EUROPE - Regulation subjecting pension funds to international accountancy and solvency rules has been attacked as 'short sighted' by the president of the Belgian Association of Pension Funds (ABIP-BVPI).
Neyt said: "Pension fund accounting is becoming more and more short term, [but] for us, the short term is not important. We have to pay pensions, not now, but in the future. The regulators treat us like banks, meaning they look to the short term.
"[Regulators] promote ALM, [but] they do everything against the ALM thinking. Banks, insurance companies and pension funds have all been put in the same box but they are totally different businesses, yet the regulator looks at them all through the same glasses."
With over a third (35-36%) of European GDP represented by the 'patient capital' of pension funds, Neyt said it was not in anyone's interest for funds to become traders rather than investors.
Neyt added: "Pension funds worldwide create a lot of stability in the markets because we don't move in times such as now. We look long term and create stability because of the amount of assets in pension funds which support the equities markets."
Nigel Peaple, director of policy at the UK National Association of Pension Funds, agreed with Neyt's concerns: "There are proposals to change IAS and FSB accounting, which the NAPF supports. There's a concern on the over-emphasis of mark-to-market accounting models, which tend to exaggerate the scale of liabilities of DB pension schemes, and trustee boards get nervous about the scale of this."
Patrick Marien, an account director with Aon Consulting Belgium, commented: "A pension fund has a long term engagement and if you look at solvency, it takes a short term view. But when you talk to financial directors, they really want to avoid volatility at the IAS level. This is one of the reasons why liability driven investment might become more popular."
A recent study by actuaries Lane Clark & Peacock (LCP) showed the aggregate funding position of FTSE 100 companies had swung from a £12bn (US$23.1bn) surplus to a deficit of £41bn within 12 months, due to the requirements of international accounting standards which employ mark-to-market models.
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