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Brussels legislation will hit pension funds hard

Tuesday, 10th November 2009

Following meetings in Brussels today Conservative MEP Roger Helmer has warned pensioners in the East Midlands that proposed legislation could reduce their income and push up premiums by between 15-20%.

Mr Helmer’s Conservative colleague Vicky Ford MEP asked a direct question about the issue which was responded to by a representative of Europe's largest pension fund manager, APG Asset Management. APG currently manage around €230 billion of pensioners' money and their representative confirmed that if they could not use Alternative Investments then their returns would be hit by 1 - 1.5% each year. To make up for such a reduction, either premiums for those still working would have to increase by 15-20%, or pensioners would see their income drop.

APG also explained that as well as traditional equity and bond markets, their pension funds now invest around a third of their portfolios in so-called Alternative Investments, to increase diversity and spread risks.

The EU's proposed AIFMD (Alternative Investment Fund Managers Directive) will allow regulators to better monitor the build up of risks in the future and is intended to help protect investors from repeats of the market collapse that occurred during the credit crunch. However, it will also limit both the amount of European money that can be invested outside the EU and place significant constraints on AIFM (managers of Alternative Investment funds) operating inside the common market.

Roger Helmer commented:

"At a time when there is a growing pensions crisis across Europe coupled with an ageing population politicians need to look much closer at the huge costs that this could put on pension funds.

"Investors should be protected from undue risk but is this very high price one that Europe really wants to impose on savers?"