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  #711  
Old 05-25-2018, 03:28 PM
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UNITED KINGDOM

https://www.ai-cio.com/news/ftse-100...time-10-years/

Quote:
FTSE 100 Pension Plans Reach Surplus for First Time in 10 Years
Report estimates that pension plans’ funding status rose to 101% at year-end 2017.
Spoiler:
As of the end of 2017, the FTSE 100 pension plans were in surplus for the first time since 2007, according to a report from UK consulting firm Lane Clark & Peacock (LCP).

LCP estimates the overall accounting position improved to 101% in 2017 from 95%, turning a 31 billion ($41.4 billion) deficit into a 4 billion surplus by the end of the year. It also said it estimates that the surplus figure has improved even more since the end of the year to over 20 billion at the end of April.

“That’s good news, but funding deficits remain and company directors are under ever-increasing pressure to pay more contributions,” Phil Cuddeford, LCP’s head of corporate consulting, said in a release. “They need to balance this demand against the risk of adverse consequences on distributable reserves, credit ratings, or regulatory capital in light of the accounting surplus.”

The funding of the FTSE 100 pensions is ahead of the rest of the UK’s corporate pension plans, however, those have also steadily progressed toward a surplus. The funding level of the 5,588 corporate UK pensions plans in the Pension Protection Fund’s (PPF) 7800 Index rose to 95.1% at the end of April, from 93.1% at the end of March.

The LCP report attributed the funding improvement to three main reasons: increased pension contributions, strong investment growth, and updated life expectancy and inflation assumptions. It said that UK companies contributed 13 billion, which is more than twice the cost of the extra benefits members earned during the year. It also said companies adopted new methods to set discount rates to largely negate worsening financial conditions.

It also said the continuing declines in life expectancy assumptions are good news for company balance sheets, and for companies looking to secure benefits with an insurer, as insurers reflect these trends in their pricing.

“We show clear evidence that companies are increasingly using more sophisticated ways to set the most important assumption, the discount rate,” said the report. “Over the last two years, we estimate companies have used this to improve balance sheets by around 15 billion.”

LCP’s report cited the recent collapses of retailer BHS and facilities management company Carillion as having increased the focus on whether companies are skimping on their pension contributions in order to reward shareholders with dividends. It said that since the two companies failed with “significant pension black holes,” there has been a “quantum step-up” in scrutiny.

According to the report, dividends totaled more than six times the amount companies paid to pension plans in 2017, compared to four times in 2016.

“Despite The Pensions Regulator’s guidance for companies to pay contributions as quickly as is ‘reasonably affordable,’ traditional thinking has often been that strong companies can pay deficits off over longer periods—resulting in lower contributions each year,” said the report. “The fall of BHS and Carillion are all challenging this mindset.”

According to the report, companies continued to take action to manage their pension risk in 2017, with closures to future accrual, liability management exercises, insurance transactions, and investment de-risking. The proportion of assets invested in equities is now less than 25%, compared to more than 60% 15 years ago, said the report.

However, the report warned that the surplus status of the FTSE 100 pension funds could be fleeting.

“On the odd occasions there has been a combined surplus in the last 15 years, market conditions have quickly wiped it out,” said the report. “It remains to be seen if the current surplus is here to stay.”
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  #712  
Old 05-28-2018, 04:41 PM
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NETHERLANDS
DIVESTMENT

https://www.ai-cio.com/news/netherla...estments-coal/

Quote:
Netherlands Metal Workers Pension Fund Pulls Investments in Coal | Chief Investment Officer

Fund says its producers have a grim future as society abandons the fuel as an energy source.
Spoiler:


Pensioenfonds Van De Metalektro has chosen to stop investing in coal emissions companies.
The $55.4 billion Netherlands-based pension fund, which covers the retirement benefits for metal workers, said that coal-only companies no longer have “future-proof operations.” This led to the decision to exclude the stocks.
“That is why we ask companies in which we invest to actively contribute to a reduction in CO2 emissions and a cleaner energy supply,” said Eric Uijen, the chairman of the fund’s executive board, in a statement.
Basing its beliefs on the Paris Climate Agreement, the metal workers’ pension expects that coal will eventually stop being used as a means of energy. It called investments in coal producers “stranded assets” in a news release, where it added that it makes “no distinction” between metallurgical coal (which creates heat for steelmaking) and thermal coal (which generates electricity).
Metalektro plans to reduce the carbon footprint of all of its investments by 25% in 2021. It has been discussing its carbon dioxide stance with energy companies, particularly the top 10 carbon emitters, which exclude Exxon Mobil and Royal Dutch Shell. If the companies will not talk with the fund or do not meet its reduction requirements, they are placed on the fund’s exclusion list.
The fund also requires 10% of its portfolio across all asset classes to contribute to meeting the United Nations’ Sustainable Development Goals code. Pensioenfonds Van De Metalektro also does not invest in tar sand oil or tobacco.

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  #713  
Old 05-28-2018, 04:42 PM
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ALCOA

https://www.ai-cio.com/news/alcoa-co...pension-plans/

Quote:
Alcoa Contributes $500 Million to US Pension Plans | Chief Investment Officer

Spoiler:
Aluminum producer used proceeds from recent debt offering to fund contribution.
Aluminum producer Alcoa Corp. made discretionary contributions of $500 million to its US pension plans using the gross proceeds of a recently*closed debt offering.
“This discretionary funding is in complete alignment with our strategic priority to strengthen the balance sheet, as it reduces near-term pension funding risk using a fixed-rate, 10-year maturity instrument,” Alcoa Chief Financial Officer William Oplinger said in a release. “Further, because the debt increase is offset by a lower net pension liability, it is leverage-neutral and does not impact our 2018 capital allocation strategy.”
The company funded the contribution from a debt offering that closed last week that consisted of $500 million aggregate principal amount of 6.125% senior notes due in 2028. The notes were sold through wholly owned subsidiary Alcoa Nederland Holding B.V. in a private placement to qualified institutional buyers, and to certain non-US investors in offshore transactions.
During its May investor presentation, Alcoa said it would provide $300 million of additional funding into its pension plans during the year, on top of the estimated $450 million in required minimum contributions for fiscal year 2018. That would indicate that the company still plans to contribute another $250 million to its pension funds before the year is out. According to Alcoa, as of the end of 2017, its US pension plans had a funding status of approximately 83%.
Alcoa said it shed approximately one-third of its targeted $300 million in liabilities when the company purchased group annuity contracts and transferred approximately $555 million in obligations, and related assets, of defined benefit pension plans in Canada. As part of the annuity agreements, Alcoa contributed approximately $95 million to facilitate the annuity transaction and maintain the funding level of the remaining plan obligations.
For the rest of the year, Alcoa said it expects to achieve further liability optimization of approximately $200 million, either through discretionary contributions to its pension plans, reducing funded debt in Brazil, or a combination of the two.
In its investor presentation, the company said its 2018 capital allocation framework is to maintain liquidity with a cash balance greater than $1 billion; spend approximately $300 million in sustaining capital expenditures; drive value creation through approximately $150 million in return-seeking capital expenditures; and reduce debt and pension and other post-retirement employee benefits liabilities by a total of $300 million.

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  #714  
Old 05-28-2018, 04:44 PM
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HOSPITALS

https://www.truthinaccounting.org/ne...not-criticized

Quote:
Blame game: Why this accounting rule should be praised, not criticized : News : Truth in Accounting

Spoiler:
An article published in Bloomberg on May 9th highlighted the troubled financial condition of a hospital in northern Mississippi. *As the title, “Not So Great GASB: Accounting Rule Pushes Hospital Near Default,” suggests, the author puts most of the blame on an accounting rule implemented by the Governmental Accounting Standards Board (GASB) that requires public entities to disclose all of their pension liabilities on the balance sheet. The author states that the rule is “creating credit problems for hospitals even though their operations haven’t changed materially” and “they’re making required contributions to state pension plans.”
But saying this accounting standard is the reason for the hospital’s poor financial condition is like blaming your credit card company for your bad credit score while you have a huge outstanding balance on your account. You could argue that you’ve been making your minimum monthly payments, just as the hospital has been making its required annual pension contributions.
Instead of being criticized, GASB should be praised for requiring public hospitals, and state and local governments, to put their pension liabilities on the face of their balance sheets. If anything, I would criticize GASB for taking too long to make this change. The Financial Accounting Standards Board (FASB), which sets accounting standards for corporations, began requiring private hospitals and corporations to report their pension liabilities in 1980.
Four years later, GASB considered requiring the same, but didn’t want state and local governments to have a dramatic increase in their liabilities and a resulting huge decrease in their net positions. As a result, GASB decided to let governmental entities report their pension liabilities slowly over time. You could say that public hospitals have had an unfair advantage in the bond market when they didn’t have to report huge pension debt as liabilities.
In addition to letting governments amortize this balance over 30 years, governments were allowed to delay recognizing benefit enhancements and actuarial adjustments. Each year these increases in the pension liability were amortized and added to the employees’ current service costs and accumulating interest to calculate the government's’ pension expenses. If the government paid the pension expense in full, then no pension liability appeared on its books. The only time a pension liability would appear on the books is if a government didn’t pay the calculated pension expense in full; *then the cumulative deficits would appear as its “Net Pension Obligation.”
The result is most governments reported small or no pension liabilities on their balance sheets, while their actual pension liabilities were in the millions, if not tens of billions, of dollars. Truth in Accounting’s study of state governments’ 2014 balance sheets found that only $80 billion of Net Pension Obligations were reported, while in truth more than $632 billion of unfunded pension liabilities existed.
These pension accounting rules were so convoluted that when Detroit went bankrupt, its balance sheet reported a $1.3 billion “Net Pension Asset” despite the city really having $985 million pension liability.
If a governmental entity was part of a multi-employer plan, as most public hospitals are, then it was almost impossible to determine its share of the liability in its employees’ pension plans. Governmental entities and pension plans were not required to calculate, much less disclose, that information.
Every governmental entity, including each public hospital like the Mississippi hospital, knew it had some liability because its employees were participating in a pension plan and the government entities were paying an employer contribution. Employee compensation plans included accruing pension benefits. Each year employees were earning the right to receive these benefits and the hospital was incurring the related compensation costs and liability. Just because GASB didn’t require every hospital to record its share of the pension plan’s unfunded liability, that doesn’t mean the liability didn’t exist.
The various government employers involved in multi-employer plans seemed to think that they need only worry about making their contributions. Unfortunately, history has shown that even if the governments made the contributions the pension plan actuaries told them are required, the unfunded pension liability was increasing, not decreasing. This phenomenon is due to benefits enhancements, inadequate contributions and periodic adjustments to actuarial assumptions, such as the pension plan discount rates and mortality schedules. *
If unfunded pension liabilities would have been reported on public hospitals’ and government balance sheets, the elected officials and citizens would have known how much money was being charged to the pension credit card and adjustments could have been made.
Some government officials still tell me that they don’t understand why they have to put their pension liability on their balance sheet because, as the Bloomberg article points out, they have been paying their required contributions. *Again, this is like people not understanding why they should look at their credit card balance if they are paying their minimum payments. In fact, it is worse in the case of governments, because elected and employed government officials are not on the hook to pay the balance. Future taxpayers are going to pay the benefits for workers who are retired and not providing any services to those taxpayers.
Now public hospitals and other governmental entities have seen their reported debt go up significantly, which some, like the author, seem to think is unfair. *However, reporting the truth is vital to our democracy. Citizens, including taxpayers, deserve accurate information, so they can be informed participants in their governments’ financial decisions.

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  #715  
Old 05-30-2018, 08:36 AM
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UNITED KINGDOM
VALUATION

https://www.professionalpensions.com...m_term=CONNING

Quote:
Death by discount rate: The fundamental flaws of the accounting approach to pension scheme valuation

Controversy over the discount rate used to value defined benefit pension liabilities is nothing new but, as Tim Wilkinson and Frank Curtiss explain, the flaws may be more serious than many realise.

Spoiler:
The creation of an expert panel to review the valuation of the Universities Superannuation Scheme (USS) has kept the scheme open, at least for the time being. But for defined benefit (DB) provision generally, the picture is grim. No FTSE 100 company now has a DB scheme open to newcomers. BT and British Airways have recently closed large schemes citing, as did the USS before its reprieve, the impact interest rates have had on deficits.

Discount rate controversy is nothing new. One rarely, if ever, hears people in the industry say that using the yield on high quality corporate bonds (as accountants do), or a rate just above gilt yields (as most actuarial valuations do) is without problems. But the flaws are more serious than many realise. The theoretical case for these rates is acutely defective. They have wrecked company balance sheets, caused the misallocation of billions of pounds of corporate resources to plug illusory deficits, distorted scheme investment strategies, and played a major part in the collapse of private DB provision. If a disaster even a fraction of the size had befallen the state pension system, governments would have been voted out of office. It's a national scandal.

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Sometimes, good things come in small packages….
The rot set in in November 2000, with the publication of the accounting standard FRS 17, the spirit of which is still with us today in the form of IAS 19 and FRS 102. Both these standards require liabilities to be discounted by reference to ‘high quality corporate bonds'.

Plenty of people spotted there was a problem. The Confederation of British Industry (CBI) said FRS 17 would undermine final salary schemes, while Peter Thompson, who was chairman of what is now the Pensions and Lifetime Savings Association prophesied, correctly, that it would "drive many employers from providing defined benefit pensions".

Sir David Tweedie, the chairman of the Accounting Standards Board (ASB) while the standard was being developed, acknowledged the discount rate was an issue. Interviewed in 2006, he said the corporate bond rate was chosen because: "Everyone else around the world used it. We had given up by that stage; we had spent two years trying to find a discount rate."

It's not surprising that the ASB had difficulty finding a suitable rate. In reducing an entire pension scheme to two numbers, too much information has to be thrown away. The best tool for monitoring a pension scheme is a cashflow forecast. The conversion from forecast to balance sheet has to be done, but it should be done with due respect to the principle of neutrality. If a scheme has healthy cashflows in perpetuity it is simply bad accounting to do the arithmetic in such a way as to produce an illusory deficit.

With deficits being merely an artefact of measurement, rather than a reflection of underlying economic reality, the unfortunate outcome was poor decision-making. Some schemes altered their asset mix in an attempt to avoid volatility or hedge liabilities, turning away from investments that would almost certainly have given better returns in the long run. The resulting demand for a finite supply of bonds drove down yields, and hence discount rates, in a vicious circle that increased the (already overstated) liabilities. Even David Tweedie described this result as "daft".

The time value of money is an entity-specific, or even a project-specific, concept. It only makes proper sense when chosen relative to the time preferences of the entity concerned, and after due consideration of the alternative uses to which the money could reasonably be put. The most suitable choice in the case of a pension scheme is therefore the best estimate of its future investment return; and this also produces the result that corresponds most closely to a cashflow forecast. If a scheme is required to pay 100 in a year's time, and only has 91 today, it will still be able to meet its liability if it has an investment return of 10%. Divide the 100 liability by 110% and you get 91, so the scheme is fully funded.

A discount rate based on investment return was considered by the ASB, but rejected8. In fairness, there are complications. Future returns have to be estimated, and this introduces the opportunity for manipulation. Schemes may also be tempted to take on too much risk in order to suppress liabilities - the opposite error from over-investing in bonds. These are reasonable objections, but ultimately they fail. Society would have been better served by having auditors and regulators spend their time policing over-exuberant return assumptions than from having them preside over death by discount rate.

A factor commonly cited in support of IAS 19 is consistency - all companies have to use a similar rate. Because schemes do not all follow similar investment strategies, however, the additional cash they will need from their employers in the future will differ widely, even for those with the same deficit. Therefore, the IAS 19 rate is also inconsistent with the concept of a true and fair view, since IAS 19 liabilities do not legitimately represent a real future obligation to pay.

Another productive way of looking at the problem is to work backwards (as did First Actuarial's Hilary Salt and Derek Benstead in their September 2017 report for the UCU, Progressing the valuation of the USS) - asking questions such as ‘for past service, at what break-even discount rate will the liabilities have the same value as the assets?' and ‘for future service, at what discount rate will future inflows have the same present value as future service outflows?'. Though less suited to financial statements, these calculations can be an extremely useful tool for planning. If the break-even rates are less than the likely rate of future investment returns, there is no need for additional payments into the scheme.

Turning to actuarial valuations, the scheme funding regulations are superior to accounting standards, since they allow the rate to reflect the return on scheme investments. In practice however, according to data from The Pensions Regulator (TPR), the median scheme uses a rate of about 1.1 percentage points above 20-year gilts.

There are a number of reasons for this. The scheme funding regulations require assumptions to be chosen prudently. The regulator is also of the view that the rate should be lowered where the employer covenant is weak. The logic of the latter policy, however, is highly dubious. Boiling a pension scheme down to two numbers already means asking the discounting calculation to do more heavy lifting than it is really capable of. The starting point for a discussion on deficit correction should be a cashflow forecast, not a shortfall inflated by the risk of employer failure.

The result is that trustees, under pressure from TPR, have settled into overly prudent practices. A long run return one percentage point above the 20-year gilt rate, which is itself hovering just above historic lows due to quantitative easing, is completely at odds with what trustees believe when they are devising investment strategies, appointing investment managers, and setting benchmarks. For example, despite the bursting of the dotcom bubble in 2000, and the financial crisis of 2008, the total return on the FTSE All Share Index from January 2000 to April 2017 was 4.6% per annum.

Returning to the USS, according to its reports and accounts for the year ended 31 March 2017 it has achieved a return of 12% per annum over the last five years, while the total value of the fund, net of contributions and benefits, increased from 34.2bn to 60.5bn between 2012 and 2017.

Yet here - almost unbelievably - is an extract from the 2017 report and accounts: "…the deficit on the technical provisions basis … has increased from 5.3bn in 2014 to 12.6bn at 31 March 2017. The investment performance … has not outweighed the effect of the fall in discount rates which has led to the liabilities increasing at a faster rate … over the period."

There is an elephant in the room. What we are witnessing is not prudence; it is prudence gone mad.

First Actuarial, on behalf of the Universities and Colleges Union, has developed a USS cashflow forecast, and also calculated the scheme's break-even discount rates of the kind alluded to earlier. The results are striking. Despite its supposed 12.6bn deficit, at current contribution rates the scheme can pay benefits until at least 2068 with virtually zero reliance on either capital gains or investment income. Furthermore, the break-even discount rates for both past and future service are well below the expected returns on equities and property. On any reasonable calculation, the USS is in perfect health. The biggest risks it faces are bad accounting and poor regulation.

Fortunately, there are signs that the industry might be receptive to change. Michael O'Higgins, who was chairman of TPR from 2011 to 2014, is open to the idea that cashflow forecasts might be a way forward, writing in Professional Pensions that they make it "much plainer what incremental investment return would be needed to close any cash flow gaps, and trustees and employers could together consider whether any additional investment risk to achieve that increment was worth taking, or whether additional contributions would be preferable".

Perhaps the elephant is visible after all. But changes to the accounting and regulatory framework need to be made quickly, while there is still something left to save.

Frank Curtiss is the immediate past president of the ICSA and the former head of corporate governance at RPMI Railpen. Tim Wilkinson is the former chief accountant at RPMI Railpen


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  #716  
Old 06-13-2018, 07:45 AM
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UNITED KINGDOM
WORKCHAIN
FRAUD

https://www.ai-cio.com/news/recruitm...kers-pensions/

Quote:
Recruitment Firm Staff Posed as Temps to Opt Workers Out of Pensions
TPR says the company tried to deny workers’ pensions to avoid benefits payments.


Spoiler:
Senior staff at UK recruitment firm Workchain have pleaded guilty to impersonating temporary workers in order to opt them out of the company’s pension plan, according to The Pensions Regulator (TPR).

TPR said Workchain owners and directors Phil Tong and Adam Hinkley encouraged five senior employees to get the temporary workers out of the pension so the company could avoid having to make payments on their behalf. It also said financial controller Hannah Armson, human resources and compliance officer Lisa Neal, and branch managers Martin West, Robert Tomlinson, and Andrew Thorpe conspired to opt workers out of the National Employment Savings Trust (NEST) pension using its online system.

“Workchain’s directors saw denying their temporary workers pensions as a quick and easy way to save the company money,” Darren Ryder, TPR’s director of automatic enrollment, said in a release. “Both they and their senior staff thought nothing of misusing NEST’s online portal. Thanks to the vigilance of NEST, their attempt to cheat the automatic enrolment system failed.”

TPR, along with the Employment Agency Standards Inspectorate, Derbyshire Constabulary and Nottinghamshire Constabulary launched a joint investigation into Derby-based Workchain after NEST reported concerns about Workchain to TPR in May 2014. NEST is a defined contribution workplace pension that was established to facilitate automatic enrollment as part of the government’s workplace pension reforms under the Pensions Act 2008.

TPR prosecuted Workchain, the two directors, and five senior employees for unauthorized access to computer data, contrary to section 1(1) of the Computer Misuse Act 1990. TPR said it is the first time the regulator has launched prosecutions for the offense.

All of the defendants pleaded guilty to the offense when they appeared at Derby Magistrates’ Court. The judge committed the case to Derby Crown Court for a sentencing hearing on June 28.

A conviction for computer misuse carries a maximum sentence of six months’ imprisonment, and/or an unlimited fine in a magistrates’ court, and two years’ imprisonment, and/or an unlimited fine if the case is committed to the Crown Court.

“Automatic enrolment is not an option,” said Ryder. “It’s the law and the law is clear—no one can opt a worker out of a pension scheme, even if the worker agrees. Those who try to avoid their pension responsibilities in this way face prosecution.”

Tags: Adam Hinkley, pension, Phil Tong, The Pensions Regulator, UK, Workchain


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Old 06-19-2018, 11:47 AM
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UNITED KINGDOM
DIVESTMENT

https://www.theguardian.com/business...el-investments

Quote:
UK pension funds get green light to dump fossil fuel investments
Government directive means trustees will be able to push harder for green investments
Spoiler:
Managers of the 1.5tn invested in Britain’sworkplace pension schemes are to be given new powers to dump shares in oil, gas and coal companies in favour of long-term investment in green and “social impact” opportunities.

Government proposals published on Monday are designed to give pension fund trustees more confidence to divest from environmentally damaging fossil fuels and put their cash in green alternatives if it meets their members’ wishes. Until now many pension trustees have been hamstrung by fiduciary duties that they feel requires them to seek the best returns irrespective of the threat of climate change.

The new rules, though couched in opaque legalese, are a coded go-ahead for pension funds to sell shares in fossil fuel companies if they believe that they could turn into “stranded assets”. The term refers to companies’ coal, oil and gas deposits that may not ever be monetised as the world transitions to a low-carbon economy.

In the paper published on Monday, Clarifying and Strengthening Trustees’ Investment Duties, the Department for Work and Pensions (DWP) said: “Our proposed regulations are intended to reassure trustees that they can (and indeed should) take account of financially material risks, whether these stem from investee firms’ traditional financial reporting, or from broader risks covered in non-financial reporting or elsewhere.”


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Environmental campaigners reckon that investments amounting to trillions of dollars in fossil fuels – coal mines, oil wells, power stations, conventional vehicles – will lose their value when the world moves decisively to a low-carbon economy.

They believe that fossil fuel reserves and production facilities will become stranded assets, having absorbed capital but are unable to be used to make a profit. This carbon bubble has been estimated at between $1tn (753m) and $4tn, a large chunk of the global economy’s balance sheet.

But the DWP warned that the new rules do not give carte blanche for activist groups to bully pension funds into selling out of fossil fuels. “These proposals are not intended to give any support to activist groups for boycotts or divestment from certain assets,” the DWP paper said. “Trustees have primacy in investment decisions and, whilst they should not necessarily rule out the ability to take account of members’ views, they are never obliged to, and the prime focus is to deliver a return to members.”

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Unison, the public sector union, launched a campaign in January to encourage local government pension funds – which have invested 16bn in the fossil fuel industry – to divest from carbon.

The new rules, subject to a consultation period, have been brought forward by secretary of state for work and pensions, Esther McVey.

“As we see the younger generation care more about where their money is going, they are also increasingly questioning that their pensions are invested in a way that aligns with their values,” she said. “This money can now be used to build a more sustainable, fairer and equal society for future generations.”

Climate change campaigners said they were delighted at the proposals. Bethan Livesey, head of policy at ShareAction, said: “ShareAction has been pushing for changes to these regulations for years.

“For too long, many pension schemes have disclosed little more than vague, high-level statements on their approach to ESG [Environmental, Social and Governance] factors, and it is unclear what, if anything, is being done behind the scenes.

“Pension schemes seem to fall into three camps: those who understand the financial value of taking ESG factors seriously and do so, those who say they understand but do very little and those who have no clue. These changes to the regulations should at the very least enlighten the third group.”


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A growing number of UK and European insurance companies have started selling holdings in coal companies and refusing to insure their operations. More than 15bn has been divested by insurers including Allianz, Aviva, Axa, Legal & General, Swiss Re and Zurich in the past two years, according to Unfriend Coal Network, a global coalition of NGOs and campaigners including 350.org and Greenpeace.

Last week Legal & General said it would exclude China Construction Bank, Russia’s Rosneft, the Japanese carmaker Subaru and five other companies that have failed to act on climate change from its Future World Fund.

The Rockefeller Family Fund, a charitable fund of the Rockefeller family, which made its fortune from Standard Oil, has started divesting from fossil fuel holdings.

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However, Cambridge University has just ruled out divesting from oil and gas in its 6.3bn endowment fund – despite public pressure from hundreds of academics and a hunger strike by three undergraduates. Cambridge said it had no direct investment in fossil fuel companies and wanted to avoid any direct investment in coal and tar sands, while keeping indirect investment to a minimum.


https://www.reuters.com/article/brit...-idUSL8N1TK2KE
Quote:
Millennials pressure Britain into making pension billions do more good
Spoiler:
LONDON, June 18 (Thomson Reuters Foundation) - Pension companies will have to reveal the social and environmental impact of the billions they invest on behalf of those saving for their retirement under new rules prompted by demand from millennials, Britain announced on Monday.

The regulations will allow savers to monitor how their money is being invested by the companies running pension schemes, which have a collective value of more than 1.5 trillion pounds ($1.99 trillion), the government said.

Pensions Secretary Esther McVey said young workers were “increasingly questioning that their pensions are invested in a way that aligns with their values.”

“This money can now be used to build a more sustainable, fairer and equal society for future generations,” she said in a statement.

Millions more British workers are putting aside money for their retirement following the introduction of auto-enrolment, where companies automatically sign staff up to pension schemes.

Three-quarters of 22- to 29-year-olds working in the private sector now have a workplace pension, the government said.

Civil society minister Tracey Crouch said the announcement was an exciting opportunity for impact investment - capital placed with companies and organisations that can demonstrate they benefit society or the environment.

Michele Giddens, chair of the UK National Advisory Board on Impact Investing, said the move would also help motivate young people to save for their future at an age when retirement seems distant.

“If they can feel something about the impact of that investment, that gives them a greater connection, which is beneficial in that it motivates them more to put more into their pension plans,” she told the Thomson Reuters Foundation.

A recent survey of more than 200 investors that included pension funds, by the Global Impact Investing Network (GIIN) found money invested in projects with a social or environmental benefit has doubled in the last year to $228 billion .

Graham Precey, chairman of the group corporate responsibility and ethics committee at pension company Legal & General, said the announcement represented a marketing opportunity for the pensions industry.

"If you're a pension company that can prove how it's used money to have a positive impact on society, you're going to get more business because there are more people looking to invest in a fund with conscience," Precey said. ($1 = 0.7554 pounds) (Reporting by Lee Mannion @leemannion, Editing by Claire Cozens. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights, climate change and resilience. Visit news.trust.org)
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Old 06-20-2018, 06:03 AM
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ST. JOSEPH HEALTH SERVICES
RHODE ISLAND

http://ripr.org/post/roman-catholic-...wsuit#stream/0

Quote:
Roman Catholic Bishop Of Providence, Hospital Operators Accused in Pension Lawsuit

Spoiler:
The Roman Catholic Bishop of Providence and hospital operator Prospect Chartercare, LLC are among the defendants accused of conspiracy and fraud in two class-action lawsuits filed late Monday.



The suits filed in state and federal courts accuse Bishop Thomas Tobin and hospital operators of deliberately underfunding St. Joseph Health Services’s pension plan and then lying about the plan’s financial condition to beneficiaries and state regulators.

The plan -- which covers at least 2,700 current and former employees of Our Lady of Fatima Hospital and St. Joseph Health Services -- was left with no source of revenue when the Fatima hospital was sold in 2014 to Prospect Charter, the local arm of the California-based for profit Prospect Medical Holdings. The pension plan is currently in receivership, a form of bankrupty.

The Diocese, which founded the pension plan, denied any wrongdoing.

“The Diocese of Providence strongly disagrees with the allegations asserted against it in this very long and complex lawsuit,’’ the Diocese said in an email Tuesday. “As we have stated from the very beginning, we continue to be concerned about the well-being of all those affected by the pension situation, and we hope that this matter can be resolved quickly and justly. Nonetheless, the Diocese will respond appropriately to these claims and we are confident that our position will prevail.”

The pension was set up as a "church plan,'' which meant it was not federally insured and did not have the same funding requirements as plans covered under the federal Employee Retirement Security Act, or ERISA. The federal lawsuit, however, says the plan did not qualify as a church plan at least since 2009, meaning the plan's operators would have been required to meet specific funding thresholds.

The suit, which asks for unspecified damages, names more than a dozen defendants, including the for-profit Californian-based parent of CharterCare, prospect Medical Holdings, Inc; Roger Williams Medical Center, LLC, The Rhode Island Community Foundation and the Angell Pension Group, Inc.

AMONG THE ACCUSATIONS:

For at least a decade, St. Joseph’s Health System of Rhode Island (SJHSRI) stopped making the necessary contribution to the pension plan, leaving it “grossly underfunded.
The defendants new the pension plan was “grossly underfunded” for at least a decade and conspired to hide it from the plan participants by repeatedly lying or misrepresenting the plan’s financial condition in presentations and handouts.
The defendants conspired with officials in the Diocese to falsely claim the pension plan was a “church plan,” which would have exempted it from federal ERISA rules and tax laws.

St. Joseph Health Service’s parent company, Prospect CharterCare, an arm of the California hospital chain, Prospect Medical Holdings, stripped $8.2 million in charitable assets from SJHSRI and its other subsidiary over the last four years. The money was either spent or put in a foundation the parent company controlled.
Handouts to hospital employees contained “grossing misleading” and “false” statements assuring them they would receive monthly pension payments “for as long as you live,” and that the pension plans “is fully paid by the hospital.”
Hospital representatives lied to state regulators about the funding levels needed to sustain the plan after the hospital’s sale;
The Diocese assisted or advised in preparing false tax returns for St. Joseph’s Hospital falsely claiming the company’s nonprofit status
Read the state Superior Court lawsuit here.

Read the federal court lawsuit here:

updated 3:35 p.m.


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UNITED KINGDOM
DIVESTMENT

https://www.businessgreen.com/bg/new...te-risk-duties

Quote:
'Lightbulb moment': Proposed pension reforms place heavy impetus on climate risk duties

Spoiler:
Green groups and pension industry welcome proposed reforms which could help shift investment away from fossil fuels towards low carbon economy

UK pension schemes could be given far stronger incentives to move their money away fossil fuel industries and better account for climate risks under proposed government reforms that are being hailed as a "lightbulb moment" for the sector.

The Department for Work and Pensions (DWP) is seeking views on reforming workplace pension scheme trustees' duties to make sure they consider environmental, social and governance (ESG) risks - including climate change - in their investment decisions.

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The proposed changes to pensions law were published yesterday, with the Financial Conduct Authority (FCA) - the UK's top financial regulator - stating that climate risk should be considered as "equally important" as other financial risks such as liquidity and inflation in pension scheme strategies.

Trustees already have an obligation to consider material risks, which should clearly incorporate climate and environmental risks. However, the government has previously admitted there is a "lack of attention and outright misunderstanding" among pension trustees of their fiduciary duty with regards to environmental and climate risk disclosure.

Consequently, green groups yesterday hailed the new proposals as a breakthrough moment for the UK pensions industry, while pensions groups also widely welcomed the proposed reforms.

ClientEarth pensions lawyer Danielle Lawson said the DWP and FCA's announcements showed "climate risk has hit the mainstream" and that the proposals helped bust "a persistent myth in the industry" that environmental risks were not as important as other financial considerations.

"This is a lightbulb moment for UK pensions - the FCA's acknowledgment that financially material climate risks should be incorporated into investment decision-making, as part of pension providers' legal duties, opens the door to a much more in-depth consideration of exposure to climate risk for UK markets and financial institutions generally," she said.

The consultation - entitled Clarifying and Strengthening Trustees' Investment Duties - seeks legislative reforms to encourage greater consideration of long-term financial risks such as climate change and to give more weight to pension scheme members' ethical and environmental concerns.

The draft legislative reforms were first announced in December last year and came in response to the concerns from the Law Commission that there are currently too many barriers to considering ESG and climate issues in pension scheme governance.

Under the new proposals changes to the Occupational Pension Schemes (Investment) Regulations 2005 would require trustees to clearly set out their policies on evaluating long-term investment risks, while making it easier for them to invest members' funds in assets that deliver sustainable market returns.

Trust-based schemes would also have to draft new statements of investment principles (SIPs) before October 2019 outlining how they will evaluate such risks, and would thereafter have to report annually on how they have complied with their SIP and engaged with companies they have invested in.

Head of policy at campaign group ShareAction, Bethan Livesey, said pension funds have for too long disclosed "vague, high-level statements on their approach to ESG factors" while also failing to report on what they were doing to protect members from rising investment risks posed by climate change.

"These regulatory changes will help expose negligence and neglect, and help protect savers from poorly managed risks," she said.

According to the DWP, the timetable for passing the reforms into law is "subject to demands on Parliament's time", but if the draft regulations were to be laid in autumn of this year, DWP "would propose a coming into force date for the first measures of 1 October 2019".

However, the consultation document also states that if the regulations are not laid until early 2019, "most provisions would have a 'coming into force date' of 6 April 2020". The consultation closes on 16 July.

For contract-based schemes meanwhile - which also includes the rapidly growing market for auto-enrolment - the FCA is planning a separate consultation next year with the intention of implementing similar policies.

The UK Sustainable Investment and Finance Association (UKSIF) said the DWP consultation made clear the government expects all trust-based schemes to address ESG risks and to have policies on stewardship, while the FCA language makes also clear this will be expected in contract-based schemes.

Simon Howard, CEO of UKSIF, welcomed the steps outlined by the government and FCA, which he said would help clarify widely recognised confusion among pension schemes over addressing climate change risks.

"By taking these steps the government and FCA are protecting pension savers from serious financial risks, and they are nudging pension schemes towards the opportunities which will arise as the economy takes the necessary steps to adapt to today's environmental, social and governance imperatives," he said. "All schemes, and not just the leaders, will have to recognise the world is changing."

Pensions bodies also welcomed the moves to better address climate risk. Institute and Faculty of Actuaries president, Marjorie Ngwenya, said: "Those individuals who are being automatically enrolled into a pension as they enter the workforce will be saving for decades to come and it is important that their investment managers not only think about financial returns, but also the impact those investments are having on the kind of world we will be living in by the time they come to retire."

The new package of proposals are part of a wider trend that has seen climate risks pushed up the agenda for growing numbers of investors, most notably through last year's publication of climate disclosure guidelines from the Taskforce on Climate-related Financial Disclosures (TCFD).

A host of high profile investors and businesses have pledged to report in line with the TCFD's recommendations on a voluntary basis. However, the latest government proposals provide further evidence that investors can also expect to face growing regulatory pressure as they seek to better respond to climate-related risks.

The pension reforms set out by the government yesterday have certainly been long awaited, and reaction suggests they are that rare thing - a policy welcomed across the board by industry, businesses, and campaign groups alike. If they are enacted quickly, they will no doubt give yet further impetus for pension funds and asset managers to tackle climate risks, ditch high carbon industries, and move more of their money into the low carbon transition.


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Old 06-25-2018, 12:47 PM
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DIOCESE OF PROVIDENCE, RHODE ISLAND

http://www.golocalprov.com/news/excl...-faces-failure

Quote:
EXCLUSIVE: Diocese of Providence’s Teachers & Staff Pension Fund Faces Failure, May Impact Thousands

Spoiler:
According to Diocesan documents secured by GoLocalProv, the pension fund for a large number of teachers and staff at Catholic schools in Rhode Island is economically unstable.
“The unfunded liability of the Lay Employees’ Retirement Plan will continue to grow and will become untenable in the near future,” states a recent Diocesan document.

The document, entitled, “Recommendation of Finance Council Subcommittee Regarding the Law Employees’ Retirement Plan," dated October 2017, paints a bleak future for the fund, outlines the causes of the fund’s tenuous structure, and calls for immediate action to stabilize the fund.

The Diocese refused to respond to questions.

Latest Revelation of Diocesan Pension Problems

A second document also secured by GoLocal, which was prepared by the Diocese top financial officers -- Monsignor Raymond Bastia and Chief Financial Officer Michael Sabatino -- is to be considered by top Diocesan officials at a meeting scheduled for this week with Bishop Thomas Tobin.

The document is dated June 19, 2018, and marked “immediate action” and it calls for drastic cuts to beneficiaries of the fund. Also, to be considered at the meeting is the October 2017 recommendation document and the plan outlined is to be considered for action this week.

Another dire statement in the report says, "Even with the revised more realistic assumptions, if we make these changes, it will still take 30-35 years to fully fund the Plan."

The impact for those presently in the plan is sweeping. One of the hardest hit are those now working but who have not vested in the fund. To be eligible, an employee must have worked for ten years.

The impact on those non-vested staffers is that they will lose all of the pension contributions made into their accounts if the plan is approved. Other big impacts are the fund will be frozen and fund members wanting to exit the fund, who may be concerned that the fund will collapse, could be allowed to exit -- but will take a 40 percent cut to their lump sum payment.

For a nine-year teacher who has taught for nine years and had an annual average salary of $50,000 over those years, they would have accrued an estimated $54,000, but under the plan to be adopted by the Diocese -- that teacher will receive zero.

The October recommendation document which is up for consideration this week cites four primary reasons why the plan is unstable:

Although the Plan has had performance in line with the market, the 2015 and 2016 performance (0.43% and -3.11%, respectively) fell short of the long-term return of 7.5% per year.
A new understanding that, based on current economic environment, 7.5% is an unrealistic annual rate of return expectation going forward
An actuarial consensus (reflected in mortality tables) that life expectancies have increased significantly
Currently and anticipated decreases in overall contribution, based on the declining payroll base due to closing of schools and parishes.




Does the Diocese Analysis of the Weakness of the Fund Understate the Flaws in the Fundamentals?
The four primary reasons for the plan's lack of stability have been conditions for years. Catholic schools in Rhode Island have been closing for the last three decades, the 7.5 percent annual rate of return has not been considered achievable for the better part of a decade, and the major changes in mortality rates was achieved decades ago.

The critical need to immediately act on to change the fund raises questions about the “Church Plan’s” actual viability.

The August 2017, the St. Joseph Pension Fund collapsed leaving more than 2,700 plan members of the fund facing a shortfall of $118 million to fully pay their benefits. That pension fund failure is now being litigated in both federal and state courts. The receiver for the pension fund is alleging in the suit that the Diocese and fifteen other defendants are guilty of financial fraud.

So-called “Church Plans” are unregulated by the state and federal agencies and do not require the managing religious organizations to provide reporting of the fund’s performance to the members.

The June 19 document outlines a plan that has significant impact on hundreds of teachers and staff now working for the Diocese and the related schools who participate in the fund, as well as, as many as thousands of plan retirees.

According to the documents, “It is strongly recommended for the reasons outlined in the Subcommittee document of October 2017 that the present Lay Employee Defined Benefit Plan be frozen on or before 12/31/18.”

“Simultaneous to the freeze of the DB [Defined Benefit] Plan a new Defined Contribution Plan should be created by using the existing 403(b) plan as the platform, with modifications. New DC Plan to use 2% of the payroll contributions towards an employer contribution to the DC plan.”

Presently, each of the member schools makes a 12 percent contribution to the fund on behalf of their respective employees, but under the new plan, which is expected to be implemented, the schools (which include Bishop Hendricken, St. Raphael, and Prout School, as well as many of the Catholic middle and elementary schools) will continue to be required to make the contribution of 12 percent, but 10 percent will go to stabilizing the fledgling fund and 2 percent will go into a, de facto, new fund.

Has the Church Been Misleading Employees and Member Schools?

Behind the scenes, the Diocese’s financial staff has been scrambling for the past year to stave off a near-term collapse of the fund, and the public relations of the church has been communicating stable performance of the Diocese’s finances.

“The annual audit of its finances shows the Diocese of Providence closed out fiscal year 2016/2017 in a stable position thanks to a growing economy that has produced strong returns on its investments coupled with a successful Catholic Charity Appeal last spring," wrote Rick Snizek, Executive Editor of the Rhode Island Catholic.

“All of these factors were helpful to our diocese as we remain faithful to the mission of evangelization and to our joy-filled commitment to the many corporal and spiritual works of mercy that we provide to the people of our state and beyond,” said Bishop Thomas J. Tobin in a statement announcing the report, which was examined by the independent auditing firm Mayer, Hoffman and McCann, P.C., and reviewed and accepted by the Diocesan Finance Council.

Trouble for Diocesan Lay Employees’ Retirement Plan Cropped Up in 2009

There have been early signs of trouble dating back to 2010. GoLocal reported in September of 2017:

According to a 2009 article in the Diocese of Providence’s newspaper, Rhode Island Catholic, the Lay Employees’ Retirement Plan was in distress and the benefits payouts were being cut back.

The then-administrative secretary to the Lay Employees’ fund, J. Timothy Kocab, administrative secretary of the Lay Employees’ Retirement Board said, “The plan’s assets…have declined significantly in value during the past several months.”

In addition, Kocab is quoted as saying, "These are necessary steps in order for us to refocus our resources on strengthening the funding position of the Lay Employees’ Retirement Plan.”

Kocab told Diocesan employees in a letter, "Your employer remains committed to helping you build financial security for your retirement years.”

In September, the Diocese fiscal office refused to answer questions about the St. Joseph pension fund bankruptcy, the Lay Employees’ Retirement Fund, or any other church funds associated with the Diocese of Providence.

According to the Diocese’s website, the fiscal office was “established in 1973 to assist the Roman Catholic Bishop of Providence and related Diocesan Corporations in their administration of the temporal resources of the Church, the Fiscal Office operates in a multi-corporate environment and is responsible for the day to day activity of some 30 separate internal corporations.”



Teachers who have not participated in the fund for at least ten years will lose all contributions

The Changes to The Plan Now Being Recommended
The details of the 2017 draft plan, which was the result of the Bishop convening the 2017 subcommittee of the Finance Council to review the unfunded liability issue and propose solutions, contain the initial work of the 2017 subcommittee whose task was to get its arms around the problem's nature and scope using updated assumptions based on the current economic environment.

As stated in the documents:

In conjunction with the Plan actuaries, the revised assumptions are as follows:

* 6.75% long-term investment return expectations

* Most recently published mortality tables by Society of Actuaries

* 2% annual decline in participant population for 10 years followed by 1% declines

* 2% annual pay increases

Under these revised assumptions, it is understood, that unless we increase contributions by nearly 15% - and there is no appetite for that - the Plan is likely to become insolvent before 2047. Therefore, the 2017 Subcommittee also is recommending:

* A full freeze of the Plan (no new participants are accruals)

* No change to benefits of folks that have retired

* No change to accrued benefits through the date of the freeze

* No change to payroll contributions (remains at 12% of the full-time payroll)

* Amed the withdrawal liability provisions of the Plan to require approval for any employer to withdraw after the freeze

* Offer a voluntary discounted lump-sum buyout to certain participants

* Fund a partial replacement defined contribution benefit

Even with the revised more realistic assumptions, if we make these changes, it will still take 30-35 years to fully fund the Plan.
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