Last summer, engineering firm PPG won its case against the Dutch tax authority over VAT exemptions in defined benefit schemes.The successful case put forward by the firm led the European Court of Justice (ECJ) to decide that, if a sponsor is responsible for management costs, both administration and investment management, of a defined benefit scheme, it could be interpreted as a business cost directly related to economic activity, and thus VAT-exempt.However, standing alongside the Dutch tax authority is the UK revenue and customs office, which, after tasting defeat with its counterpart on mainland Europe, retreated to the UK to contemplate its interpretation of the ECJ ruling.This it did. Published last week, HMRC said in its interpretations that it would continue to refund VAT on administration costs, exclude VAT paid on investment management and only offer refunds to employers, or to pension funds in some cases. It is aninteresting and somewhat narrow interpretation of the ECJ’s ruling.The revenue office has managed not only to exclude the main sticking point of investment costs from VAT exemption but also increase the tax bill for some unfortunate schemes.Assuming it thought this would draw a line under legal VAT challenges from pension funds, HMRC might be quite surprised about what lies in wait in 2014.HMRC continued to reason its exclusion of investment management from VAT exemption on the basis that it does not have an immediate link to the taxable revenue of a business, whereas administration costs for the fund do.While only appearing to overhaul its stance on VAT in the wake of the PPG case, HMRC did remove the option of reclaiming 30% of VAT on joint invoicing.Previously, if investment management and administration costs were invoiced together, and incurred by the employer, the sponsor was eligible to reclaim 30% of VAT paid on the invoice.However, the ECJ ruling has meant this needs to be removed.While it may look reasonable under its new guidance to do so, there is a sticking point.In situations where schemes have a joint invoice for both administration and investment management, these will no longer be tax recoverable.This could result in the tax liability for sponsors increasingly, unless a contractual change with the pension fund, or its providers, is enacted.At the core of all this is HMRC trying to force the idea that a pension fund and its sponsor are separate entities, where the former does not impact on the latter’s economic activity.In reality, this is not the case.It also tries to enforce the difference between investment management costs and administration, on the basis that investment management provides for a service that is already tax exempt – i.e. the return on investments.While HMRC’s stance on the cost of investment management might be considered reasonable in a black and white world, none of it quite fits together.Most companies base their economic activity on their employees, who are remunerated through fixed pay and benefits, including pension funds, and are thus a cost to the business.So the stance of not including the costs of running a pension scheme within the bracket of a company’s economic activity is bemusing.Sponsors will feel similarly, certainly, and if HMRC thought its latest brief would draw a line under challenges over VAT, it may soon be justifying its stance, back in the courtroom.
In a separate filing from April, Merseyside Pension Fund alleges the “blame for the Deepwater Harizon disaster lies squarely with BP”, with its corporate culture “consistently” emphasising reduced running costs “above protecting lives and the environment”.It also alleges that the defendants, again including Hayward and Suttles, made “materially false and misleading statements”, both publicly and directly to Merseyside and its investment managers.The local authority fund further claims that it would not have bought shares in the company “had it known the truth about the matters […] at least not at the prices it paid”, which it said were inflated.It said it suffered losses and is now seeking to prove the amount of the losses at trial.All three of the UK funds are represented by US law firms Pomerantz and Abraham, Watkins, Nichols, Sorrels, Agosto & Friend, based in New York and Texas.The complaints echo those made in another lawsuit, filed by a number of large US public pension funds, Norges Bank and ABP, which claim they relied on BP’s “false and misleading” statements when deciding to acquire BP shares.Over the period examined by the suit – running from the end of 2007 through June 2010 – ABP said it acquired BP shares more than 125 times from the London Stock Exchange and at least a further 20 times from its New York counterpart.Similarly, Norges Bank acquired shares more than 280 times from both exchanges over the same period.Jeremy Liebermann, partner at law firm Pomerantz, told IPE a total of 137 plaintiffs had so far brought claims against BP in the current class action suit.Discussing the involvement of Merseyside and a number of other UK local authority funds, he said: “The theory is, under UK common law – and that’s quite unique to have a UK common law claim proceed against a company in the US – the court has agreed to exercise jurisdiction over the claim.”He said there were more than 20 UK funds and asset managers and a similar number of European funds involved in the class action.“There is quite a large international component in here,” he said. The Merseyside Pension Fund, the UK scheme for employees of IBM and the Merchant Navy Officers Pension Fund are among the European investors taking BP to court over the 2010 oil spill in the Gulf of Mexico.The UK schemes join plaintiffs Norges Bank – on behalf of the NOK5.1trn (€630bn) Government Pension Fund Global – €310bn Dutch civil fund scheme ABP and more than 40 European funds and asset managers in taking the company to court over its role in the accident, which saw the oil spill continue for 87 days.The joint action by the IBM UK Pensions Trust and the trustee body of the MNOPF, filed in the US District Court for the Southern District of Texas in May, directly names former BP chief executive Tony Hayward and a number of other senior executives, alleging the company misrepresented BP’s ability to respond to the Deepwater Horizon spill.The action also alleges Hayward and Douglas Suttles, BP’s former COO, who led the company’s response to the spill, misrepresented the amount of oil leaking into the ocean in the wake of the accident.
“The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively.”Altmann, appointed pensions minister after the May general election saw the Conservative party win a majority, added: “The market needs time and space to adjust to the other reforms underway, and these areas will be revisited once there has been an opportunity for that to happen.”Webb, who joined Royal London Asset Management after losing his parliamentary seat, previously argued that defined ambition was not simply an academic exercise.Asked by IPE in June if the new government would still pursue the agenda set out during his five years in office, he said: “It may not be the first priority – there are more pressing ones. But departments can do things in parallel.”Collective DC funds, made possible in the UK by the Pensions Scheme Act 2015, have not enjoyed widespread support.The cross-party work and pensions select committee argued in March that the Department for Work & Pensions should suspend any future work on defined ambition until after the rollout of auto-enrolment.Defined ambition, and the eventual introduction of collective DC, was one of Webb’s key policy goals, first articulated in 2011 when he spoke of the need to “facilitate” the re-introduction of risk-sharing in DC. The UK government has put on hold any further attempts to introduce collective defined contribution (DC), bringing to an end reforms championed by former pensions minister Steve Webb.In a written statement, Webb’s successor Ros Altmann cited the need to work through the new pensions freedoms – which allow savers to draw down their pension from age 55 – and other recent regulatory changes as the reason for moving away from defined ambition.Altmann said it was important that focus remained on the new pensions freedoms, and the bedding in of the state pension reform overseen by Webb, to ensure they were a success.“That is why we have decided the time is not right to implement defined ambition, collective benefits and automatic transfers,” she said.
The announcement of their appointments comes after Tony Guida, as previously reported, joined the manager’s alternative risk premia team in December from ERI Scientific Beta, an EDHEC-Risk Institute platform.Chattopadhyay joins from Adveq, a global alternative investment firm. Before then, she worked at the Universities Superannuation Scheme and ABN Amro.Eifert joins from Macquarie Securities, having also previously worked for Bluecrest and Mainfirst.The hires come after RPMI overhauled its investment strategy in connection with a transformation programme launched in 2013.Ciarán Barr, RPMI investment director, said: “We are intent on delivering more value to our members by selectively increasing internal resources to manage and control more of the investment portfolios internally where it is efficient to do so.” RPMI Railpen has further strengthened its internal asset management capabilities, announcing two newcomers to its in-house investment team.The hires are for newly created roles.Sweta Chattopadhyay joined the manager of the £22bn (€28bn) UK Railway Pensions Scheme’s private markets team as a senior investment manager. Matthias Eifert was appointed investment manager and will focus on fundamental equity analysis with a responsibility for managing concentrated equity portfolios.
Joey Alcock explores the future ramifications for investors’ portfolios of the UK’s decision to leave the EU Since the EU referendum held in the UK on 23 June, we have observed elevated volatility across global capital markets. The immediate reactions to the Leave vote were sharp falls in the sterling and equity markets, while bond markets rallied. A rebound in equity markets has seen most regions recover the losses from the initial sell-off. This may have delayed the crystallising of earlier assurances of policy support by the Bank of England and other central banks. Nonetheless, market uncertainty surrounding Brexit lingers, as evidenced by sterling’s trading at historical lows versus the US dollar. Contingencies in place While the referendum result was universally surprising to the managers, their portfolios were not “caught out”. Most managers saw little upside potential from a Remain vote, as this had already been priced into markets. However, they saw substantial downside potential for equities from a Leave vote. Given this asymmetric expected return profile, managers were comfortable prior to the vote to say hedge out exposure to sterling or trim allocations to European and UK financial stocks. These strategies ultimately dampened the negative impact on their portfolios relative to broader market falls. Window of opportunityGenerally, managers that approach company selection from a bottom-up, fundamental perspective viewed the post-referendum sell-off more as an opportunity to pick up bargains than the start of a sustained downturn. Certain stocks fell to target price ranges, meaning the managers could exploit this window of opportunity. Most expect to continue doing so in the coming months.There was a clear message nothing had yet led managers to conclude the result as a reason to review and/or alter their investment approaches beyond some extra caution around shorter-term volatility. Beyond the managers’ conviction in their own strategies over the cycle, this also seemed due to insufficient information being available on how a Brexit may cause any broader systematic changes.Uncertainty dominatesThere is no consensus view as to how a Brexit may impact markets longer term. Certainly, there is caution around direct and indirect exposures to the UK financials and real estate sectors, with a series of UK-based REITs managers restricting investor redemptions adding to the anxiety. One area of broad consensus is that Brexit should be another driver of lower global growth for longer. Even so, we see a number of managers highlighting that, should further central bank easing occur, this should provide some tailwind for equities. A number of managers have also pointed out that effects of the global financial crisis and drawn-out deleveraging of the world economy have thrown up a steady series of market dislocations, and that a Brexit could be just another one of these, with others still to come.All managers agreed more volatility in equity markets and the financial system was to be expected, as well as on the importance of balancing opportunities and risks arising when constructing portfolios. Active stock pickers on the whole are optimistic around their ability to identify and exploit periods of volatility to generate outperformance over the medium term. Equity strategies more reliant on momentum may find the upcoming environment especially challenging, as they do not typically cope well with repeated shocks and rapid market changes. Investors with such exposures may wish to consider the degree of exposure to such approaches in this context. For anyone struggling to determine how the EU referendum will impact their portfolio, note many other experienced investors are facing the same concerns. Despite the waves of Brexit-related media, we remain in the early days of a post-referendum, pre-Brexit world and can take comfort that fund managers are not overly worried and even see potential opportunity over the medium term. Joey Alcock is senior associate for public markets at bfinance
Chinese government bonds produced a 10.2% return last year for AP2, while property generated 14.7% and private equity returned 19.9%, according to the fund’s annual report.Eva Halvarsson, AP2’s CEO, said last year was characterised by several factors, including an underlying strong global economy coupled with market turbulence because of geopolitical events.Preparations for the new investment regulations and continued sustainability integration also played a big role in the pension fund’s work last year, she added.“One important aspect of the latter has been the implementation of our internally developed indices, which focus heavily on sustainability factors,” Halvarsson said.The revised investment mandate for the four main AP funds came into effect at the beginning of this year.“We welcome the new investment regulations and the opportunity to invest more in various types of non-listed assets, which could compensate for a lower anticipated return on some listed assets, help diversify the portfolio further and set better conditions for creating continued solid, risk-adjusted returns,” Halvarsson said.The pension fund also reported that its listed equity portfolio’s greenhouse gas emissions for 2018 amounted to the equivalent of 1.7m tonnes of carbon dioxide. This was down from 2.6m tonnes in 2017. Sweden’s AP2 made a 1.3% loss on investments last year, with a slump in listed equities counteracted by “solid” returns from private equity, real estate and Chinese bonds.The fund – one of the country’s four main buffer funds for the state pension system – said the loss amounted to a decline of SEK4.3bn (€411m) in absolute terms, contributing to a fall in assets under management to SEK334.8bn at the end of December, compared to SEK345.9bn a year earlier.However, the fall was mainly caused by a SEK6.8bn net payment into the national pension system.While the fund’s equity investments lost money – in common with almost every other pension provider to have reported 2018 results – AP2’s alternative investments portfolio posted significant gains.
A pension fund has launched a request for information on IPE Quest in relation to a potential mandate to invest €950m in sovereign local currency emerging market debt.According to search QN-2578, the investor is interested in receiving information from asset managers with experience managing such a mandate in an “enhanced manner,” aiming to replicate key criteria of the benchmark with lower turnover and lower transaction costs.It said it might change the benchmark of the mandate to include hard currency debt from emerging market sovereigns.Responses to the request for information will inform the pension fund’s longlist of managers, which it said would be cut down to two to three managers following a comprehensive analysis. It will carry out site visits to managers on the shortlist and perform reference checks on them. Managers must have a code of conduct to be able to be considered for the next round of the selection process, as well as an ISAE 3402 Type II or AAF 01/06 quality certification or equivalent.The deadline for responses to the request for information is 19 December. Applicants should state performance to 31 October 2019 gross of fees.The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected]
David Bird (left), and Stefan LundberghKerrin Rosenberg, CEO at Cardano UK, said: “David’s knowledge as a platform specialist combined with Stefan’s expertise in pension design will be extremely beneficial to our clients. Their experience will both complement and strengthen our existing teams as we continue to grow our DC business.”NOW: Pensions is the pension provider for IPE International Publishers.Looking for IPE’s latest magazine? Read the digital edition here. At Cardano Bird is to lead the continued development of its DC offering advising single employer schemes, “particularly those of a certain size of with specific requirements”, it said.Both Lundbergh and Bird will also work closely with NOW: Pensions, the master trust that Cardano acquired in 2019 from Denmark’s ATP.#*#*Show Fullscreen*#*# Stefan Lundbergh, considered a thought-leader with regard to pension design, has been appointed head of defined contribution (DC) design for Cardano, with the consultancy today also announcing that David Bird had joined from Willis Towers Watson (WTW) in a newly created senior role in its DC team.Lundbergh is already director of Cardano Insights, the firm’s research department, a position he will maintain.Until recently he was a non-executive board member of AP4, one of Sweden’s buffer funds. He has held various positions at Skandia Life in Sweden and in the summer of 2017 he led the review of the country’s premium pension system. He has also worked at APG in the Netherlands.Bird joined Cardano as head of DC platform, a new role within the company. He previously worked at WTW, where he was responsible for the LifeSight DC Master Trust, its multi-employer DC offering, and “accumulated lots of experience consulting across a wide range of clients and projects including pension change, responding to tax and other legislative change and de-risking”.
ESMA said the assessment would be conducted using its peer review methodology because the EU Transparency Directive only contained high level principles regarding financial reporting and its supervision, and the International Accounting Standards Regulation was not included in the list of acts for which ESMA could launch an investigation into a potential breach of EU law.The watchdog today made available a peer review assessment of Germany that was previously confidential, saying it was doing so “in view of the overriding public interest in this particular case and the enforcement of financial reporting in Germany”.The peer review was carried out by ESMA in 2017, with Germany one of seven EU member states covered. ESMA noted that its Germany report identified areas of improvement to the country’s enforcement model, including:1. the procedures in place in both FREP and BaFin;2. the selection and examination of issuers;3. independence and conflict of interests in FREP; and4. cooperation between the two authorities.According to ESMA, in the report it also invited BaFin and the European Commission to investigate whether the Transparency Directive was correctly transposed by Germany, “given BaFin’s self-declared inability to comply with the GLEFI due to a lack of enforcement powers”.ESMA’s announcement of the fast-track assessment comes after the Commission wrote to the watchdog in late June to invite it to conduct a fact-finding analysis of the events leading up to the collapse of Wirecard.ESMA said its assessment would be completed by 30 October.To read the digital edition of IPE’s latest magazine click here. The EU securities markets watchdog is to carry out a fast-track assessment of the German financial reporting system following the collapse of Wirecard.The assessment will focus on the supervisory response by regulator BaFin and financial reporting enforcement authority FREP to the events leading to the collapse of Wirecard AG, and specifically on their application of guidelines (GLEFI) issued by ESMA in 2014 on the enforcement of financial information.Wirecard, a member of Germany’s bluechip DAX index, filed for insolvency last month after revealing a €1.9bn hole in its accounts and reported incidences of fraud.“High quality financial reporting is core to investor trust in capital markets and Wirecard’s collapse has undermined this trust,” said ESMA in a statement today. “Therefore, it is necessary to assess these events to help in restoring investor confidence.”
Modern living.More from newsParks and wildlife the new lust-haves post coronavirus18 hours agoNoosa’s best beachfront penthouse is about to hit the market18 hours agoThe ground floor is the central living area of the home, with an open plan kitchen overlooking the family room, rumpus room and a patio.Four of the five bedrooms are up on the top floor, something Ms Fairon said was a good layout for a family. No need to go to the multiplex.She did not make many changes to the home, as she said it already had all the things she and her family wanted.With some of her kids planning to move out on their own she has decided to sell the home.It is on the market now through Place Manly. Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 7:28Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -7:28 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels576p576p480p480p256p256p228p228pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenPrestige property with Liz Tilley07:29 HOT PROPERTY: Take a look inside this idylic Bayside home.FROM the outside, this double-storey home at 42 Lexey Crescent looks like just another spacious family home, but to Kelly Fairon it was so much more.She moved in to the Wakerley property two years ago at a time when her children were growing up and wanted a bit more space.With five bedrooms and three bathrooms across its 354sq m floor space, there is more than enough room for every member of the family. Bayside breezes.But it was the additions of the extra social rooms, like the rumpus room, family room and media room that was perfect for her kids. “I wanted that media room so my kids could have somewhere they could have their mates over,” Ms Fairon said. “It is fitted out with eight cinema seats that recline,” she said. Because the seats were installed in the room they are staying with the house, along with the pool table in the games room. Floor plan.“You still have your own space but most of you are sleeping on the same level,” she said.The home is close to the shop at Gumdale and Manly West and close to Manly Rd.Upstairs on the deck there are sweeping views of the cityscape in the distance.