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Workers’ Capital News - August 22

In this issue:

  • Pensions and Investments

    Drawing on Pension Contributions to Cover Consultancy Charges/ Divestment from News Corp/ Danish Pension Schemes Merge/ CalPERS Moves Towards Risk-based Dynamic Asset Allocation Approach

Pensions and Investments

Drawing on Pension Contributions to Cover Consultancy Charges

As reported on its website, the TUC has recently brought attention to the issue of employers covering consultancy charges by drawing on staff pension contributions. Implementing new legal provisions for auto-enrollment into pensions has led many employers to seek advice from external consultants. While some employers are able to absorb the costs incurred, others are passing on consultancy fees to staff’s pension payments. The Financial Services Authority (FSA) has highlighted that applying these charges to pension contributions could result in non compliance with rules on minimum contribution rates. In response, the Department for Work and Pensions (DWP) has maintained that consultancy fees are lawful if they are paid after contributions enter the pension pot. The TUC is urging the UK government to ban employers from using staff pension payments to pay consultancy charges, citing that it is an unfair burden to place on workers.

Divestment from News Corp

Ahead of News Corp’s upcoming annual general meeting in October, shareholders have been increasingly calling for major governance reforms at the company. Last month a group of 18 institutional investors, including the Christian Brothers Investment Services and members of the UK’s Local Authority Pension Fund Forum, issued a letter to News Corp pushing for the appointment of an independent chair. Most recently, on August 7th, as reported by Responsible Investor and IPE news, the Church Commissioners and the Church of England Pensions Board released a statement announcing their divestment of the 2.4m Euros they had invested in News Corp. The media company has come under fire for corporate irresponsibility since the surfacing of phone hacking allegations last year. The Church’s Ethical Investment Advisory Group (EIAG) has been engaged in dialogue with News Corp over the last year since the phone hacking scandal first emerged, urging the company to commit to corporate governance reform. However, as outlined in a statement by the Church, the EIAG does not believe that significant progress has been made by the company towards change.

Danish Pension Schemes Merge

A new labour-market pension scheme in Denmark, called Pension for Funktionaerer (Clerical Workers’ Pension), will be created through the merger of FunktionærPension and Dansk Erhverv Pension. As reported by IPE news, the merger of the two schemes was fueled due to the increasing difficulties faced by being small in the pensions market. PFA, Denmark’s largest occupational pensions provider, currently administers both schemes separately. PFA’s director, Lars Ellehave-Andersen, has emphasized the importance of pension schemes using economies of scale to lower costs and improve returns. Similarly, Jørgen Hoppe, chairman of HK Trade, has also expressed support for the merger, stating that members’ pensions have been secured through the move and that the new scheme will result in lower prices and better returns. Due to competition and the expected impacts of the upcoming Solvency II reserve requirement rules, Danish pension schemes have recently been facing increasing pressure to merge.

CalPERS Moves Towards Risk-based Dynamic Asset Allocation Approach

Top 1000 Funds reports that CalPERS’ is undertaking major changes in its investment decision-making processes as detailed in its new business plan. The plan outlines the fund’s movement towards a risk-based dynamic asset allocation approach. It describes the implementation of a comprehensive risk management system and methods for measuring, managing and communicating investment risks. The two-year business plan is part of a larger five-year strategic plan that is focused on enhancing performance and innovation, improving the long-term sustainability of programs, and bettering long-term pension and health benefit sustainability. The 11 objectives detailed in the fund’s strategic plan, includes funding the system through an integrated view of pension assets and liabilities. A central part of the fund’s strategic plan, which was initiated in January, has also involved seeking input from stakeholders, such as CalPERS leadership, staff and employer organizations. Input received has focused on themes such as innovation to balance risk and returns, efforts to lower investment operating costs, and the value of considering ESG factors.

Disclaimer: The CWC News Digest is a compilation of news items covered in industry publications. The content does not necessarily reflect the views of the Committee on Workers Capital or its members. Comments and reflections on news items may be sent to gpatel@share.ca .

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