Letters

first_imgAlmaty needs helpSir – In your news item on Kazakstan (RG 12.96 p786) reference is made to the signature of a letter of intent for Skoda Plzen to rehabilitate the tramway networks in Almaty and Akmola. Some difficulty may be experienced in rehabilitating the Akmola network, as while Akmola has trolleybuses, it has never operated a tramway.Even to rehabilitate the Almaty tramway would involve much effort. Since the end of the Soviet era, six of the nine routes have closed, and the fleet of 202 cars has diminished to about 55, of which only 36 are capable of operation on any one day. The condition of both vehicles and track is almost beyond redemption, and the local authority sees the future in terms of franchising urban motor bus routes for private sector operation.That said, it is understood that certain issues have been discussed at central government level concerning Skoda’s capabilities in the sphere of electric transport development, especially for Almaty. However, as yet there have been neither specific feasibility studies nor any business plans, nor has there been any discussion about the scale or apportionment of investment. Thus at present electric transport rehabilitation is little more than an idea, although it may gain some tangible shape when Skoda’s delegation arrives in Almaty for negotiations.Some sort of aid package would make sense, as Almaty currently holds the dubious distinction of being the world’s only major city which is simultaneously abandoning its tramway and failing to open its metro (on which work ceased in 1993). The national and local authorities might be well advised to consider integrating the still physically intact tramway with the metro tunnels to create a San Francisco style subway-surface light rail network.T V RunnaclesNorth Point, Hong Konglast_img read more

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APF Bill suffers new setback after Dutch Senate postpones reading

first_imgThe Senate wants to wait to receive this legal advice, as well as the Cabinet’s response, before deciding on the reading of the APF Bill.Legal expert Hans van Meerten warned that the deferment – particularly if the Council of State’s advice leads to legal changes – could jeopardise the new legislation’s coming into force on 1 January 2016.The Bill’s postponement also means uncertainty over the exact rules and conditions for the APF will continue.The APF, or general pension fund, is to offer Dutch schemes the option of operating under a single, independent board, but with ring-fenced assets.It is designed to be a third type of pension fund, replacing the API – the defined benefit vehicle for cross-border schemes, which never took off.The introduction of the APF had already been postponed by six months to 1 January 2016.Last April, legal experts warned that the delay would reduce the options for a large number of schemes considering liquidation. Parliamentary approval of a Bill for the new APF pensions vehicle has suffered a fresh setback after the Dutch Senate postponed its reading. The deferment followed an amendment – tabled by MPs Helma Lodders (VVD) and Roos Vermeij (PvdA) – to allow merging industry-wide schemes to keep ring-fenced assets.However, the Cabinet advised against the amendment due to potential risks to the mandatory participation of industry-wide pension funds.The Council of State – the highest legal college in the Netherlands – is assessing the issue at the request of Jetta Klijnsma, state secretary at Social Affairs.last_img read more

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LGPS pooling to be forced, regardless of in-house management staff

first_imgThe UK government will force the nearly 90 local authority funds in England and Wales to pool their assets, and plans to finalise its proposals by March next year.The Department for Communities and Local Government (DCLG) has told the Local Government Pension Scheme (LGPS) Advisory Board that all of the £193bn (€264bn) in assets would be pooled.It insisted that none of the funds would be offered an exemption, even if it had a proven track record for in-house management.It follows an announcement in the Summer Budget that a consultation on costs would be conducted by the autumn.  In documents released by the advisory board ahead of a meeting on 21 September, it said details of how pension assets could be pooled would be released this autumn, while the government hoped firm proposals would be in place by March 2016.“A ‘clear direction of travel’ would be useful within the next six months,” an annex attached to Monday’s draft agenda of the board meeting said.“Proposals are expected to be realised within the lifetime of this Parliament. It is recognised that this is a challenge, but Secretary of State [Greg Clark] has a preference for collaboration over prescription.”The document stressed that the proposals would move away from the notion of banning active investment by the LGPS – a suggestion heavily criticised by councils, and one that triggered threats of a lawsuit.Those local authority funds with sizeable in-house managers – including the schemes for South Yorkshire and Greater Manchester – were put on notice that their in-house management teams would not enable them to sidestep any of the pooling proposals, as there would not be exemptions for any fund.“However, outperforming internal investment teams are well placed to work together to lead and influence the pooling proposals,” the annex said, summarising responses from a meeting in late August.Schemes in Scotland, including Lothian and Strathclyde, that have in-house management are to be exempt, as reform is a matter for the devolved Scottish Parliament.Pension funds were also warned that they should not expect any compensation from the central government for the costs associated with the restructuring of portfolios.But they were also assured that those funds less willing to opt for collective investment vehicles (CIVs) – the approach chosen by the London councils for pooling – would not be penalised, as long as there were “other, just as acceptable” means of pooling.A separate meeting document outlined a number of speculative approaches to pooling, including regionally based collaboration and ones based around asset classes, all with the prerequisite that they meet as yet undefined scale criteria.It said pooling could be achieved through joint tender exercises, which seven funds have recently launched for a passive equity mandate, combined vehicles such as the London CIV, or joint vehicles such as the one launched by the London Pensions Fund Authority in conjunction with the Greater Manchester Pension Fund.last_img read more

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Asset managers say capital markets must be ‘servants of society’

first_imgCapital markets must be reformed to better serve society, examining risks other than traditional financial metrics, according to a UK think tank.The report by Tomorrow’s Company argues that threats to quality of life, climate change and future nutrition need to be better addressed by capital market participants, as the market has a “vital” part to play in meeting such human needs.Mark Goyder, chief executive at Tomorrow’s Company, said it was important for markets to be “servants of society and not behave like the masters of the universe”.“We need to design the rules of markets and shape our habits as market participants so we see life this way,” he said. The report, titled ‘Tomorrow’s Capital Markets’, argues that there is a need to understand that an asset’s value is “multi-dimensional rather than simply financial” and suggests a greater focus on environmental, social and governance matters.“It is about building risk resilience now and for the future,” the report says.“It is about identifying the opportunities that come from dealing with challenges we need to urgently address.“And it is about recognising that addressing these challenges and achieving acceptable, if not superior, risk-adjusted returns are not incompatible aims.”The report adds that it is about ensuring money is not being invested “only to end up in a miserable world”.The report follows on from a number of similarly themed reports by the think tank, which argue that short-term investment is “yesterday’s game”, as well as a list of recommendations by asset owners on how to improve stewardship.The new report, supported by consultancy Towers Watson and asset managers including Aviva Investors and Hermes Investment Management, also stresses the importance of aligning incentives with the interest of investors.Damien Carnell, director at Towers Watson and a member of the report’s steering group, emphasised the need to understand how incentives could lead to “unwanted consequences”.“In future,” he said, “there needs to be a much greater awareness of the design process, the importance of governance in design and operation, and the role of good corporate culture for incentives to be improved.”last_img read more

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Ryter steps down as president of Swiss pension association

first_imgChristoph Ryter has stepped down as president of Switzerland’s pension fund association (ASIP) after nearly a decade.Ryter, chief executive of the pension fund of retailer Migros, is to be succeeded by Jean-Rémy Roulet, currently chief executive of the CHF846m (€703m) Caisse paritaire de l’industrie et de la construction (CPPIC), the pension fund for construction workers in Geneva.It brings to an end Ryter’s nine-year presidency of the association, which began when he was still chief executive of the Swiss pension fund for mining company Alcan. Roulet, who joined ASIP’s management board in 2013, was elected at the association’s annual general meeting, which also saw Markus Hübscher and Christoph Sarrasin join the association’s board. Hübscher is chief executive of Pensionskasse SBB, the fund for the Swiss federal railway, while Sarrasin is director of Nestlé Pensionskasse.In a statement, Roulet pointed to the success of the Swiss government’s reform package Altersvorsorge 2020 (AV2020) and threw his support behind its goals of ensuring financial stability of the first and second-pillar systems.“ASIP is in favour of a balanced, rather than excessive, reform, one that can be shouldered by citizens, members and employers,” he said.He added that all stakeholders needed to be ready to compromise to ensure the passage of AV2020.Its success, he said, should not be thrown into doubt by demands from those to the left or right of the political spectrum.“If the reform fails,” he added, “this will have a wide-ranging impact and lead to increased costs, which in turn would make the next reform much more difficult to implement.”last_img read more

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Joseph Mariathasan: The decline of India’s infrastructure buyers

first_imgAs anyone who has travelled around both India and China can attest, India lies a couple of decades behind China in terms of the quality of its infrastructure.This provides both frustrations and opportunities for investors. To create infrastructure that is on a par with China’s will take many years and gargantuan amounts of investment. Finance minister Arun Jaitley has estimated that India required $646bn (€590bn) over the next five years alone, 70% of which would be required in the power, roads, and urban infrastructure sectors.How well money is spent on infrastructure is as important as how much money is spent. To that end, economists and policy makers such as Ajay Shah – a professor at the National Institute for Public Finance and Policy in New Delhi – have long argued that the private sector should play a greater role in financing infrastructure in India.For investors, this sector also offers a potentially attractive and relatively low-risk strategy for taking advantage of India’s undoubtedly attractive long-term growth rates. For India itself, Shah argued that private ownership would give better hardware, as such investors care about what is being built. It would also give better safekeeping of the assets. He argued that private owners would strenuously push for adequate user charges, and act as a counterweight against the biases of the Indian political system in favour of low user charges and hence a burden upon the exchequer. The private sector is willing to walk away from unviable projects, in contrast to governments, which will build infrastructure in respond to political pressures. Shah made the case that Indian public finance would be better off with its balance sheet freed from infrastructure assets, with these instead held by listed utilities companies issuing debt and equity. By accessing global investors it is possible to deliver low-cost financing.With increasing interest in India from foreign investors, it might seem surprising that recent years have actually seen a marked drop in the share of private sector financing of infrastructure projects in India. From 2003 to 2011, there was a massive increase in private sector financing of infrastructure projects. By 2011, there was a stock of roughly $400bn of private infrastructure investment projects that were under implementation, according to Shah.But in the years following, the value of private infrastructure projects receded substantially to the tune of around $80bn in nominal terms. If inflation were taken into account, it would amount to a decline of 25%. In contrast, public sector financing of infrastructure has seen a steady growth since 2011, so the overall level of investment remained reasonably stable.It is not clear why private sector investment has declined. The original logic in favour of greater private participation in infrastructure remains unchanged. As Shah argued, the private sector would use capital more effectively, deliver a better incremental capital-output ratio, and take care of assets better. The compositional shift in favour of public infrastructure projects he saw as a weakness in India. The reason for the shift, he speculated, might be that in the first wave of private sector participation the Indian authorities did not adequately understand that it required complex institutional machinery.Instead of addressing the issues to enable private sector involvement, Shah said there had been an excessive willingness to give up on private sector participation and make do with muscular state-led investment. Such centrally planned projects have their strengths, but as the experience of China has also shown, there is a risk of large investments producing low returns in terms of incremental GDP per unit investment.For foreign investors, infrastructure investment in emerging markets could potentially offer attractive yields with relatively low risks and large capacities, albeit illiquid. India, with its political stability, should be able to provide infrastructure investments at attractive yields and risk levels for long term pension and sovereign wealth funds.It would be a shame both for India and for foreign investors if a framework could not be developed that gave them the comfort to invest in Indian infrastructure.last_img read more

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People moves: LD’s new chief; ex-MP appointed PME trustee

first_imgLD, Sampension, PME, Delta Lloyd, Lombard Odier IM, Vanguard, PwC, FCA, Robeco, WisdomTree, Mirae Asset, BlueBay, Montae, AltisLD/Sampension – Charlotte Mark has been appointed as the new finance director at Denmark’s Lønmodtagernes Dyrtidsfond (LD), and will start the job on 1 September. She is replacing Lars Wallberg who has now left the pension fund to be chief executive of Norliv, the company collectively owned by Nordea Life & Pension Denmark customers.Mark is currently head of equities and alternatives at Sampension, where she has worked for 16 years. Sampension said it had started the process of recruiting a replacement. In her new role at LD, Mark will be responsible for the investment of LD’s DKK43bn (€5.8bn) of assets and will also be head of the pension fund’s financial operations.PME – Roos Vermeij has been appointed as executive trustee at the €45bn PME, the pension fund for the metal and electro-technical engineering industry. Vermeij will be tasked with pensions and social security in the three-strong team of Eric Uijen (chairman) and Marcel Andringa (asset management). Vermeij was an MP for the Dutch Labour party (PvdA) from 2006 until March, and was the party’s spokesperson for pensions and social security. Prior to this, she was a director at TransLink Systems, the company which developed the Oyster Card travel payment system in the Netherlands. Vermeij succeeds Mariëtte Simons, who was recently appointed on the board of the €187bn healthcare pension fund PFZW. Delta Lloyd AM – Jacco Maters, chief executive and CIO at Delta Lloyd Asset Management, has left the company, which was recently taken over by NN Group. Satish Bapat, CEO of NN Investment Partners, has also become chief executive of Delta Lloyd AM, as both asset managers are to be merged.Rob van Mazijk, chief operations officer at Delta Lloyd, will stay on until year-end as a special adviser to Bob Overbeek, NN IP’s COO. During the integration process, Van Mazijk is to contribute to continuity and stability at Delta Lloyd. Anticipating the merger, several management staff have left Delta Lloyd AM. Arnold Gast, head of the investment office, departed last month. Chief risk officer Jelle Ritzerveld will leave as of 1 August.Lombard Odier Investment Managers – Lombard Odier IM has hired Ritesh Bamania as head of solutions for institutional clients. He joins from Mercer where he was a senior investment consultant. He has also worked at UBS Global Asset Management and Willis Towers Watson. Carolina Minio-Paluello, global head of sales and solutions at Lombard Odier IM, said “A solutions-based approach has never been more important to help investors meet their complex objectives.”Vanguard – Thomas Merz has been named head of European distribution ex-UK, a newly created role, at Vanguard, the giant passive fund manager. He is based in Zurich and joins from UBS Global Asset Management, where he was head of exchange-traded funds (ETFs).PwC – The accounting and consultancy giant has hired Marcus Fink to its pensions legal team. He joins from Ashurst where he led the pensions practice. In a statement, PwC said Fink had “particular experience in pensions investment matters, particularly negotiating and overseeing derivative and hedging investments, implementing asset-backed funding vehicles”.Financial Conduct Authority – Anne Richards has been appointed chair of the UK regulator’s Practitioner Panel from 1 August. She is chief executive at M&G, a position she took on a year ago. The Practitioner Panel providers feedback on policy and regulations from regulated firms to the Financial Conduct Authority. In addition, John Trundle has been named chair of the Markets Practitioner Panel. He is CEO of Euroclear UK & Ireland.Robeco – The Dutch asset manager has appointed Ralph van Daalen as a member of its institutional relations team, starting on 1 August. Van Daalen, who has more than 14 years experience in the financial sector, will focus on extending Robeco’s domestic operations, in particular pension funds and insurance companies. He will report to Hilko de Brouwer, who has recently been appointed head of institutional relations in the Netherlands and the Nordics. Van Daalen joins from BMO Global Asset Management, where he was responsible for institutional sales in the Netherlands. Prior to this, he was senior investment adviser for pension funds at Willis Towers Watson.WisdomTree – The US ETF provider has named Alexis Marinof as head of European distribution. He was formerly head of State Street Global Advisors’ SPDR ETF business for Europe, the Middle East, and Africa (EMEA), and held a number of other senior roles at the company. He replaces Morgan Lee, who has transferred to the US to lead WisdomTree’s distribution on the west coast of the country.David Abner, head of Europe at WisdomTree, said: “Alexis brings exceptional industry knowledge from his experience at State Street Global Advisors, where he managed all aspects of the EMEA ETF business across a diverse client base. I look forward to Alexis’s contributions as part of our ongoing efforts to expand and deepen the relationships we have across our diverse pan-European investors and traders.”Mirae Asset – The specialist Asian investment group has hired Christina Eriksson as its head of Nordic sales. She was previously at Investec Asset Management where she worked on sales in the Nordics and Switzerland. Mirae Asset said Eriksson would be responsible for the distribution of “investment solutions”.BlueBay Asset Management – The specialist fixed income manager has hired Zhenbo Hou to its emerging markets research team. He was previously senior officer for macroeconomic research at the Bank of China. The appointment comes as China attempts to open up its fixed income markets through the establishment of Bond Connect, a trading link between Hong Kong and mainland China.Montae – Vandena van der Meer has become a partner at Dutch consultant Montae, responsible for advice to employers and works councils. Van der Meer has been a senior adviser at Rijswijk-based Montae since 2012. Prior to this, she worked as pensions consultant at PwC.Altis Investments – NN IP’s subsidiary for manager selection and monitoring has appointed Maarten Roth, Benoit Jacquemont, and Danny Wemmenhove as new team members. As of 1 September, Roth is to start as senior portfolio manager for equities in The Hague. He joined from Blue Sky Group and also worked at ING and Rabobank. Jacquemont has already started as senior portfolio manager for fixed income in The Hague. Previously, he has been employed by Cardano, Deloitte and State Street. Wemmenhove has also started as portfolio manager for equities, based in Switzerland. He has worked at the asset managers PGGM and Actiam.last_img read more

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UK roundup: £41bn LGPS pool appoints third-party operator

first_imgA £41bn (€46.3bn) group of Local Government Pension Schemes (LGPS) has appointed Link Fund Solutions to run its pooled assets.The ACCESS pool – made up of 11 LGPS funds – announced this morning it had named Link to set up an authorised contractual scheme, to be overseen by the Financial Conduct Authority.Link will set up a series of sub-funds to pool the 11 pension funds’ assets, in accordance with the government’s policy to encourage collaboration and efficiencies across the LGPS.Councillor Andrew Reid, chairman of the ACCESS Joint Committee, said the appointment was “fundamental” to the pool’s approach. GKN last week announced an agreement with US firm Dana to spin off the GKN Driveline subsidiary into a joint venture with Dana. As part of the deal Dana would take on almost £1.4bn of global pension liabilities, including  £533m from UK schemes. Dana also agreed a cash contribution of £124m.Meanwhile, GKN said it would undertake a number of derisking measures for its remaining UK schemes, including an ‘enhanced transfer value’ exercise – which offers members an added incentive to transfer out of their defined benefit scheme – and a ‘pension increase exchange’, which grants a one-off uplift to annual payments in exchange for waiving future inflation-linked increases.In a statement, the trustee board of GKN’s pension schemes said: “The Trustees believe that their agreement with GKN, which is subject to the offer by Melrose Industries lapsing or being withdrawn, provides appropriate mitigation to the schemes in relation to the proposed transaction with Dana and the proposed business disposals.”However, in its revised offer this morning the Melrose board attacked GKN’s plans, claiming that GKN would have gross pension liabilities of more than 10 times its remaining profits after selling off parts of the company.“We have already committed to make annual payments to the GKN pension schemes at a level greater than that which GKN pays into the schemes today, over and above the substantial voluntary cash contribution of £150m that we announced previously,” Melrose added.GKN shareholders have until 29 March to decide whether to accept the offer.Northern Ireland public scheme sets out divestment policyThe £7.7bn pension fund for public sector workers in Northern Ireland has said it would not divest from oil and gas companies for ethical reasons despite pressure from local campaign groups.The Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC), which oversees the fund, said in a note to members that “wholesale disinvestment from companies extracting fossil fuels is not part of its strategy as this would mean that NILGOSC would lose its power to engage with the relevant companies”.It added that exiting such investments would have “no effect” on carbon dioxide levels.“Therefore [NILGOSC] proactively considers opportunities to invest in clean energy and is currently invested in, locally and globally, manufacturers of electric vehicles, wind power, solar power, hydropower, biomass, and energy conservation,” the note said.It pointed out that the fund had signed up to a number of international measures such as the Carbon Disclosure Project and the 2014 Global Investor Statement on Climate Change, as well as engaging actively in shareholder resolutions related to environmental and sustainability issues. Link’s contract is for five years with an option to extend for another two.ACCESS is one of eight pools to be set up and the second to appoint Link, after the Wales Pension Partnership in January. Its 11 founding schemes are Cambridgeshire, East Sussex, Essex, Hampshire, Hertfordshire, Isle of Wight, Kent, Norfolk, Northamptonshire, Suffolk, and West Sussex.The pools must be up and running by the start of April.GKN grants more pension promises as Melrose issues ultimatumUK-listed engineering company GKN has made a series of funding promises to its pension scheme trustees as part of an attempt to fend off a hostile takeover bid.Last week the company set out plans to demerge its aerospace and drivetrain subsidiaries and divert some of the proceeds towards its UK pension funds.This morning Melrose – which has been attempting to buy GKN since the start of the year – submitted a final offer of £8.1bn for the company, which the GKN board said it was “evaluating”.last_img read more

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Ireland eyes DC consolidation with master trust rule changes

first_imgIreland’s pensions regulator has launched a consultation on the future regulation of defined contribution (DC) master trusts with a view to encouraging consolidation in the sector.In a document published today, the Pensions Authority warned that there were “far too many pension schemes that are delivering poor outcomes for members”.“The Authority would like to see a smaller number of larger schemes to provide for future saving,” it added.Combined with the implementation of IORP II rules – which are due to bring in additional governance requirements for pension schemes and their trustees – the Pensions Authority said it expected an increase in the number of DC master trusts operating in Ireland. In its consultation, the regulator laid out a number of proposed requirements for master trusts, their backers and their trustees.Each new master trust must have a trustee board with a minimum of two members, the majority of whom must be independent from the scheme, its owner and any service providers.The board must put forward a “detailed and comprehensive” three-year business plan for the master trust, showing income and expenditure forecasts and demonstrating that the trust “has a reasonable prospect of being viable under all scenarios”.The trustee board – which should be set up as a “designated activity company” – must be “sufficiently capitalised”, the Pensions Authority said, with access to enough cash for two years of operations without additional injections. The regulator did not specify a figure for this, but said it planned to review each master trust’s financial position annually.“Given their potential scale and inherent complexity, the Authority will consider master trusts to be in the highest risk category for supervision and specific reporting requirements will be in place,” the regulator stated.Other proposed requirements for master trusts included written policies on engagement with members and employers, conflicts of interest, transparency of charges, and winding up the trust.The proposed reforms come as Ireland’s government is exploring a wide range of pensions and welfare reforms, including changes to the state pension, new protections for defined benefit schemes and members, and the introduction of automatic enrolment.The Pensions Authority is seeking responses by 5 October. The full paper is available on the regulator’s website.last_img read more

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UK’s share of EU pension liabilities is €9.8bn, government says

first_imgAs well as European Commission staff and MEPs, the pension liabilities also relate to current and former staff of the European Defence Agency, the European Union Institute for Security Studies, and the European Union Satellite Centre.The EU will send the UK an updated estimate every year from 2022, calculated “using actuarial valuations made in accordance with the relevant International Public Sector Accounting Standards”.Breugel studyThe expected bill is in line with an estimate made in 2017 by think tank Breugel, which put the UK’s total obligations at between €7.7bn and €10bn.Authors Zsolt Darvas, Konstantinos Efstathiou, and Inês Goncalves Raposo argued at the time that the discount rate used for calculating staff contributions was “unjustified”, as it had resulted in staff collectively contributing less towards annual pension costs than the one-third they were supposed to.In 2015, staff contributions were measured using a discount rate based an 18-year historical moving average. This was set to increase gradually to a 30-year average by 2021.“Since nominal and real interest rates have fallen in many advanced countries in the past 30 to 40 years,” the authors wrote, “there was a big decline in the balance sheet discount rate after the euro crisis abated after 2012. This decline pushed up the present value of pension/sickness insurance liabilities. In contrast, since the length of the historical moving average used for the staff contribution calculations has gradually increased in recent years, that discount rate has in fact increased, contrasting with the global decline in interest rates.”The authors said this implied that EU staff had been “underfinancing their pensions… and will continue to underfinance for more than a decade to come, compared to the theoretical requirement”. If liabilities were calculated using a risk-free rate, as is common practice in the UK, then staff contributions could increase “substantially”, they added. The UK expects to be on the hook for at least €9.75bn of EU staff pension liabilities, the government said this week.Asked for details of the pension section of UK’s withdrawal agreement, Michael Bates, minister for international development, stated that the country’s liabilities were calculated based on the ratio of the UK’s EU budget contributions between 2014 and 2020 compared to the total contributions of all member states.The withdrawal agreement, struck between the UK government and the EU in November last year, specifies that the final pension bill will be based on the EU staff pension fund’s membership as of 31 December 2020, meaning that the bill could increase from the current estimate, which was based on data from 31 October 2018.According to the agreement, the payments will be made in 10 instalments, with the first due on 31 October 2021.last_img read more

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