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EU Pensions Directive - implications

EU Pensions Directive - implications. Overview of new environment. No change to principles underlying scheme investment Explicit rather than implicit rules Communication with members Some specific changes. Current position. 2005 Act passed but not commenced

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EU Pensions Directive - implications

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  1. EU Pensions Directive- implications Annual Investment Conference 12th April 2005

  2. Overview of new environment • No change to principles underlying scheme investment • Explicit rather than implicit rules • Communication with members • Some specific changes Annual Investment Conference 12th April 2005

  3. Current position • 2005 Act passed but not commenced • Regulations not yet published by DSFA • Principles rather than detailed prescription • 23 September, 2005 Annual Investment Conference 12th April 2005

  4. The Directive and investment • Article 18 – investment rules • Article 12 – statement of investment policy • Article 11.3 – SIPP communication • Article 9.1(c) – trustee training • Article 9.1(f) – risks • Article 11.4(c) – member information • Article 13(c) – information to regulator Annual Investment Conference 12th April 2005

  5. Article 18 • Assets invested in best interests of members and beneficiaries…ensure security, quality, liquidity and profitability…invested in a manner appropriate to the nature and duration of the expected future retirement benefits • Look-through to underlying assets • Predominantly regulated markets Annual Investment Conference 12th April 2005

  6. Article 18, continued • Derivatives – only for reduction in investment risk or to facilitate efficient portfolio management • Properly diversified • Self-investment • No borrowing Annual Investment Conference 12th April 2005

  7. Statement of Investment Policy Principles • Prepare and maintain • Review every 3 years • Revise without delay • At least describe • Investment risk measurements • Risk management processes • Strategic asset allocation • Make available to members Annual Investment Conference 12th April 2005

  8. Trustee training • Regulations to come • Appropriate to level of delegation • Investment management oversight Annual Investment Conference 12th April 2005

  9. Other member communication • 9.1 (f) – Members must be sufficiently informed of… ‘financial, technical and other risks’… and ‘the nature and distribution of those risks’. • 11.4(c) – Where the member bears the investment risk • Range of investment options • Actual investment portfolio • Information on risk exposure • Costs Annual Investment Conference 12th April 2005

  10. Information to regulator Regulator may see • Asset liability studies • Evidence of consistency with investment policy principles Annual Investment Conference 12th April 2005

  11. Summary • Few new principles • More awareness • Better documentation Annual Investment Conference 12th April 2005

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