Rachel Oliver reports from the EURACS 'Pensions in Europe: Progress through Security conference in Kraków

The first licences for money managers to form Polish pension fund societies (open invested pension funds) were awarded this month to six firms, it was announced at the EURACS 'Pensions in Europe: Progress through Security' conference held in Kraków recently.

The successful applicants given licences by UNFE, the Polish Office of Supervision of Pension Funds, have been named as: Pioneer, PZU (Pows-zechny Zaklad Ubezpieczen) , Bank Handlowy w Warszawie, Commercial Union, Bank Gdanski and Nationale Nederlanden. Around 16 service pro-viders have applied for licences to date, one of the most recent applicants being UK firm Norwich Union.

The start up dates on mandatory second pillar pensions in Poland was recently delayed until April 1 1999.

Ian Batty, partner at Cameron Mac-kenna in Warsaw expressed his relief at the delay: "I think it would have been the most appalling fiasco if it had started on 1 January 1999," he said, adding, "I think a lot of the private sector is grateful for these delays."

Further applications for pension fund licences are expected up until the end of the year, despite the lack of time left to those providers to set up by next spring. "It is quite a tight time scale in order to market in time, but there are still people interested," he said.

Perek Bialas of the Polish Office of the Government Plenipotentiary for Social Security reform, acknowledged the delays on Poland's pension reform which have been attributed to the expense and logistics problems linked with the new administration systems, but referred to it as more of a political issue. "There is a lot of different acts, rules, how to technically operate within this reform, so politicians want to be sure it will work before they give it the all clear," she said pointing out that: "Each company which has em-ployees will have to have this programme. It is almost won and reform is looking to the door."

However, Batty aired his own concerns over whether the "monstrously complicated computer system" would be up and running with pension schemes even in time for the new start up date. "There are some in the industry who think there could be further delays in getting contributions to the funds."

Also at the conference, delegates threw down the gauntlet for EC commissioner Mario Monti to clarify his position on the prudent man principle. Christine Barman of Pragma Consulting questioned how pension funds can actually be prudent while stuck under a cloud of investment restrictions. "There is a difference between prudent man, freedom of investment and demolishing quantitative limits and the way the DGXV commissioner views this is different."

Barman then criticised the commission for prolonging the process of defining what prudent investing actually meant in a European context: "It is really a nuance and between the EC and the Cabinets, they play on the fine tuning of the words."

She suggested a possible route forward was to lessen investment restrictions while tightening supervisory controls, though added that she be-lieved the EU states were "heading in a good direction" and expressed hope for Monti's communication expected in March next year.

Manuel Peraita of Peraita Partners in Madrid relayed many of the delegates concerns, however, that discussions are still only in the very early stages. "I think it's a discussion which will not finish with this communication," he said.

Ann Maher of the Irish Pensions Board expressed doubts that any progress will be made following the communication and reiterated the fact that at the EC hearing, all member states simply restated their own positions as they stood today and five years ago. "I found it a very depressing event," she said.

Colin Steward, secretary general of EURACS went as far as to question the commission's intentions on passing a directive at all, in light of Monti's forseeable departure from his post next year. "I am cynical about the continued commitment to this directive,"he said.

On the pan-European pension fund issue, he urged more support from the pension funds themselves, in light of what he viewed as a lack of clarification made on the issue following the Safir case.

There were also calls to redefine how a 'level playing field' can be adapted amongst asset managers and insurance companies, which the latter group came out in full force to support at the hearing. Pragma's Barman suggested that if it was to materialise it must apply to the pension products as opposed to the institutions. "The way to go is a level playing field, but taking as a product, unit linked life insurance, defined benefit, defined contribution and all the products around it. If a directive is going to come, something will be done on this and it will be done on the products, not the institutions."

She also called for a clearer, unified set of regulations to cover all pension providers. "You have mutual funds from the US barging in, you have insurance companies, bancassurances and so on."

Daniel Broby of Unibank suggested there should also be a unified actuarial approach to calculating the rate of return across Europe in the same risk environments. But Peraita suggested that the interest rate factor still stands in the way of this becoming a reality. "Even if we were in a market with the same interest rates, two different plans might require two different rates."