Today on 13 February 2019, PensionsEurope published a brochure on cross-border pension funds that has been prepared by PensionsEurope Standing Committee DC. It explores (i) what is a cross-border occupational pension fund, (ii) how does a cross-border occupational pension fund practically work, (iii) what are the main pros and cons of a cross-border occupational pension fund, and (iv) a case study how a company would implement a cross-border occupational pension fund for its employees.
PensionsEurope brochure concludes that a cross-border DC occupational pension fund can be an efficient and innovative solution for multinational corporations with different local pension schemes in the EU. It can be an opportunity to improve overall cost efficiency and to better monitor the different pension schemes with more centralized management and oversight. In addition, it could also help multinational corporations to allow easier mobility of their employees. However, companies putting in place cross-border schemes have to be well prepared and/or supported to handle the implementation process which can be complex and lengthy.
Today on 11 February 2019, PensionsEurope published its annual statistics and Report on Pension Funds Statistics and Trends 2018, and you can find them here.
The tightening monetary policy attracts more investments in bonds, and this applies for pension funds as well. However, many pension funds have indicated that they do not expect significant changes to their investments in sovereign bonds, and in some countries these investments are even expected to continue to decline in spite of the increasing interest rates.
Pension funds have increasingly moved their assets to equities or (from equities) to alternatives or they have invested more in both equities and alternatives. In some other countries, there has been an increasing interest in illiquid assets (such as private debt, private equity, and real estate). Pension funds do not aim to make significant changes to the share of their investments in public equities in the upcoming years.
Pension funds’ stabilizing and countercyclical investment behavior is expected to continue. The main risks to this behavior are the growing popularity of low-cost passive investments (although the rebalancing/countercyclical behaviour could very well be continued) and the gradual shift towards DC/hybrid schemes instead of DB schemes (although many DC schemes pursue a lifecycle approach implying a countercyclical rebalancing strategy). Furthermore, legislative capital requirements or accounting rules may drive pension funds away from equities (including long-term sustainable investments) in favour of other investments (including sovereign bonds).
PensionsEurope and its Romanian Member Association (APAPR) are very much concerned about the reform of the Romanian mandatory second pillar pension system introduced by the government at the end of December 2018. That pension reform e.g. envisages new disproportionate capital requirements for pension funds which PensionsEurope finds highly political.
In the press release published on 30 January 2019, PensionsEurope calls on Romania to withdraw its plan to introduce new 10% capital requirements for the Romanian DC plans, as they would devastate their current stability and good results and together with other reform proposals, destroy Romanian second pillar DC pension plans. That would be contrary to the European policy recommendations which highlight the importance of strengthening supplementary pensions in order that all Europeans would have an adequate standard of living in retirement.