EUROPE - Fears that the EU might consider proposals limiting pension scheme investment in high-risk assets are unfounded, leaked documents show.
A working document for the EU pensions directive - which was proposed by Spain - reveals that most rules on pension scheme investment will be left up to each member state.
A leading investment consultant said: “Of the actuarial aspects, there’s nothing controversial in this document. It’s littered with comments such as ‘prudent man’ and ‘the home member state should be responsible.
“It has been the stance of the commission all the way through to say the basic calculations for the funding of pension schemes shall devolve to the individual member states.”
The consultant added that, in accordance with the EU proposals, if the MFR deemed it appropriate for a company to have 100% of its pension fund in equities there would be no EU legislation to prevent it.
The only cautionary note on investments in the proposals concerns hedge funds and other derivatives.
The document states: “Investment in derivative instruments shall be possible in so far as they contribute to a reduction of investment risks or facilitate efficient portfolio management.
“The institution shall also avoid excessive risk concentration concerning the counterpart of other derivative operations.”
But a high level source at a leading international law firm told IPN that this type of arrangement was nothing more than a fudged compromise where individual member states could still apply investment rules to back their own hidden agendas.
“This move could kill growth in investment,” said the source.
By Simon Meek and Madhu Kalia
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.