Based on the current asset allocation of the surveyed institutions, Towers Watson calculated an average expected return of 3.9% per annum over the next decade.In a statement on the study ‘Pension Risk Management and Allocation of Pension Assets 2014’, Nigel Cresswell, head of investment consulting at Towers Watson Germany, said: “German companies should consider whether a rather conservative approach is in line with their individual return expectations.”He said German investors were already accepting the low-interest-rate environment as the new normal rather than an exceptional situation.But he warned that a low discount rate and a change in the interest rate curve “still contain a high risk potential for the liabilities side of investors”.Cresswell said he was convinced “the unused possibilities for diversification have a huge potential for improving returns”.His suggestions include direct investments in alternative asset classes, as well as a broader use of smart beta strategies in that space.Further, he criticised the disuse of governance structures to make return drivers more efficient and adjust them to the long-term return/risk targets of investors.“Up until now, governance was seen as a stand-alone concept determined at the beginning of the investment process and is static in nature,” Cresswell said.But he predicted that increased complexity of investments would lead to an expansion of the governance concept by an “organisational design” approach.He added that, in portfolio construction, qualitative models for risk/return assessments were already replacing quantitative models, whose weaknesses were revealed in the wake of the financial crisis. Ongoing diversification within the portfolios of German institutional investors has not shifted overall bond and equity exposure, according to Towers Watson, which surveyed pension providers with nearly €130bn in combined assets.The consultancy found that pension institutions were looking for returns in government bonds from peripheral Europe and the emerging markets, as well as high-yield bonds and loans.It said equity investors were seeking “strong regional diversification”, with an increased home bias reflected in a euro-zone equity overweight. However, bonds still account for the lion’s share of the average German portfolio (59%), followed by equities (27%) and alternatives (10%).
The NPRF, which will soon become the Ireland Strategic Investment Fund (ISIF), also provided €10m in equity capital to fund the organisation’s start-up costs.The SBCI’s official launch, attended by German finance minister Wolfgang Schäuble and the heads of the EIB and KfW, comes days after the NPRF announced a 1.9% return for the third quarter of the year.It said its €7.1bn discretionary portfolio, which is still controlled by the NPRF Commission rather than the Irish government, returned 1.5% over the three months to the end of September and 4.3% over 2014.The discretionary portfolio’s asset allocation remained largely unchanged over the quarter, with the majority of assets invested in euro-zone bonds or held in cash.Nearly €1.7bn was invested in equities, and the remaining €1.5bn in alternative assets including commodities and infrastructure.Detailing its exposure to the Irish economy, made in preparation for the launch of the ISIF, the third-quarter report also noted a €44m investment to a Dublin waste-incinerator project.The plant, being built by CDM Smith on behalf of Covanta Energy, offers the highest multiple of any commitment so far due to the project’s total €500m cost.The NPRF has aimed to act as cornerstone investor in all its commitments, attracting significant third-party capital to all ventures.To date, the NPRF has committed €1.3bn to Irish projects, including a suite of funds to offer financing to local SMEs.The outgoing head of the National Treasury Management Agency has previously said it would take “years” to re-allocate the NPRF’s holdings toward Ireland. It was unclear at the time of writing whether the NPRF’s commitment to the SBCI would be drawn from the discretionary portfolio or the fund’s directed portfolio.The investment is a political decision agreed by government and directed by finance minister Michael Noonan, rather than a commercial decision signed off by the NPRF Commission. The National Pension Reserve Fund (NPRF) is to provide €350m in capital to the Strategic Banking Corporation of Ireland (SBCI), meant to boost funding available to Ireland’s small and medium-sized enterprises (SMEs).The NPRF’s contribution to the entity comes alongside €400m from the European Investment Bank (EIB) and a further €150m from the Kreditanstalt für Wiederaufbau (kfW), Germany’s state-owned development bank.The initial €800m in funding, to which the SBCI will grant retail banks access, as long as they pass on the lower interest rates, could grow to €5bn over the next five years.Its initial capitalisation is significantly higher than the €500m pledged when the SBCI was first announced in May.
Austria’s Victoria-Volksbanken Pensionskasse (VV-PK) and the Victoria-Volksbanken Vorsorgekasse (VV-VK) – the provident fund managing mandatory employer contributions towards severance pay – have been put on the market. In a confidential sales prospectus seen by IPE, dated March 2015 and drawn-up in English, both entities are offered either as a package or separately, with no price tag.As of the end of 2014, equity for the pension fund was estimated at €16.3m, while equity in the provident fund came to approximately €5.7m.Sources familiar with the market expect the sales price to be at leat €30m. Initial non-binding offers are expected by the end of March and are to be processed by KPMG, appointed to “exclusively advise in the intended transaction” – dubbed Project Eagle – as stated in the sales prospectus.Victoria-Volksbanken declined to comment on the matter for the time being.The pension and provident funds are co-owned by the Volksbanken banking group, as well as a subsidiary of German insurer Ergo.According to the sales prospectus, while only Volksbanken is to offer its shares initially, “all the other shareholders are potentially willing to sell”.This means an interested party could buy a 100% stake in either or both entities.As per year-end 2014, the pension fund had close to €660m in assets under management (AUM) and reported an annual return of 5.9%. By comparison, the market average was close to 8%.At the provident fund, AUM stood at €224m, while returns came in at 3.6%, against a market average of approximately 4%.Volksbanken was the only large banking group in Austria to fail the stress test and is now winding itself down. One potential buyer could be Fair-finance.Markus Zeilinger, founder and chairman of the board at Austria’s youngest Vorsorgekasse, recently expressed an interest in buying a Pensionskasse “if one came onto the market”.He said such a purchase might be Fair-finance’s “last chance” to enter the country’s Pensionskassen market, as building one from scratch “does not make sense in the current environment”.
Commentators responding to a public consultation on the effectiveness of the International Financial Reporting Standards (IFRS) Foundation have slammed the quality of the global rulemaker’s work.The IFRS Foundation is the parent body of the London-based International Accounting Standards Board (IASB) and the IFRS Interpretations Committee.In a formal comment letter, the Institute of Chartered Accountants of England & Wales wrote: “It seems significant resources have been dedicated to fixing problems that should have been identified during the standard-setting process.“Again, this may indicate further improvements can be made to the board’s due process.” Alongside the damning verdict on the IASB’s efforts, critics also slammed its interpretations committee and processes as “slow and unresponsive” and prone to making too many short-term changes to standards.The comments come despite a major bid in recent years by the Foundation and the board to address the committee’s past failings.In a summary of the feedback received by the board and the Foundation, staff told the IASB’s 16 March board meeting: “Many respondents, however, commented on the Board’s approach to finalising the issue of a Standard.”The board’s critics, it emerged, want it to pay more heed to quality control during the final stages of publishing a standard.They said this new focus would help to encourage consistent application of standards.Critics also claimed the board tended to publish a standard only to issue a flurry of editorial corrections, minor amendments and interpretive guidance.Staff wrote: “These respondents thought such amendments hurt the credibility of the Standards and [failed to] provide an incentive for preparers to take an early start in implementing the Standards.”Some respondents also believed the board and its interpretations committee were too willing to amend IFRSs rather than allow preparers and their advisers to exercise judgement.In addition, there were claims the IASB had got its priorities wrong by focusing on the development of new standards rather than on drafting and checking them.The IASB currently operates a fatal-flaw review where it sends out a near-final draft of a new or amended IFRS to a panel of experts.In the case of the 2011 amendments to IAS 19, the project staff circulated a draft of the changes to auditors and consultants.Sources familiar with the process alleged at the time that staff made substantive changes to the treatment of plan administration costs under IAS 19 during this process.Back in 2010, former IASB member Robert Garnett launched a withering public attack on staff for making amendments to a proposed standard on joint-venture accounting without putting them through formal due process.Garnett said: “We need to take the issue offline – we need to re-deliberate the whole basis for annual improvements.“I am not at all pleased with comments from staff about wording changes that go back to the beginning of this year that have been agreed in public meetings, and then offline you decide to change them.”Constituents now want the board to make its fatal-flaw review drafts public.They also want the board to spent more time checking the standards for errors and inconsistencies.Meanwhile, the board’s interpretations committee, responsible for the IFRS 14 asset-ceiling guidance, also came under fire.According to staff, commentators slammed the committee as “slow and unresponsive, with a long lag between submissions and decisions”.They also claimed it “sometimes addresses ‘symptoms’ of problems with standards rather than the underlying causes”.The feedback will come as a blow to the IASB, which four years ago launched a major bid to improve the committee’s image and make it more responsive.Speaking in during an IASB meeting on 21 March 2012, IASB director Michael Stewart said the IFRS Foundation Trustees wanted the committee to identify “other ways” to assist constituents “in conjunction with the board”.As matters then stood, the committee would either issue an interpretation, recommend that the IASB amends an IFRS or reject the issue on the grounds that the standards are clear.Stewart said the committee would in future also consider developing additional illustrative examples, providing more detailed agenda decisions, or handling an issue as an educational project.But IASB member Tak Ochi, speaking during the 16 March board meeting, said the move had turned out to be less than successful.“What happened was we issued more narrow-scope amendments … and then eventually we changed standards more than before,” he said. “Sometimes, it causes unintended consequences.”The change in strategy has also done little to win over some pensions-accounting specialists.In recent months, a major effort by the committee to amend IFRIC 14 has run into the sand, with an exposure draft receiving a mixed response among experts.
Members of the BVV, the €26bn pension provider for Germany’s financial industry, have approved by a large margin proposed amendments on guarantees.In light of the current interest-rate environment, the BVV recommended dropping its 4% guarantee for pension claims accrued from 2017.Overall, the adjustment would entail a 24% annual cut in guaranteed pension increases, it said. Rainer Jakubowski, CFO at the BVV, told IPE: “We have decided not to guarantee 4% net interest on all future pension rights, each year, at all times, regardless of the return situation, because it would have been irresponsible. “We are not touching pension rights already accrued – we are merely adjusting the future to the market environment.”He said the members of the pension provider, organised as a mutual association, understood the “need to take such measures in the current market environment”.At a general assembly, more than 90% of employee and employer representatives approved the amendments, which will apply to both the Pensionskasse and the Versorgungskasse.“Other providers will have to take similar steps in the near future,” Jakubowski predicted.He conceded, however, that members had asked “a lot of questions”, and that more than 100 one-on-one talks with companies had been necessary to achieve the outcome of the vote.On a voluntary basis, “several large members” have already pledged to make additional contributions to the BVV to compensate for the future cuts.“There already has been significant commitment by some members, and we will see who else will follow over the coming months,” Jakubowski said.He said it was “sad” that such measures had to be taken now, but he emphasised that it was not because the BVV had made bad investments.Last year, the BVV granted a net interest rate of 3.4%.“We have achieved this despite the low-interest-rate environment, which is nothing but a natural disaster created by the central banks,” he said.
“But, in fact, the final reform draft is nothing less than the full integration of occupational pensions into pensions policy. This might even turn into a fully fledged pension system with a dual core – the state and the companies.”The reform proposals of Nahles, a Social Democrat, have not enjoyed the full support of the CDU, its government coalition partner, particularly with respect to the first pillar.Nahles’s proposal includes a minimum 46% first-pillar replacement rate “for everyone” until 2046 – a minor drop from the present rate of 48%.First-pillar contribution rates, which now stand at around 20% of income before tax, would remain below 25% until 2045.The proposal also recommends a minimum pension for long-term contributors, as well as eventually raising pension levels in former East Germany to those in the west.In the third pillar, Nahles wants to review the cost structures of so-called Riester products and incentivise the industry to produce a standard Riester product to serve as a benchmark.Her proposal also addresses the second pillar – mainly the new law to strengthen occupational pensions, the Betriebsrentenstärkungsgesetz, which the ministry presented a few weeks ago.The aba, in its preliminary response to the draft consultation, argued that the possibility to set up occupational pension plans without guarantees should also be an option for companies that are not part of collective bargaining agreements (Tarifplan).The government’s proposal for new industry-wide pension plans only covers industries that have such agreements on minimum wage and other social standards in place.“It is therefore hard to fathom,” the aba said, “whether the planned measures will lead to a higher coverage at the expected level. An evaluation of the process seems to be in order.”The association also pointed to possible loopholes in the draft that it said could lead to companies being held accountable for deficits in pension plans despite the ‘no-guarantee’ set-up.For its part, the German association of insurers (GDV) welcomed the reform in principle but rejected the idea of a blanket ban for guarantees in new vehicles.“A legal ban on any form of guarantees in the new pension plans is counter-productive,” it said. “It should be up to the social partners in each industry to decide whether they want to allow guarantees.”The GDV also called for freedom of choice for all employers, including those outside industries with bargaining agreements, or those introducing opting-out models.Meanwhile, the association of insurance brokers (Versicherungskaufleute) said it doubted whether social partners had enough expertise to make the right decisions.It said each new pension plan should therefore only be set up under the advice of one of its members.Nahles’s full reform package can be found on the social ministry’s website. German social and labour affairs minister Andrea Nahles has presented her proposal for the comprehensive reform of the country’s pension system.German newspapers and talk shows have already begun to debate the government’s proposals in earnest, but, so far, they have focused almost solely on the first-pillar system, a fact lamented by industry expert Heribert Karch.In a blog, Karch – a board member at MetallRente and chairman of the board at occupational pensions association aba – questioned the absence of occupational pensions from the debate. “Everything else in the country is broadly debated by the public except occupational pensions – these are considered ‘shadow pensions’,” he said.
Germany’s MetallRente pension plan for the metal industry brought in 4,000 small and medium companies as clients last year, it announced this week.For 2017, assets in the insurance-based pension vehicle offered by MetallRente – “MetallDirektversicherung” – will be topped up with a net interest rate of 3.35%.The annual interest rate is calculated by insurance-based pension vehicles in Germany based on capital and actuarial returns, costs, and net inflows.MetallRente’s interest rate is more than three times the minimum required: by law, guaranteed pension products only have to grant 0.9% interest rate from 2017. The rate was cut last year from 1.25%. Since the financial crisis the interest rate granted on MetallRente’s guarantee product has steadily fallen from around 5%, along with legal minimum guarantees.“Given our cost advantages, occupational pensions remain more attractive than traditional, individual saving,” said Heribert Karch, managing director at MetallRente.He also stressed the metal industry was going against the trend of a dropping share in occupational pension participation revealed by new government statistics – as reported by IPE earlier this week.“Our share in new occupational pension contracts is increasing year-on-year,” Karch said.The 4,000 new clients was “the largest growth over the last five years”, the pension fund confirmed.“The awareness about occupational pensions has increased significantly among SMEs,” Karch told IPE. “But there also seems to be a silent consolidation in the market with some pension providers not growing at all, or only very little, while others – including us – continue to grow.”Karch warned a recent increase in employers setting up pension plans will not continue at the same rate without reforms. He has repeatedly voiced support for the government’s idea to introduce new pension vehicles without guarantees to ease the burden on employers.However, the MetallRente example shows that most companies still choose the guarantee option. Only €150m of the group’s total assets are managed in the Pensionsfonds MetallRente is offering. MetallDirektversicherung makes up the vast majority of the pension provider’s total assets of €5.1bn as at year-end 2016.This is mainly only chosen for very young employees, and the asset allocation profile is adjusted accordingly. For people below 55 the equity quota is between 70% and 80%, while for people above that age it is cut to 45%, and then to 10% just before retirement.Over the last five years the MetallRente Pensionsfonds returned 8.7% annually and 5.9% since inception in 2003.Karch said equities were the main source for the performance of this portfolio in 2016.
Investment research provisions in the newly-introduced MiFID II regime will have a varied impact on pension funds, according to interviews with a number of European investors. The new regulation, which came into effect on Wednesday, means asset managers can no longer acquire investment research for free from providers such as investment banks and brokerage firms and pass it on to clients. For the first time, an explicit price needs to be put on research, leading to a challenging ‘price discovery’ process.Pension funds with internal teams that acquire research directly from investment banks have, like asset managers, been engaged in this process, and have limited resources for acquiring research at a cost. Markus Schaen, senior fund manager at Dutch fiduciary manager MN, said: “Budget constraints will likely mean that our internal teams will have to make choices and will have, as a result, access to the research from a lower number of parties under MiFID II.” “Many of their brokers – the more traditional sell side ones – have indicated that they will charge our teams for access to research and other resources under MiFID II. The parties are currently negotiating on the price for access,” he added. Investment research: changes ahead as MiFID II kicks inRasmus Bessing, director at PFA Asset Management, the asset management division of Danish pension fund PFA, said it was very hard to foresee to what extent MiFID II’s research cost ‘unbundling provision will change the research landscape. It was not unlikely, however, that it would lead to fewer providers of research, he added. “We foresee that we will continue to to use external research,” said Bessing. “However, when the new rules come into force, we will monitor the cost associated with investment research. We believe MiFID II should not lead to increased costs overall, and we will make sure that the cost of research paid for explicitly results in lower execution cost.”A survey carried out by the buy-side division of the International Capital Market Association in October found that 83% of respondents thought they would use fewer research providers once the new regulatory regime came into effect. The survey was focussed on research about fixed income, currencies and commodities. According to MN’s Schaen, pension fund teams responsible for manager selection and monitoring should be affected by MiFID II to a more limited extent. “We have used research on stocks and companies provided by sell-side firms, but to a limited extent, and we plan to continue as is.” Tony Persson, acting head of investment management at Alecta“It looks like the vast majority of [asset managers] will not charge us for access to research under MiFID II and will absorb the cost themselves”, he said.Virtually all asset managers have ended up signalling they will not pass on the additional cost to clients – a survey conducted by IPE last month identified only two of the top 120 European asset managers as planning to pass on the charges to clients.But MiFID II may lead to pressure on firms to reduce money spent on research, according to Schaen.“This can be achieved by lowering the number of analysts and replacing more experienced but more expensive analysts with cheaper junior analysts,” he said. “[…] In any case, this will harm coverage of the market. Fewer analysts will look at a given company, which is especially true for companies that carry a smaller index weight, and less time will be spent on a company, which should lead to lower-quality analysis.”Alecta, the Swedish pension fund, is not a heavy user of third party-research, according to Tony Persson, its acting head of investment management.“We have used research on stocks and companies provided by sell-side firms such as brokers and investment banks, but to a limited extent,” he told IPE. ”We plan to continue as is. “Research material is acquired without middlemen directly from our counterparty as we manage all our assets internally. We have never had to pay explicitly or implicitly for this research. All investment decisions are guided by our own internal analysis.”There is widespread consensus, however, that MiFID II will change the landscape of investment research provision. A June 2017 report by McKinsey estimated that for European asset managers that decide to pay for research in full, profits could be reduced by as much as 15-20%. “The resulting change to research operations will be enormous,” said the report.For more coverage of the impact of MiFID II on investment research, see this month’s report on investment research and this month’s On the Record interviews
Lombard Odier, Detailhandel, Bibliotheken, Barings, Eurizon, Hymans Robertson, Savills IM, Principal Global Investors, KGAL Lombard Odier – The Swiss asset manager has poached Christopher Kaminker from SEB for the newly created role of head of sustainable investment research and strategy, while Ebba Lepage has been appointed head of corporate sustainability. At SEB, Kaminker was head of sustainable finance research. Before joining the Nordic banking group he was the lead economist and policy adviser for sustainable finance at the OECD and represented the think tank as a delegate to the G20 and Financial Stability Board. Hubert Keller, CEO of Lombard Odier Investment Managers, said: “Investors and the corporate world are coming under mounting pressure to transition to a sustainable economy. Christopher’s extensive experience across the academic, financial and policy sectors will advance our integrated sustainability solutions and bolster our research capability within LOIM as we seek to give our clients access to companies which adopt sustainable business models and practices.” Lepage joins Lombard Odier on 19 August from biomaterials corporate Stora Enso. As group vice president for M&A and corporate finance, she oversaw the company’s sustainable investment activities.Detailhandel – Sasja Keijmel has started in the newly created position of actuarial head at Detailhandel, the €24bn Dutch pension fund for the retail sector. He will also focus on the new pensions contract, to be introduced as part of the Netherlands’ pension system reform.Keijmel joins from consultancy Mercer Netherlands where he was an actuarial adviser for several company and industry-wide pension funds during the past 19 years, advising Detailhandel since 2012. Prior to his job at Mercer, Keijmel worked at Heijnis and Koelman, a predecessor of consultancy Aon Hewitt, for six years.Bibliotheken – Ernst Hagen has started as member of the supervisory board of the €2.5bn Dutch pension fund for public libraries, Openbare Bibliotheken. Hagen is also an internal supervisor at the industry-wide schemes for Rhine and inland shipping (Rijn- en Binnenvaart) and the merchant navy (Koopvaardij), and is a board member at the Pensioenfonds Equens.Since 2011, he worked at asset manager BMO Global Asset Management in several positions, including director, portfolio manager and delegated chief investment officer. Prior to this he was head of asset management at the €11bn sector scheme for the hospitality industry (Horeca & Catering).Barings – Stewart Russell has been hired as head of institutional solutions to lead Barings’ newly formed institutional solutions business. He will report to Barings’ head of global markets, Michael Freno. Ann Bryant has also joined the firm as head of insurance solutions within the new business unit, reporting to Russell. Freno said: “We are excited to welcome Stewart and Ann to the Barings team as we set out to build an institutional solutions business, strengthening our current partnerships with institutional investors globally.” Russell was most recently a portfolio manager at Moore Capital Management , but has also worked at RBS Greenwich Capital Markets and as co-chief investment officer at Fischer Francis Trees & Watts. Bryant joins from Reinsurance Group America where she served as a senior portfolio manager. Before that was she was vice president for capital markets at Summit Strategies Group, and principal at Mercer.Eurizon – The asset management company of the Intesa Sanpaolo Group has established two new units in its investment department, one dedicated to corporate governance and sustainability and other for fundamental research and analysis activities.Simone Chelini has been the head of the corporate governance and sustainability unit since the beginning of June, leading the team of specialists who have already been managing and developing the company’s work in relation to environmental, social and corporate governance (ESG) issues. Chelini was most recently coordinator of the management committee of Assogestioni, Italy’s asset management association, from 2016 to February of this year.Eurizon said it decided to centralise its activities in these areas within the investment department to “be more influential and decisive in its support of developing a sustainable business system to create long-term value for its customers”.Also in June, the asset manager established the fundamental research unit headed by Francesco Sedati, who was previously at JP Morgan Asset Management.Separately, Guido Crivellaro has joined the Italian equity team from Symphonia SGR, where he was head of equity portfolios for Italy.Tommaso Corcos, CEO of Eurizon, said the asset manager was “deploying more and more resources to some of the business areas we believe will be most sustainable in the future”.Hymans Robertson – The pensions consultancy has promoted Michael Ambery to lead its master trust research and manage the company’s relationships with defined contribution product providers. He has been at Hymans Robertson since 2006, having joined from KPMG’s pensions team. Principal Global Investors – The US asset manager has appointed Christoph Salzmann as head of distribution in Switzerland, a move it said was part of its growth strategy in the country. He previously worked for BNP Paribas Asset Management in Zurich. PGI opened its Swiss office in 2016. Savills Investment Management – The global real estate investment manager has appointed Pierre Escande as head of investment for France, Belgium and Luxembourg, responsible for originating new investment opportunities in what Savills said was an increasingly active market for the manager. Escande joins Savills IM from AEW where he was a fund manager in charge of the development and management of major institutional client portfolios. Before that he was an associate director at Invesco. KGAL – Christian Schulte Eistrup has been appointed head of international institutional business as the real assets manager seeks to further expand its presence within international investment markets.He joins from Optimum Asset Management, where he was a managing director and a member of its management and investment committees. Previous roles include head of the EMEA region for BlackRock’s real estate arm.
The CSJ proposed accelerating these increases, with the state pension age reaching 70 in 2028 and 75 by 2035, in order to keep the country’s old-age dependency ratio down and make its fiscal position more manageable. The group’s Ageing Confidently report warned that the UK was “not responding to the needs and potential of an ageing workforce”. However, Helen Morrissey, pension specialist at Royal London, warned that the proposal risked causing “huge issues” for retirees if they are not given enough time to prepare for the changes. “The state pension scheme still operates within the age thresholds set for the [first] pension schemes over 100 years ago”Centre for Social Justice“As the population ages, working longer has the potential to preserve mental and physical health, to contribute to the economy and to significantly relieve fiscal pressures,” the report stated.“Without a fundamental change in employment culture and an increase in opportunities for older workers, however, individuals, businesses and the economy will suffer.”The CSJ added: “The state pension scheme still operates within the age thresholds set for the pioneer pension schemes over 100 years ago, revealing a disconnect between contemporary life expectancies and the state pension age. This raises the question of whether the state pension age is fit for the 21st century.” The UK’s state pension age should be increased to 75, according to a report released over the weekend by the Centre for Social Justice (CSJ).The think tank – set up in 2004 by the then-Conservative Party leader Iain Duncan Smith – made a series of recommendations for policy reforms to address the UK’s ageing society.The proposed increase to the state pension age is a significant change from current UK government policy, adopted in 2014.From December 2018, the state pension age for men and women has been rising from 65, and is scheduled to reach 66 in October 2020. It will then rise to 67 by 2028, and to 68 by 2046, although the latter is subject to review. “We need to give careful thought to what kind of jobs people in their 70s are able to do, and while some people will be able to work on for longer others simply won’t be able to,” Morrissey said.“These people will face severe financial hardship if they have not saved enough into a pension to cover the years between leaving work and claiming state pension. The government needs to think carefully before taking such drastic action.”Joe Dabrowski, head of governance and investment at the Pensions and Lifetime Savings Association, tweeted that the CSJ’s retirement age plan was “an unbelievably bad idea”.Other proposalsAs well as raising the state pension age, the CSJ’s report proposed a government initiative to promote “the benefits of employing a diverse workforce” to employers, including advocating flexible working and flexible or gradual retirement.It also supported the “Mid-Life MOT” concept, first launched by the Department for Work and Pensions in February. This was designed to help individuals assess their financial wellbeing and highlight where they could access guidance and support. ‘MOT’ is a reference to the UK’s annual test of the roadworthiness of vehicles. The CSJ’s report is available here.