by making the publication and distribution of OFE advertising a criminal offence subject to a penalty of PLN1m or up to two years in prison.“We are surprised with additional change, according to which there will be no possibility to advertise OFEs in any way,” said Rusewicz. “We honestly don’t know at the moment how to interpret these rules. We don’t know, for example, if the IGTE would be able to organise any informational campaign regarding OFEs.“It would be a phenomenon for the whole EU if such a rule would be adopted by the Polish Parliament.”The draft also covers changes in the third-pillar IKZE retirement accounts introduced in 2011 to improve the take-up, including increasing the limit on tax-free contributions and reducing the tax on payouts to 10%.
The Irish government has again argued that the cost of the €534m pensions levy should be absorbed by the industry by lowering management charges, despite accepting that its ability to do so is “very limited”.Minister for finance Michael Noonan said he continued to believe the cost of his 0.6% levy on pension assets – overlapping during its last year with a further 0.15% charge introduced by the minister in the 2014 Budget – should be met by the industry itself, but he said he did not believe companies should be forced to shoulder the cost through legislation.“I have pursued this issue with the representative bodies of these companies,” he said, “but the response has not been positive. I have been told it would be a matter for individual companies to decide on the question of absorbing the cost of the levy into their existing fees and charges, but that the scope for companies to do so is very limited.”Due to the overlap between the existing and the new pensions levy, the Irish Exchequer expects to reap income of €675m from the stamp duty in 2014, up from the €534m in payments to the end of June 2013. Last year, Noonan said a Department of Social Protection report on pension management fees would show the industry how the impact of the levy could be offset, a view he reiterated.“Implementation of these recommendations aims to ensure compliance with regulatory requirements and enhance the transparency and understanding of pension charges amongst trustees, employers and scheme members with a view to supporting competitive pricing and ultimately limiting erosion to the value of the pension received by the member,” he said.Speaking the same day as Noonan, minister for social protection Joan Burton noted that work was underway to implement all of the recommendations contained within her department’s report.She reiterated that the new Pensions Council – the body soon to be charged with advising on pensions policy once the Pensions Board is reconfigured into the Pensions Authority in an effort to avoid regulatory capture – would help her oversee the implementation.“The first task I will be giving the new Council is to monitor the implementation of the recommendations in the Report on Pension Charges and advise me if further actions are needed,” she said.“Should this prove necessary, a further policy and regulatory response may be brought to government.”
Amin Rajan, chief executive at CREATE-Research, says pension plans have ‘absolute clarity’ on their beliefs
ENPAM, Italy’s €17bn pension fund for medical consultants, has committed €150m to a venture capital fund investing in early-stage companies within the medical technologies sector.Principia III raised a total of €160m at its first close, with an ultimate subscription of up to €500m to be invested in around 30 companies. The €150m commitment by the first-pillar fund will be drawn down over approximately five years.ENPAM said it was making the investment because healthcare was a strategic sector it wished to develop and support, and that doing so would be fundamental to intergenerational sustainability of the fund.But a spokesman for ENPAM said there were also strong financial and operational reasons to target healthcare provision in Italy. “Firstly, we believe it is poised to be a strategic and fast-growing sector, because of demographic ageing trends in Italy and Europe.“Secondly, tight budget policies will likely benefit innovative processes in public healthcare delivery, which is one of the target zones for Principia III.”He said Principia III was the only venture capital fund with the agenda to invest in this type of company.The spokesman pointed to manager Principia SGR’s inclusion of Italy’s National Research Council (CNR) as one of its shareholders as “very important”, as it would be able to rely on its relationships with research institutions.Within ENPAM’s portfolio, the investment will form part of its mission-related holdings – assets linked to long-term sustainability deriving from the medical professions, invested through bonds, equities, private equity and real estate.The portfolio also includes a further €50m commitment to healthcare, in assisted-living residential health facilities.The mission-related segment has a maximum allocation of 5%.Initially, the investment in Principia III will represent over half of ENPAM’s 1% strategic allocation to private equity, although the fund expects to increase the share further.The remainder of the private equity allocation – 0.4% of the total portfolio – is made up of stakes in five other funds, run by Igi, Quadrivio and Dgpa Sator, and also including a stake in Principia II, which invests in small and medium-sized enterprises in the digital innovation space, mainly in central and southern Italy.Additionally, ENPAM has holdings Advanced Capital III, Advanced Capital Real Estate and Network Capital Partners, private equity fund-of-funds.ENPAM’s internal rate of return on its private equity portfolio since inception in 2002 has been around 1.7%. Over the same period, the FTSE Italia Small Cap Index – the nearest benchmark, given the domestic bias of the portfolio – returned -1.0%.Although ENPAM’s investment forms by far the major share of Principia III, the fund did not see it has a drawback.The spokesman said: “Venture capital is not well-established in Italy, where bank funding has been the primary conduit and legislators have only recently made it possible for the country’s smaller companies to issue bonds directly.“So we are willing to be a catalyst through being the first big investor in this fund,” he added. ”Others will follow.”For more on Italy’s pension fund market, read the past coverage by IPE
“Regional yield differences between the stock markets were unusually large,” he added. “The stock indices of the United States and emerging economies ended up in clearly positive territory.“Meanwhile, the European market, weighed down by growth and Brexit-related concerns, closed H1 clearly in the red.”Mursula said he was convinced equity market volatility would continue to the end of the year, due to continued geopolitical uncertainty and the “rough estimates and guesses” as to the impact of the UK’s decision to leave the European Union.“Both phenomena increase the markets’ uneasiness and are certainly not going to raise any hopes of a recovery in economic growth,” he said.However, away from equity markets, Ilmarinen’s sizeable fixed income portfolio – accounting for nearly 45% of assets – returned 0.3%, within which loans returned 1.9%, and bonds issued by public corporations 2.7%.Real estate, 11.3% of assets, returned 1.7%, while the mutual’s portfolio of ‘other’ investments – including hedge fund holdings and commodities – returned 10.6%.Despite the lower overall returns for the first six months of 2016, Ilmarinen still reported an average return of 4.3% over the course of the last decade, translating to a 2.6% real return averaged over the last 10 years. Finland’s Ilmarinen has closed out the first half of the year with investment losses, albeit with returns from the three months to June mitigating losses of 1.4% from the first quarter.Ending June with €35.7bn in assets, the pensions mutual said its holdings returned 0.8% over the second quarter, resulting in first-half results of -0.6%.While its equity portfolio overall generated losses of 3.6%, owing to the 5.8% loss on its listed equity holdings, Ilmarinen’s private equity portfolio produced a stronger performance, returning 5.5%.Mikko Mursula, the mutual’s CIO, noted equity markets had continued to be volatile throughout the first six months of the year.
Investors that do not consider environmental, social or corporate governance (ESG) risks in their portfolios risk breaching their fiduciary duty to members, according to the investment chief of one of Switzerland’s biggest asset owners.At the Swiss Sustainable Finance (SSF) conference in Berne on Tuesday, Frank Juliano, head of asset management at the CHF37.6bn (€32.7bn) Swiss buffer fund Compenswiss, said investors should “at least take it into consideration” even if ESG investments did not make it into portfolios.Authorities in Switzerland – in line with peers in the European Union – are considering making it mandatory for institutional investors to include ESG as part of their fiduciary duty.“We are managing assets for all Swiss people and we have to make sure our decisions are in their best interest,” Juliano said. “The outcome of an ESG assessment may be that it is not suitable for the portfolio, but without such an assessment you face possible drawdowns for insured people.”He emphasised, however, that there was “no one-size-fits-all approach”.Compenswiss runs the assets for the Swiss first pillar provider AHV/AVS, as well as for funds backing state healthcare and military service payments.Elsewhere at the SSF conference, delegates agreed that the issue of climate change should not be considered in isolation from other ESG factors.Remy Briand, head of ESG and real estate at MSCI, told delegates: “There is globally a lot more focus and interest in ESG and especially climate segment but how that questioning translates into strategies and targets to reduce risk still remains relatively coarse.”However, he said there had been “quite a bit of improvement”.Briand called on investors to be more informed in their decision to include, for example, low-carbon indices in their investment strategies.“A first step for investors should be to measure risk in their portfolio to see whether it is less or more exposed to carbon than the benchmark,” he said. “That is not something most institutions are doing right now.”Conference organiser the SSF Association was founded four years ago to promote ESG topics in Switzerland.
The signatories said: “We urge you to do better.”Though they understood the IEA did not intend to define policy or investment decisions, they stressed that the WEO is the globally authoritative publication on energy and energy infrastructure and is used to inform significant investment and political decisions worldwide.“As the WEO can become a self-fulfilling prophecy, it carries a major responsibility that goes way beyond that of other publications that are merely descriptive,” they wrote, adding that the IEA could not be derelict of this responsibility.“We renew our call on the IEA to make a fully transparent Sustainable Development Scenario the central reference in the 2020 WEO,” they wrote.“The ambition of the SDS must be increased to present a reasonable probability of reaching net-zero emissions by 2050 (not 2070) and limiting warming to 1.5ºC (not 1.8ºC),” the letter reads.The year 2020 was a turning point for the world, the signatories wrote, saying this was the year when people either grasped the challenges and opportunities before them, or continued delaying and obstructing the low-carbon transformation.“This is an opportunity for the IEA to step out in front and show the world what is necessary for us to deliver a 1.5ºC future,” the letter concludes.Odd Arild Grefstad, chief executive officer of Storebrand, said separately that the IEA needed to provide better tools for governments, investors and companies to align policies, investments and business strategies with the Paris Agreement.“The IEA has the opportunity to take the lead and showcase what it takes to deliver in line with the Paris Agreement. In their latest report, they have not succeeded in this,” he said.Other signatories to the joint letter from the pensions and investment sector include leaders of Folksam, IKEA, AMF, Nordea Life & Pension, Zurich Insurance Group and Allianz. Nordic pension providers including Norway’s Storebrand, Danish pension fund PensionDanmark and Sweden’s biggest pension fund Alecta are among 64 signatories of a hard-hitting letter telling the head of the International Energy Agency (IEA) his organisation must urgently provide a lead in decarbonisation efforts.Sent to Fatih Birol, the executive director of the IEA in Paris today, the letter from climate action organisations, prominent individuals, academics and investors took issue with the agency’s 2019 World Economic Outlook (WEO) released on 13 November.The signatories welcomed improvements the IEA had made to this latest annual WEO, including renaming the New Policies Scenario to the more accurately entitled ‘Stated Policies Scenario’, extending the Sustainable Development Scenario (SDS) to 2050, and reintroducing some discussion of the critical 1.5ºC warming limit.However, they wrote: “Such minor improvements are very welcome, but should not be mistaken for delivering upon urgently needed substantial changes.”
“This is the outcome investors were looking for,” she added. “The policy certainty it provides will help unlock the additional flows of capital required to deliver a climate neutral future.”Pfeifer called on other political leaders to follow suit, saying “this is what delivering the Paris Agreement looks like”.The IIGCC and more than 40 of its members had earlier this month called on EU leaders to approve a net zero emissions target at the European Council.Signatories included asset managers such as Aberdeen Standard Investments, Hermes Investment Management, and Legal and General Investment Management.Ingrid Holmes, head of policy and advocacy at Hermes, welcomed the Council’s approval of the net-zero target but said “execution is imperative”.“It will be interesting to see how each of the member states goes about addressing their commitments,” she added.At BNP Paribas Asset Management, meanwhile, Helena Viñes Fiestas, global head of stewardship and policy, said: the Commission and EU member states were “putting their ambition where science is”.“All EU countries have a duty to support carbon neutrality, and the measures needed to ensure that each economic sector transitions to net zero emissions by 2050,” she said. “That’s why approval of the target today is so important and such a significant step forward.” The EU Council has endorsed an objective for the EU economy to become climate-neutral by 2050, a move that investors welcomed as delivering what was needed from world leaders.According to a Council document, the agreement came despite one member state, reportedly Poland, not being able to commit to implement the 2050 objective at this stage. The Council “will come back to this” in June next year, it said.The 2050 target is a key element of the Green Deal presented by the European Commission on Wednesday; the Commission said it would within 100 days table a proposal to enshrine the 2050 goal in legislation.Stephanie Pfeifer, chief executive officer of the Institutional Investors Group on Climate Change (IIGCC), said the news about the Council’s position meant “member states are now fully committed to the long-term transformation of the European economy at the highest political level, in line with a 1.5 degree future”.
Michael Elliss bought this southport house last year to develop the land. He didn’t want to demolish the historic home so offered it up for free. Picture Glenn HampsonA QUEENSLAND family has snapped up the historic Gold Coast home that was offered up for free.Brett McClelland and Rachael Webb have decided to take the Southport home, which they plan to move to their Canungra property and live in with their children.Mr McClelland said they were “over the moon” to have snapped up the one-bedroom, one bathroom 1930s brick and weatherboard house at 86 Johnston St.“The moment we walked in, we knew we needed this house,” he said.“It would be a shame if it was knocked down.”He said a friend of theirs worked at a company that could move the house for them but they still needed to get council approval, which could take months. The home belonged to Patricia Henricksen, who was born in the living room and lived there for most of her life. Picture Glenn Hampson“There will be a lot of work involved (and) there’s a lot of hurdles we’ve got to get through yet,” he said.More from news02:37International architect Desmond Brooks selling luxury beach villa16 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days agoThe property was home to Patricia Henricksen from the day she was born in the living room in 1935 until it sold at auction last year.Michael Elliss and Cameron Reed of MCM Property Developments snapped it up for $880,000 with plans to build a three-storey unit block.They were reluctant to knock the existing house down but Ms Henricksen’s death earlier this year halted any thought of demolition. Ms Henricksen passed away last month. Picture Glenn HampsonLast month, Mr Elliss offered the home up to anyone who would love it as much as Ms Henricksen did for free as long as they could pay to relocate it, which would cost between $15,000 and $18,000.“I got so many inquiries, I just didn’t expect anything like that,” Mr Elliss said.When he opened the home for inspections, he asked visitors to write a message explaining what they would do to the house.He said Mr McClelland and Ms Webb explained they would restore it to its former glory, which showed they respected the old home.He offered it to them immediately.“I’m really happy,” he said.“It would have been good to keep it on the Coast but at the end of the day, they’re going to look after it.” The one-bedroom, one bathroom 1930s brick and weatherboard house at 86 Johnston St, Southport.
What a kitchen! More from news02:37International architect Desmond Brooks selling luxury beach villa13 hours ago02:37Gold Coast property: Sovereign Islands mega mansion hits market with $16m price tag2 days ago“We came up from the coast for a tree change and that was nearly 17 years ago,” she said.They spent years establishing and growing the gardens then renovating the home to make it the stunning property it is today.MORE NEWS: How to be successful during peak rental season Rest easy each night knowing you live in an amazing house. “It was an empty canvas and we’re both quite artistic,” Mrs Tolmie said.“The garden is quite renowned, it’s been in many, many magazines and (on) TV.“We also have a charity concert up here every year.” The gatehouse is ideal for guests. MORE NEWS: Melbourne businessman selling Coast sub-penthouse Get lost in your own backyard. BEHIND the front gates of a grand Tamborine Mountain estate is a sight that will take your breath away.Manicured European inspired gardens surround a traditional Queenslander, known as Glenloch.There is also a gate house greeting guests to the property.The stunning estate is the brainchild of Caroline and Rob Tolmie.Mrs Tolmie said there was not much more than paddocks and bushland when they first laid eyes on it almost 20 years ago. The best place to soak up the surroundings.The gardens include ponds and water features as well as an entertainment pavilion.“A glass of wine at the end of the day looking down on the fountain and waterfall is a really nice place to be,” Mrs Tolmie said.Inside the main house, it is all class with chandeliers, two wine cellars and a fireplace in the master bedroom.Mrs Tolmie said one of the best parts of the property was its location just minutes from the small town’s cafes and restaurants.“But although you’re right in the middle of it, (the property) is like a little secret,” she said. The main residence, Glenloch, is a traditional Queenslander. Fancy a bubble bath with a glass of bubbly? Inside, it’s grand at every turn.