With increasing life expectancy in Europe, Pensions have become a key challenge in the political and economic environment. European pension schemes differ greatly by country and so far have been subject to mostly national reforms. However, the European Commission has become increasingly concerned about the availability of pensions and public financing.
Pension funds have become an alternative to pay-as-yougo pension systems and have grown strongly in recent years. They are looking for partners that can support them in a complex environment of ever-changing regulations, low interest rates and increasing client demands.
EUROPEAN PENSION FUND TRANSITION
European Commission studies show that over the next 50 years, the dependency ratio of pensioners to people of working-age will change from 1:4 to 1:2, meaning that two people of working age only will support each pensioner. Add this to a long period of low, and even negative interest rates, and everyone understands the calls for reform in national pension systems. The European Commission has therefore taken initiatives in order to harmonise occupational and personal pension schemes supplementing state pensions, which most EU Member States have already begun to implement. All existing funded pension fund schemes have to meet the challenge of maintaining investment returns in today’s low interest environment while liabilities rise. This means that the overall pension fund industry must pay greater attention to their asset liability matching, Pension Fund Management costs per participant, operating model, asset pooling, taxation, reorganisations, as well as changing European regulations.
The Dutch market is a perfect example where this development is transforming the pension fund scene. The number of pension funds under supervision by the Dutch Central Bank is rapidly decreasing (1997: 1000; 2007: 700; 2017: 260) and at the end of this year the 200 mark might be passed below.
“Pension funds have historically managed all activities in-house but today, most of the pension funds focus on the asset liability activities and seek to outsource certain tasks to asset managers, custodians, fiduciary managers, and thirdparty administrators,” explains Rob Verheul, Managing Director Sourcing at KAS BANK.
THE ACQUISITION OF KAS BANK GIVES CACEIS A PROMISING ADDITIONAL AVENUE FOR GROWTH
CACEIS has confirmed its panEuropean ambition with the proposed acquisition of KAS BANK, strengthening its position in the Netherlands which will support its clients’ international business development strategy. The financial strength of CACEIS reinforces guarantees for custody and depositary services being provided to the Pension Fund Industry.“CACEIS already supports many major French retirement and savings companies. It services a vast array of asset management companies, UCITS and AIFs which are all directly or indirectly linked to European pension funds. With the KAS BANK transaction, CACEIS Group will add the skills and resources of a well-established Dutch player,” explains Pierre Oger, Group Product Manager at CACEIS.
KAS BANK is a highly respected player with expertise in pension fund servicing in the Netherlands, the UK and Germany. Once the migration is successfully completed, the Dutch office aims to play a key role in CACEIS’ international growth strategy.
PENSIONS CENTRE OF EXCELLENCE IN EUROPE
CACEIS’ Pensions Centre of Excellence will provide a one-stop shop for the European Pension Fund Industry offering fully internally-sourced front-to-back functionality and support services.
Through this Centre of Excellence, CACEIS will offer full Front Office functionality (portfolio construction using assets and liabilities, portfolio management, order management, risk and performance analysis) as a hosted solution, seamlessly integrated with the investment administration. Addedvalue pension solutions will include risk reporting, risk advisory to the investment committee, duration and currency overlay.
“The core of the service offering is the third-party investment administration. The Pensions Centre of Excellence acts as a dedicated external administrator which manages the investment book of records of the pension clients. It enables trade day processing of transactions, valuation of the portfolios and daily reporting on asset value and exposures of the pension funds’ overall investment portfolios as well as pension liabilities. Given the all-inclusive nature of the investment administration, all pension fund / middle-office reporting services are provided, including financial accounting, annual reporting, regulatory reporting, tax and performance-, risk- and ESG reporting,” says Rob Verheul.
The Centre of Excellence encompasses reconciliation with custodians, clearing members and counterparties. Furthermore, it ensures that the pension set up is compliant with national and European legal- and regulatory reporting.
Pension fund clients will benefit from a dedicated team of professionals with asset management experience and knowledge, that will manage all relevant processes; a single point of contact for the clients’ oversight; all front- and middle-office functionalities with near real-time data on all the (risk) exposures of the investment portfolios and the liability schemes.
“CACEIS’ Pensions Centre of Excellence will improve execution, operational and financial risk, STP ratio, order- and confirmation management process, and provide a data-driven system environment including dashboards for the client’s oversight role and client data marts for analyses and reporting purposes,” adds Pierre Oger.
With CACEIS’ Pensions Centre of Excellence, the Pension fund community benefits from a fully integrated set of services offered by a specialised team with the knowledge and experience to understand the development priorities and servicing needs of each individual pensions client.
CACEIS’ global scope and in-depth understanding of the shifting pensions regulations and domestic practices across major European markets, enables pension industry players to benefit from the dedicated support of a leading European player, allowing them to focus on their core business of managing pension fund assets and liabilities.