US pension fund to sue BP; Axa retreats from UK pensions; BA strikes deal with trustees; global pension funds in JV
US pension fund to sue BP As the massive task of cleaning up the devastating oil spill in the Gulf of Mexico continues, the hit to BP's stock is the subject of a class action suit by the New York State Common Retirement Fund. The third largest public pension fund in the United States, with US$132.6 billion ($151.65 billion) under management, held 19 million shares in BP when the Deepwater Horizon oil rig exploded in May and said it would seek damages for the resulting decline in shareholder value. "BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill and we're going to hold it accountable," New York State comptroller Thomas P DiNapoli said.
Axa retreats from UK pensions French insurer Axa will sell its United Kingdom-based traditional life and pensions businesses to buyout fund Resolution for £2.75 billion ($4.73 billion). Axa said it would continue to grow its UK wealth management business as well as its specialist pensions and investment operations. The sale will give Resolution a strong presence in the UK life insurance market, having acquired Friends Provident for £1.9 billion ($3.3 billion) in 2009. Resolution was also rumoured to be a potential buyer for Aegon's UK life and pensions arm, but the UK insurer has opted to restructure the business. Aegon said it would cut costs by 25 per cent and continue to invest in the UK private pensions market but move out of the bulk annuities market.
BA strikes deal with trustees British Airways (BA) has reached an agreement with trustees on a recovery plan to keep its two pension schemes open and address pension deficits.
Annual contributions will remain at the current level of £330 million ($568.2 million) with an annual increase in line with inflation averaging 3 per cent. The agreed deficit contributions continue until 2026 for its New Airways Pension Scheme and 2023 for its Airways Pension Scheme. BA will make additional deficit contributions if the year-end cash balance exceeds £1.8 billion ($3.1 billion) and will provide £250 million ($430.4 million) of additional security over the company's assets in case of insolvency. It is a crucial step for BA's proposed merger with Spanish airline Iberia, which has three months to accept the recovery plan.
Unique joint venture for international pension funds Dutch government and education sector pension fund ABP (Stichting Pensioenfonds ABP) and Canada's OMERS (Ontario Municipal Employees Retirement System) are backing a combined venture capital initiative in both countries. Set up as a 15-year program under the name of Investing in the Knowledge Economy of the Future, INKEF Capital will invest €200 million ($282.8 million) over the first five years in start-ups with innovative ideas and technologies. The €200 billion ($282.8 billion) ABP fund and C$47 billion ($51.9 billion) OMERS fund will contribute half of the funding each. The firms said the long-term investment strategy of the program was especially suitable for pensions. "Both partners regard collaboration between pension funds in programs for direct investment as a promising new strategic option, both in this asset class as in others," they said in a joint media release.
UK pension funds still wary of equities United Kingdom equities, which account for 24 per cent of pension assets, went from being the worst-performing asset class in 2008 to the best in 2009, returning 30.1 per cent, according to UBS's 2009 Pension Fund Indicators report. But the survey, published by UBS Global Asset Management, showed a further drop in equity allocations for UK employer-backed pension funds. The average allocation to equities fell to 54 per cent, while bond investments reached 36 per cent - the highest level since the early 1960s. Despite some recovery in financial markets during 2009, funding positions had not improved as much due to changes in the value of schemes' liabilities, the report noted, while investors remained risk averse to equities.
UK retirement age could go to 70 Britain's new government has unveiled plans to bring forward the change in pension age, but for now has limited the proposed rise from 65 to 66 to men.
Works and Pensions secretary Iain Duncan Smith said the rise could come as early as 2016, 10 years earlier than envisaged by the previous government, and could go to 70 eventually. "If people are going to live longer, healthier lives, then we need to have a serious debate about both affordability and retirement income. Undoubtedly, that will mean working longer," Duncan Smith said.
