Belgian pension funds look for equality with insurers
Belgian pension funds are looking for a level playing field with insurers as the authorities review the relevant regulations.
Pension funds hope to expand into fixed commitment funds by running funds on the basis of a tariff and mortality tables - in addition to conventional funds, according to Hervé Noel president of the Belgian Pension Fund Association.
Noel told IPE: We strongly want pension funds to do the same as a life insurance company - to be able to guarantee a tariff."
He added that while the traditional division between life insurers and pension funds continued to exist, some life insurers were now offering non-tariff investments.
Discussing pending regulatory changes which cover both pension funds and life insurers, he added: "I think the frontier is not so much between life insurance and pension funds but between giving fixed commitments as opposed to undertaking to manage the money the best way you can." He expects the issues to be resolved relatively easily adding that Belgium already had a relatively liberal investment regime.
The proposed changes have been presented to the Belgium Economy Ministry by the industry regulator the Office de Controle des Assurances (OCA). They will then pass to Commission des Assurances, a consultative body comprising government, industry and consumer interests, which is likely to make amendments before returning to the government for enactment. Noel says that he expects the changes to become law in the new year.
Brian Hill, head of the Brussels investment practice of Watson Wyatt, assessing the proposals, said: "The key changes are custody moving from Belgium-only custodians to custodians in the EU or OECD and the removal of the 15% minimum investment in Belgium state bonds."
Only Belgium banks are currently recognised as providers of custody, although it is arguable that banks such as State Street with an office in Belgium and a "passport" regulated by the Bank of England should also have been recognisable as custodians for Belgium under European law.
The proposed changes have been welcomed by Maurice Baum, the head of global custody at State Street Bank, Belgium. He said: "At least it will bring Belgium in line with the EU directive."
He added that he believed State Street to be well placed to win new custody business having established relationships with several funds already. Although other Belgian funds had been reluctant to work with a US bank, the new regime would probably help to change attitudes and allow the bank to win new business, even with increased international competition.
Hill also highlighted another change. "The reforms effectively prevent any significant investment in the sponsoring company," he said. This will be brought about by the proposal that pension plans will be able to hold only five per cent of assets in any one issuer (excluding mutual funds) and ten per cent of any real estate complex respectively excluding significant ownership of the sponsoring company's equity or property. John Lappin"