Round-up of the monthly news and developments from the global investment market with stories regarding the Professional Pensions UK Pensions awards, LPP, the UK Government and more.
EC News Investments is accompanied by a round-up of the months people moves and mandates and buyouts, giving you indepth insight into the market.
The winners of the Professional Pensions UK Pensions awards 2017
- Greatest single contribution to occupational pensions 1998 – 2017 - Alan Pickering
- 20 Years of excellence in consultancy - LCP
- 20 Years of excellence in investment management - Legal & General Investment Management
- 20 Years of excellence in defined contribution - Standard Life PLC
- Actuarial/Pensions consultancy of the year - Barnett Waddingham
- Employee benefits consultancy of the year - Aon
- DC consultancy of the year - Mercer
- Investment consultancy of the year – LCP and Hymans Robertson
- Pension lawyers of the year - Eversheds Sutherland
- Risk reduction adviser of the year - Aon
- DC pension provider of the year - B&CE
- DC investment manager of the year - State Street Gloval Advisors
- DC multi-asset fund manager of the year - J.P. Morgan Asset Management
- DC master trust of the year - The People's Pension
- Retirement income provider of the year - LV=
- DC investment innovation of the year - Intelligent Pensions
- DC innovation of the year - Legal & General Investment Management
- Investment manager of the year - MFS International (U.K.)
- Fiduciary manager of the year - Legal & General Investment Management
- Equity manager of the year - T.Rowe Price
- DB multi-asset manager of the year - Aberdeen Asset Management
- Emerging markets manager of the year - Lazard Asset Management
- Alternative investment manager of the year - Partners Group
- Property manager of the year - Kames Capital
- Environmental, social and governance (ESG) manager of the year - Impax Asset Management
- Liability-driven investment (LDI) manager of the year - Insight Investment
- Risk reduction provider of the year - Scottish Widows
- DB investment innovation of the year - Gatemore Capital Management
- Fixed income innovation of the year - Insight Investment
- Independent trustee of the year - PAN Group - PS Independent Trustees
- Third-party administrator of the year - JLT Employee Benefits
- Communication initiative of the year - Aviva
- Technology innovation of the year - Equiniti
- Educational initiative of the year - Cardano Risk Management Limited
- Sponsor covenant provider of the year – EY and PwC
£1.8bn private equity pool launched by UK public schemes
The Local Pensions Partnership (LPP) has unveiled its second fund, combining private equity assets into a £1.8bn entity. LPP was formed by the London Pension Fund Authority (LPFA) and Lancashire County Pension Fund in 2016, launching its first pooled vehicle in November. The two pension funds posted roughly £755m in existing private equity investments at the end of March last year, before launching LLP. An LPP spokesperson said, the size of the new pooled vehicle reflected LPFA and Lancashire’s total commitments to the asset class. Susan Martin, LPP chief executive, said the partnership was developing pooled vehicles for infrastructure, total return, fixed income and credit. She said in a statement, “As a not-for-profit pension services organisation, LPP is implementing an effective investment management structure that helps to deliver cost savings and investment benefits to our clients, their employers, and scheme members.”
Voluntary code called for by UK government
A UK parliamentary committee has asked for a voluntary code for large private companies to improve the governance of unlisted firms. This includes ensuring they pay adequately towards their pension schemes. The committee proposed that the Financial Reporting Council (FRC), Institute of Directors and Institute for Family Business should create a voluntary code of conduct for the largest privately owned companies. At first they hoped it will cover companies with over 2,000 employees. The committee favoured a “light touch” approach to overseeing the code. They recommended steps for transparency about pension scheme contributions, revenues, corporate structure, remuneration, number of employees and directors’ duty to promote the success of the company.
Unaffordable costs lead Royal Mail to close its pension scheme
Royal Mail will end its final salary pension scheme in 2018 due to costs of more than £1bn a year. Royal Mail said it cannot afford to keep the pension plan open and will close it at the end of March 2018. The move will impact around 90,000 workers. The move has been condemned by the Communication Workers’ Union (CWU), which promised the "strongest possible" opposition, including a ballot for strike action. Royal Mail said, “The plan is currently in surplus but we expect the surplus will run out in 2018. The company’s annual pension contributions are currently around £400m. If no changes are made, the contributions could more than double to over £1bn in 2018. The company has said it cannot afford to keep the pension plan open We have concluded that there is no affordable solution to keep the plan open in its current form. Therefore, the company has come to the decision that the plan will close to future accrual on 31 March 2018, subject to trustee approval.” The CWU has accused Royal Mail of ignoring the views of its workforce. The union had proposed an alternative defined Wage in Retirement Scheme (WINRS), which it says would guarantee workers "a decent wage and security in retirement". Ray Ellis, CWU's acting deputy general secretary for postal workers, said, “Although Royal Mail’s own consultation exercise revealed massive opposition to its closure plan, the company has decided to ignore the views of its workforce and proceed with closure without consent.”
£520m pension scheme offered by Tata Steel
Tata Steel has offered a package of £520m to the British Steel Pension Scheme (BSPS) in a bid to end its obligations as sponsor. The company, which operates steel plants in England and Wales, wants to secure a regulated apportionment agreement (RAA) to allow BSPS to operate without a sponsor. Without this agreement, Tata say the ongoing costs of the scheme would make the UK business unviable. The trustees of BSPS have supported the idea of an RAA, arguing that a restructuring of member benefits would allow the £15bn scheme to remain sustainable without the need to enter into the Pension Protection Fund (PPF), the UK’s lifeboat fund for defined benefit pensions. The two parties need the agreement of the Pensions Regulator (TPR) before the RAA can be established.
Kempen unveils structured credit fund
Kempen Capital Management has launched a structured credit fund that allows investors to easily and cost effectively access the structured credit market. Kempen said in a statement that its Diversified Structured Credit Pool (DSCP) comprised long-only structured credit funds selected by Kempen and managed by “best-in-class specialists” Golden Tree, LibreMax and One William Street – all US-based managers. The DSCP is to target senior secured credit, student loans and residential and commercial mortgages. The emphasis would be on collateralised loan obligations (CLOs) with an investment grade rating of BBB or above, although the group said there would be a mix of investment grade and sub-investment grade bonds. According to Kempen, the DSCP has a net target return of between 4% and 6% in US dollars and unhedged. It indicated that the asset managers would receive a fixed fee of 0.6%, while Kempen would charge 0.35%. The asset manager added that the interest rate duration was expected to be two to three years and that at least 80% of the fund would be allocated to the US with the remainder targeting Europe.
UK pension funds not safeguarding rights of workers in investment policies
UK pension funds fall behind in the rest of Europe regarding responsible investment policies referencing labour rights. The study behind the findings was motivated in part by the union’s concern that although progress had been made with respect to incorporation of environmental, social and governance (ESG) factors by institutional investors, social issues are often overlooked. It assessed the responsible investment policies of the largest 100 European pension funds and providers. Nearly (63%), including funds in the Netherlands, Sweden and Denmark, referred to international standards including labour rights such as the International Labour Organisation’s core conventions and the UN Global Compact. It concluded that UK funds accounted for two-thirds of those that did not refer to international standards and 78% by assets. This is an important finding as the UK had the largest pool of retirement assets in Europe and did not provide board-level representation for workers like many other European countries.
UK pension deficits have fallen in the last 12 months
Following record deficit levels last year, pension deficits have now stabilised year-on-year and are £1bn lower than 12 months ago, according to data prepared by actuarial specialists JLT Employee Benefits. The aggregate deficit of the UK private sector pension schemes was £182bn at the end of April, compared with £183bn at the same time last year. However, the deficit contraction was not replicated among larger firms. The FTSE 350 aggregate deficit hit £71bn compared with £63bn last year and the FTSE 100 aggregate was £60bn, compared with £67bn a year ago. Charles Cowling, JLT Employee Benefits director said “Markets have been surprisingly stable at a time of political uncertainty in the UK and across Europe. As a result whilst pension deficits remain high due to quantitative easing and record low interest rates, they have remained pretty much at their current levels for some time now. This is despite the threat of inflation caused by the devaluation of sterling and rising import prices which is likely to flow through to higher pensions.”
