Pension funds in Europe should appoint a Euro-coordinator, even before the timetable for EMU has been set, Jos van Niekerk, managing director of Unilever's Progress Pension fund in Rotterdam told the an-nual conference of the National Association of Pension Funds (NAPF).
This person will have to act as the point of contact within the fund, collecting the information from various sources and acting as the person with-in the fund who generates ideas about the possible approach to this change-over." he said.
It was important that the board and management studied the Euro questions as the transition "involves high financial stakes and great potential risks if it goes wrong", he added, pointing to the risk of increased market volatility in particular. On the investment side the arrival of the Euro would call for modification of funds' asset strategy. Dutch funds will have to give their aproval to investing more outside the Netherlands, which will require greater knowledge about companies in the other Euro markets.
"There might be wider opprtunities for external fund managers and brokers in those cases where they can provide this expertise."said van Niekerk. On the question of whether EMU would bring greater correlation be-tween the economies of EMU participants, he said if this were to happen: "One should consider new ways of diversifying outside EMU, for in-stance to go more to the Far East, Am-erica, Japan or emerging markets".
"Information is the keyword in this transition and it is already clear that one thing that can be done right now is to check information systems to ensure they are Euro-proof," he said.
The conference was given a warning that 'Brussels' would find ways of transferring the surplus generated in UK pension funds to meet the unfunded pe nsion liabilities of Continental Europe's state systems, by Roger Nightingale, chief strategist with BBV Latinvest in London.
The EMU would affect UK pension schemes whether Britain be-came a member or stayed out, said Peter Murray, of Railpen and now vice chairman of NAPF. "With the return of a Labour government, it is rather more likely that Britain will become a member early in the life of EMU than would have been the case under the Conservatives." He said the pensions industry must now focus on the practical implications of EMU for funds. "Almost certainly, the chosen sterling conversion rate will be the key aspect of the single currency for pension funds both in terms of investment returns and in terms of liabilities," Murray said. The association was researching the significance of this conversion rate to pension funds for members.
The former chairman of Glaxo Wellcome Sir Colin Corness said that pensions would increasingly be influenced by a range of external factors including worldwide competition for key skilled employees.
He believed that the best solution for pensions in future was a"partnership of trust" between employee and employer. "The employer's scheme should be seen as the 'preferred provider' in this consumer driven world, providing value choice and flexibility coupled with access to the best advice available."